From Reinvent Albany
Governor Hochul faces a stark choice. She can sign Assemblymember Gallagher and Senator Hoylman-Sigal’s LLC Transparency Act, or keep New Yorkers in the dark about what Treasury Secretary Janet Yellen calls “corrupt actors” laundering billions in dirty money through New York real estate LLCs.
The LLC Transparency Act requires the actual human owners of LLCs to disclose themselves to New York State, and requires the state to publish a public database of LLC owners. The bill is supported by an unusual coalition of transparency and anti-corruption groups, housing activists, and labor unions (see below), but faces growing resistance from shell company enthusiasts.
At the Summit for Democracy on December 9, 2021, US Secretary of the Treasury Janet Yellen highlighted New York’s global importance to international money laundering:
There’s a good argument that, right now, the best place to hide and launder ill-gotten gains is actually the United States. And that’s because of the way we allow people to establish shell companies … Many corrupt actors can hide their money in Miami or Central Park skyscrapers the same way they do in shell companies. An LLC or trust can be listed as the owner. A lawyer can sign the paperwork. Indeed, sometimes the only thing these luxury properties are home to are ill-gotten gains – they’re money laundromats on the 81st floor.
Yellen is hardly the first to blow the whistle on New York’s massive LLC real estate money-laundering machine. Nearly a decade ago, New York Magazine and the New York Times published numerous stories dissecting exactly how oligarchs and narco-traffickers launder their money using LLC shell companies, especially in Manhattan. In 2011, the UN/World Bank “Puppet Masters” report highlighted the role of LLCs and real estate in places like New York City.
New York City real estate is one of the biggest political donors in New York State, and Governor Hochul will not relish a fight with some of her largest contributors. Indeed, that’s the acid test here: Is New York State’s democracy strong enough to curb the influence of global “bad actors” laundering their money through the NY real estate industry, or will the bad guys keep getting their way?
Why Governor Hochul Should Sign the LLC Transparency Act
-Protects renters from abusive landlords: Tenants’ rights groups overwhelmingly support the LLC Transparency Act because it publicly discloses the true owners of apartment buildings, and makes it harder for bad landlords to hide behind layers of LLC shell companies. NY State has the largest share of renters of any state.
-Anti-corruption: According to the U.S. Treasury, disclosing beneficial owners “will strengthen the integrity of the U.S. financial system by making it harder for illicit actors to use shell companies to launder money or hide assets.”
-New York City real estate’s role as a “stash pad” for global hot money has been well documented in reporting (see articles below).
-The authoritative UN/World Bank StAR “Puppet Masters” report says corporate vehicles like LLCs are the one thing major corruption scandals have in common.
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