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“Up to 30 percent of dirty money ends up in real estate”: How crime causes prices to explode

2024-02-12T13:43:55.274Z

Highlights: “Up to 30 percent of dirty money ends up in real estate’: How crime causes prices to explode. 100 billion euros are laundered in Germany every year. Money launderers usually benefit when real estate is as expensive as possible. This allows them to launder large sums of money. Russian oligarchs, for example, also buy noble properties in Berlin and other cities in order to get money from dubious sources. With prices per square meter of over 9,000 euros in Berlin, this is definitely noticeable.



As of: February 12, 2024, 2:29 p.m

By: Peter Sieben

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Real estate is becoming more expensive again.

In some cities, housing is no longer affordable for many people.

Gangs are driving the price spiral - and some industries are benefiting from it.

Berlin – Living is pure luxury in some places.

Real estate prices are rising again across Germany, and rents have recently become significantly more expensive, according to the German Economic Institute (IW).

This is particularly true for large cities such as Hamburg, Cologne or Berlin.

In some areas, rental prices have doubled in the last 15 years and purchase prices have even tripled.

In particularly exclusive locations the jumps are even greater - and criminals from the organized crime sector often help increase the price.

Money laundering causes property prices and rents to rise

Because criminals use real estate to get illegal money clean.

It is estimated that around 100 billion euros are laundered in this country every year.

“Up to 30 percent of dirty money ends up in real estate, which drives up real estate prices, especially in large cities.

“This ultimately affects all citizens,” says Sebastian Fiedler, criminal policy spokesman for the SPD parliamentary group, to

IPPEN.MEDIA

.

The figure of 30 percent is controversial, but all experts agree that a large proportion of illegal money is invested in houses.

Kilian Wegner knows why real estate is so popular with the mafia, criminal clans and drug lords.

He is a professor of white collar criminal law at the European University Viadrina in Frankfurt/Oder and deals intensively with the money laundering problem.

“The value of real estate is relatively difficult to determine, especially in a dynamic market situation and when it is not about standard properties.

Criminals can easily manipulate prices,” he says.

Homebuyers compete “when in doubt with criminals from all over the world”

The study situation strongly suggests that money laundering causes property prices to rise artificially, says the lawyer.

Money launderers usually benefit when real estate is as expensive as possible.

This allows them to launder large sums of money.

One way: “You can overstate the value of a property acquired through illegal means in order to take out the highest possible bank loan and thus maximize the economic benefit from the income,” explains Kilian Wegner.

Criminals can then use illegal money to repay the large loan.

“If you want to buy a residential building or commercial property in Germany, you are probably competing with criminals from all over the world.” This also has an impact on rents: expensive properties drive up the rent index.

Christian Trautvetter from the Tax Justice Network sees it similarly.

Among other things, he has worked as a forensic auditor and deals with money laundering.

“Big cities are hubs for international potentates.

A public prosecutor from Munich once told me: “It can’t be the case that I can’t afford an apartment because Russians are buying up everything here,” says Trautvetter.

Oligarchs from Russia buy real estate in Berlin

Russian oligarchs, for example, also buy noble properties in Berlin and other cities in order to get money from dubious sources.

It is difficult to estimate exactly how high the money laundering amount and thus the impact on real estate prices is.

“The police, for example, know very well how big the cocaine market is.

When it comes to cocaine alone, profits worth three billion euros are being laundered somewhere,” says Trautvetter.

There are no such figures for other areas.

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The police also do not have an overview of the entire extent of money laundering by large organizations such as the mafia.

“So far, law enforcement has only reached local medium-sized businesses, such as the clans known to the police.

Professional money laundering has barely been recorded so far,” says Trautvetter.

In other words: the number of unreported cases is large.

Trautvetter believes that the influence of dirty money on real estate prices is in the single-digit percentage range.

With prices per square meter of over 9,000 euros in Berlin, this is definitely noticeable.

“Money laundering is an economic factor in Germany”

So far in Germany it has been difficult to arrest owners of money laundering properties.

Because: “If you want to prosecute someone for money laundering, you need a concrete initial suspicion.

To do this, the crime from which the money originally comes must be known at least in rough outline,” explains lawyer Kilian Wegner.

He demands: “An authority is needed that ex officio also checks dormant capital for suspicious reasons.” In the case of real estate, for example, such an authority would have to check whether it is actually attributable to the person who is entered in the transparency register as the beneficial owner.

And whether there is any evidence that this person may not even exist and is just a front man for unknown people behind the scenes.

Paradox: Money laundering causes massive damage, but also benefits some circles.

“Money laundering is an economic factor in Germany,” says Wegner.

“Let’s take a shipbuilder who makes yachts.

If he always checked carefully where his customers’ money came from and whether they were acting legally according to German standards, he would soon have nothing left to do.”

Source: merkur

All news articles on 2024-02-12

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