convergence

Money Laundering into Real Estate
for money laundering in 2004. 51 A recent Senate investigation examined four cases of MLRE
by Politically Exposed Persons from Africa. These were high-level officials such as Teodoro
Obiang, a son of the president of Equitorial Guinea, and their families. 52
In Africa as well, there is now significant evidence of laundering by organized crime
groups into local property markets. In recent years, the population growth rates of several
African countries have been among the highest in the world. Illicit money from neighboring
countries flows into countries with high growth rates such as Kenya. This phenomenon is also
identified in southern parts of western Africa where growth rates are not as high as in Kenya.
Ransom money associated with the piracy attacks off the coast of Somalia has also contributed
to the recent real estate boom in Nairobi. New cocaine transport routes through West Africa
have also contributed to a real estate boom in that region. Expensive villas have been built with
drug proceeds in Guinea-Bissau, for example, a poverty stricken country with no legitimate
source of funds for such construction. 53 Money has flowed from other parts of Africa and Asia
into real estate in South Africa as well because of its well-developed infrastructure. 54
There are certain locales that, because of their large-scale real estate development and
failure to scrutinize the source of funds, have become magnets for laundering money. Two
examples, as previously mentioned, are the southern coast of Turkey and Dubai in UAE.
Large-scale development has occurred on the Mediterranean and Aegean coasts of Turkey
because real estate purchases can be made in cash, soaking up tens of millions of dollars that
flow back from criminal enterprises in Western Europe. 55 The proceeds of corruption and
the drug trade in Afghanistan are laundered in real estate, particularly in commercial and residential
real estate in UAE, notably Dubai. 56 Money from organized crime in the post-Soviet
area is also laundered there. As previously mentioned, Central Asian drug kingpin Kamchy
Kolbaev was arrested in his villa in Dubai. The profits from a very large case of fraud against
the Russian government committed by law enforcement officials following a corporate raid
against the Hermitage Company resulted in profits in the tens if not hundreds of millions of
dollars for the perpetrators. 57 The Russian lawyer for the Hermitage firm who opposed the
fraud died in prison after being convicted of trumped-up charges. Some of the stolen money
has been traced to expensive properties owned by the perpetrators in Dubai. 58
Latin American drug organizations continue to launder money into real estate both in
their home states and abroad. Members of Colombian and Mexican drug cartels continue to
launder money in their own countries but also place it in Central and South America. Favorite
locales are Argentina and Venezuela. 59 Money laundering into Uruguayan real estate has
also become a major problem. A recent study reports that 90 percent of money laundering in
Uruguay occurs through real estate. 60 Panama has been singled out for money laundering in
the real estate sector, 61 and Honduras has unoccupied hotels, a phenomenon also visible in
Argentina and other Latin American countries. 62
In the United States, as previously mentioned, drug cartels are using their profits to
buy property, particularly in border states. Canada has also identified drug traffickers using
property across Canada as a vehicle for money laundering. 63
Distinct patterns have been noted since 2008 and the start of the financial crisis. The
sharp decline of real estate prices has been exploited by criminals for both their operational
benefit and to purchase real estate at sharp discounts. Banking regulation encourages criminals
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