Rich, Young “Fuerdai” Chinese Are Buying Overseas Properties on Their Smartphones – WSJ

The truth is that for all of the tough talk from Li Xinping about stopping the massive outflows of capital from China, some of it probably dark money obtained from dubious enterprises and kickbacks, nothing has changed in China or in the Western cities eager to share in the wealth.

Rich, Young “Fuerdai” Chinese Are Buying Overseas Properties on Their Smartphones

Millennials acquire real estate in other countries as hedge against a weakening currency, homes for their own children when they study abroad

An increasingly larger group of Chinese millennials are looking to buy property abroad. Above, a potential buyer inspects a house for sale in Australia.

Reblogged from The Wall Street Journal, Real Estate

By Dominique Fong

Updated May 9, 2017 10:59 p.m. ET

BEIJING— Zheng Xiaohei, a marketer from Urumqi in western China, made his first overseas property investment without so much as a visit.

Mr. Zheng, 29 years old, in March purchased a studio apartment in Thailand for about 650,000 yuan ($94,255) using his smartphone and an app called Uoolu that connects users to overseas property listings.

“Investing in overseas real estate was mainly due to my good impression of Thailand,” Mr. Zheng said.

Founded two years ago, Beijing-based Uoolu is focused on tapping a specific group of home buyers: Chinese millennials looking for foreign properties.

About 70% of Chinese millennials, those born between 1981 and 1998, own a home, the highest share of respondents from nine countries and regions who were surveyed in a recent HSBC study. Chinese parents often register home purchases under their child’s name to prepare the child for marriage and raising a family, which likely boosts the percentage.

Still, a growing sliver of Chinese millennials are looking to buy property abroad. Kevin Lee, chief operating officer of Beijing-based consulting firm Youthology, put the percentage in the low single digits but said it would continue to increase.

The lure? A millennial’s desire to hedge against yuan depreciation and find affordable homes in cities with cleaner air for their children to live in when they study abroad. In the past year, home prices have soared to more than 30 times household income in major Chinese cities.

Uoolu said about 80% of its monthly active users are between the ages of 20 and 39, and that 20,000 customers have bought or are in the process of purchasing overseas property. A similar real-estate platform, Juwai.com, estimates that roughly 30% to 40% of its buyers are millennials.

Cherubic Ventures, a venture-capital firm with offices in Beijing and San Francisco, invested an undisclosed sum in Uoolu. One selling point, said the firm’s founder, Matt Cheng, was Uoolu’s target of reaching young Chinese buyers who are tech savvy and interested in cross-border investments, “but don’t know where to begin.”

Overseas investing isn’t easy at a time when the Chinese government is clamping down on capital flight amid concerns about a weakening currency. Chinese citizens aren’t allowed to transfer more than $50,000 a year out of the country or use those funds to buy overseas property.

However, this increased government scrutiny is “slowing but not cutting off” the surge of investment in U.S. property, said Arthur Margon, partner at Rosen Consulting Group.

“The more the government limits people, the more they want to invest overseas,” said Wang Hao, Uoolu’s 33-year-old chief operating officer.

People often skirt the foreign-exchange rules by, for example, pooling money among family members and friends and separately sending it into overseas bank accounts. Also, Chinese citizens who have studied or worked abroad for a few years might already have bank accounts in other countries and those overseas funds are beyond the Chinese government’s control.

Alan Wang, a 19-year-old college student in Toronto who comes from Shenzhen, said he opened a bank account in Canada for education expenses. Now it is useful for buying property, too. He and his family are thinking about purchasing a home on a budget of about 1 million Canadian dollars (US$730,600) this summer. To do so, he will have relatives send money to his bank account, he said.

Uoolu helps buyers open bank accounts in other countries and apply for mortgages there. Users pay a deposit to reserve the right to purchase a home. The money is sent directly from a buyer’s bank account to the overseas developer—Uoolu says it doesn’t handle the cross-border transaction within the mobile app.

Chris Daish, a real-estate agent at Triplemint in New York, said one of his Chinese clients, an accountant in her mid-20s who works in New York, earlier this year pooled $110,000 from five family members to help buy her a condo in the city.

“It’s a really arduous task even to get a couple hundred grand out,” said Mr. Daish, who emphasized that he doesn’t help clients with money transfers.

A 28-year-old who works in finance in Beijing in February bought two apartments in Bangkok for a total of 5 million yuan ($725,000), one for a vacation home and the other for rental income. She declined to disclose her name out of fear of government retaliation for violating capital controls.

As for some of her friends, she said, “They wish to buy but dare not.”

Source: Rich, Young Chinese Are Buying Overseas Properties on Their Smartphones – WSJ

Vancouver Real Estate Foreign Money Laundering: Nothing Has Changed

Despite all of the revelations of the sources and methods of the Vancouver housing bubble over the last two years, the situation remains largely unresolved.  Ditto in Toronto.  The foreign buyers’ tax has had only a limited effect and has problems.  Fueled by dark foreign money housed in anonymous offshore shell companies like those disclosed in the Panama Papers,  the money is managed by local financial manipulators at the behest of unidentifiable persons overseas.  The foreign buyers continue to enjoy the weakest enforcement jurisdiction in Canada

‘Corrupt Elite’ Still Laundering Money In Canadian Housing: Transparency International Report

British Columbia’s gleaming gem, Vancouver,  is found to still be the worst case example

Reblogged: The Huffington Post Canada  |  By Daniel Tencer

Posted: 03/31/2017 12:16 pm EDT Updated: 5 hours ago

Loopholes in Canadian law are allowing a “corrupt elite” to use the housing market for money-laundering, says a new report from Transparency International (TI).

The report found 10 problem areas with the laws related to real estate transactions in Canada, Australia, the U.K. and the U.S. — four countries it identifies as being hot-spots for real estate-related money laundering.

“Canada’s legal framework has severe deficiencies under four of the 10 identified areas,” TI stated in the report. “In the other six, there are either significant loopholes that increase risks of money laundering through the real estate sector or severe problems in implementation and enforcement of the law.”

This Grey’s Point “tear down” property shown here, recently sold for over $9 Million, more than $1 Million over the asking price of $7.8 Million. There were 11 offers, all cash, and no offer included any contingencies.

One glaring problem is a lack of rules requiring that the actual owner (or “beneficial owner”) of a property be identified. In Canada “there are no requirements for any person involved in real estate closings to identify the beneficial owner,” the TI report stated.

In a study published last December, TI found that the government does not know who owns 46 of the 100 most expensive homes in Vancouver.

The report found that 29 of the homes were owned by shell companies, either Canadian or offshore.

“Offshore companies pose a serious risk … because they are able to purchase property without needing to disclose any information relating to who ultimately owns and controls them to any government authority,” TI said in the report published Wednesday.

The report noted that money-laundering through real estate is growing increasingly popular.

“Large amounts of money can be legitimized at once, maintaining or increasing its value. Investments in real estate are seen as an alternative for those who fear having offshore accounts frozen.”

This chart from Transparency International shows what is known, and not known, about the ownership of Vancouver’s 100 most expensive homes.

Because of over-reliance on banks to spot money-laundering activities, and because banks aren’t involved in cash purchases of homes, money-laundering is going unnoticed, the report said.

And like in the other countries studied, in Canada “there are no data on prosecutions against real estate agents or other professionals for facilitating money laundering.”

Canada has “the best model” for enforcement of money-laundering laws among the four countries studied, the report said, but Canada’s financial intelligence agency, FINTRAC, investigates relatively few real estate transactions.

The report lays out a series of recommendations for governments, including requiring all professionals involved in a real estate transaction to disclose the actual buyer. This should also be required of companies that are buying real estate, the report said.

It also suggested that professionals involved in real estate transactions, such as lawyers and realtors, be registered with a country’s anti-money laundering authorities before they are allowed to practice.

“Governments must close the loopholes that allow corrupt politicians, civil servants and business executives to be able to hide stolen wealth through the purchase of expensive houses in London, New York, Sydney and Vancouver,” TI chair José Ugaz said in a statement.

“The failure to deliver on their anti-corruption commitments feeds poverty and inequality while the corrupt enjoy lives of luxury.”

Canada’s Open Door to Tax Fraud, Money Laundering

 

The Shell Game: Canada’s Lax Disclosure Laws Open Door to Tax Fraud, Money Laundering

Transparency International warns against country becoming a ‘haven for corrupt capital.’

Source: The Shell Game: Canada’s Lax Disclosure Laws Open Door to Tax Fraud, Money Laundering | The Tyee

Canada can avoid becoming a desirable destination for dubious global lucre if it acts soon.

How many shell companies exist in Canada? How many legal trusts? Who are the beneficial owners protected by such unnecessary veils of secrecy? No one knows because in most cases there is no legal requirement to disclose actual ownership even to regulators. In fact, more information is required to get a library card than to set up a company in most jurisdictions in Canada.

What we do know is that Canada ranks near the bottom among our OECD partners in terms of corporate disclosure requirements to fight money laundering and tax evasion. A recent report from Transparency International detailed the dismal situation and why our country has become a haven for dubious offshore property speculation.

“The Canadian government must take immediate steps to require all companies and trusts in the country to identify their beneficial owners to ensure Canada does not become a haven for corrupt capital,” warns Transparency International Canada executive director Alesia Nahirny.

Canada is one of the few developed countries that does not require the identities of company directors to be verified or any information on shareholders. In most provinces, it is legal to use “nominee” directors or shareholders without disclosing that they are acting on someone else’s behalf.

A nominee is essentially a sock puppet — the proverbial student or homemaker often listed as the title owner of some of Canada’s most expensive homes. Why would someone list a multi-million dollar property in someone else’s name? Some plausible reasons include to avoid taxes or to launder money. This practice remains completely and inexplicably legal in most parts of our painfully polite country.

Lawyers can also act as nominee directors, offering their clients an additional level of secrecy under solicitor-client privilege unavailable in most other countries. A ruling from the Supreme Court of Canada in 2015 exempted lawyers and their firms from important parts of the Proceeds of Crime and Terrorist Financing Act, further widening the yawning loopholes in our laws meant to fight money laundering. According to an international oversight body, the Financial Action Task Force of which Canada is a member, “the legal profession in Canada is especially vulnerable to misuse.”

Toronto lawyer Simon Rosenfeld was secretly taped in 2002 during a meeting in a Miami bar with an undercover RCMP officer, who was posing as a member of a Columbian drug cartel needing money-laundering services. According to the officer’s testimony, after exchanging a token dollar to cement solicitor-client secrecy, Rosenfeld bragged that moving illegal funds through Canada was “20 times” easier than the U.S., where arrest and convictions are much more likely. He described the Canadian enforcement regime as “la la land” and said that five other lawyers in Vancouver laundered $200,000 per month through trust accounts for a seven per cent commission.

The transcript of this conversation did not endear Rosenfeld to the jury during his prosecution and he was sentenced to three years in jail. He appealed the conviction and the higher court judge increased his sentence to five years. This rare successful enforcement provides some fleeting schadenfreude, but Rosenfeld’s seasoned and sad assessment of “la la land” continues to ring true.

Legal black boxes

Millions of legal trusts are estimated to exist in Canada, but there is no way of knowing since there is no requirement for them to be registered or file any record of their existence — again an outlier among other countries. They are supposed to file information on assets and trustees with the Canada Revenue Agency but only a small fraction actually do.

A trust is the consummate legal black box. Considered a mere private contract under Canadian law, trusts do not need to keep records on beneficial owners, let alone file such documents with the federal government. Trustees can conduct transactions without disclosing their role as go-betweens, making it difficult or impossible for financial institutions to comply with money laundering regulations. To our international embarrassment, the Financial Action Task Force found in 2016 that Canada was less than fully compliant in 29 out of 40 anti-money laundering measures and “non-compliant” regarding transparency and beneficial ownership of such legal arrangements.

Vancouver, Let’s Stand Up to Moneyed Interests of Real Estate

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Real estate in Vancouver and Toronto is where the rubber really hits the road on these national regulatory failings. Transparency International looked at the title documents for the 100 most expensive homes in the Lower Mainland and unsurprisingly found a sampling of all these methods to conceal the beneficial owners. Twenty-nine properties were held by Canadian or offshore shell companies, 11 were owned by nominees with no obvious source of income, six more were held by trusts. In total, 49 of these luxury estates collectively worth more than $1 billion had opaque ownership.

Canada’s lax legal oversight coupled with a decades-long public policy effort to incentivize wealthy citizenship has turned Vancouver into a global hedge city. Like London, New York, and San Francisco, Vancouver’s luxury properties have become a favored place to stash cash for the world’s wealthiest.

According to professor David Ley at the University of British Columbia, Canada effectively sold Canadian citizenships to rich offshore investors through the now-cancelled Business Immigration Program. Ley described the scheme during a lecture last September, detailing how up to 200,000 of the world’s wealthiest may have arrived in the Lower Mainland as a result of these public policy efforts, inflating property values and contributing to our current housing woes.

According to Ley, Canada’s BIP was heavily oversubscribed because Canada was selling citizenships for far below the international market rate compared to other countries with similar citizenship-for-sale incentive programs. In the U.S., candidates had to invest $1,000,000 and employ up to 10 Americans before being granted citizenship. In Canada, investors only had to loan provincial governments $800,000 to be paid back in full after five years. This come-and-get-it attitude towards passports and global capital seems sadly similar to other national assets such as natural resources, but I digress.

Besides ballooning our housing prices, was there a net economic benefit to this citizenship fire sale? According to Ley, the federal immigration database showed that “of all immigration streams to Canada, the Business Immigration Program led to the lowest declared incomes, lower even than refugees.” This was in part because wealthy offshore investors are so skillful at avoiding taxation coupled with a shocking lack of enforcement from the CRA.

Defending against dubious lucre

What can Canada do to clean up this mess and avoid becoming an even more desirable destination for dubious global lucre? A low-cost first step would be to require all Canadian companies and trusts to declare beneficial owners and publish this information on a public searchable registry. The United Kingdom brought in such a system in 2016 to improve in law enforcement and tax collection, which will more than cover the cost of implementation.

Transparency International has several other practical suggestions that are also supported by the banking sector and law enforcement:

• Beneficial ownership should be listed on all land title documents, ideally retroactively.
• Corporate registries should have the resources and requirement to accurately identify directors and shareholders
• The federal government should require all sectors — including real estate agents — to identify beneficial owners before transactions are conducted.

Besides money launderers, tax evaders and criminals, who could possibly oppose these sensible and long overdue reforms? Is the Trudeau government going to act quickly to plug these gapping holes and bring our country in line with the global fight against illicit capital? The recent cash-for-access events with wealthy offshore investors provide a telling opportunity to see on whose behalf Trudeau is acting. The whole country is watching.

Super Rich Guy to Billionaires: Get with the 99% Or Prepare for Revolution

 

Some people seem to be having a problem with Nick Hanauer.  He seems to have pissed off a lot of people, but at the same time, he seems to be talking sense and to have achieved significant traction. This often seems to happen in times of turmoil and change. A multi-millionaire in his own right, but also someone with a profound liberal arts and humanities grounding, Mr. Hanauer has called “foul,”  with the behavior of the 1%. I am personally fascinated with people like this, because I sense that Hanauer is somewhat like me. I worked with Ivy League MBA’s at Intel who said to me that they wished that they had my humanities education, while I told them that I wished I had their management education. I now teach management in a prestigious university and can comment intelligently.

I admit openly to being a capitalist, but something has gone terribly wrong with our system.  I follow the leading global investment banks. I know about Michael Lewis, Liar’s Poker, Flash Boys, LIBOR, foreign exchange fraud, commodity trading fraud, tax evasion for wealthy U.S and German clients, money laundering for drug cartels and ask myself what has gone so terribly wrong.  The worst has been Silicon Valley luminary venture capitalists like Tom Perkins, who have become an obscene embarrassment. Some of the wealthy have tried to distance themselves from Mr. Perkins, but actually have their own equivocations for why everyone misunderstands them.

I agree with Mr. Hanauer. The pendulum is swinging back as it always does and unless the rich get on board with ethical reform, the backlash will be harsh.

 

Super-Rich Guy To ‘Zillionaires’: Back $15 Minimum Wage Or

Prepare For Revolution

Reblogged from The Huffington Post  |

A Seattle millionaire is urging his super-rich peers to support a $15 minimum wage or face the possibility of a devastating populist revolt.

In an essay published this week by Politico Magazine, venture capitalist Nick Hanauer warned that the widening income gap in the U.S. would eventually spark a violent revolution.

“No society can sustain this kind of rising inequality,” Hanauer wrote in the piece, shared nearly 200,000 times on Facebook by Tuesday afternoon. “In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out.”

Hanauer, whose fortune ballooned thanks to an early investment in Amazon, first suggested raising the minimum wage to $15 last year in an op-ed published by Bloomberg View.

A February profile in the Seattle Timessaid he first became “obsessed” with the $15-an-hour figure in late 2012. Last month, with Hanauer’s blessing, Seattle’s city council unanimously passed an ordinance enshrining that wage — the nation’s highest guaranteed minimum pay — in law.

Hanauer has faced criticism from conservatives and business pundits. In 2012, his TED talk about imposing more taxes on the wealthy was banned from the conference’s site after it was deemed “too political.”

Hanauer argues in the Politico essay that the trickle-down economics evangelized by conservatives since President Ronald Reagan is “idiotic” and compared it to the way medieval monarchs and rulers claimed their fortune and power was bestowed by higher powers.

“Historically, we called that divine right,” he wrote. “Today we have trickle-down economics.”

That philosophy makes it difficult for middle-class customers to earn enough money to spend on the products people get wealthy selling, Hanauer writes.

“The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren’t only cheap labor to be exploited; they were customers, too,” he writes. “Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they’d be able to afford his Model Ts.”

Hanaeur said inaction by larger companies like Walmart and McDonald’s prove that “we should compel retailers to pay living wages – not just ask politely.”

This year has given Hanauer reasons to feel emboldened. French economist Thomas Piketty struck a nerve with his book on the widening wealth gap, Capital In The Twenty-First Century which skyrocketed to No. 1 on Amazon. Further fueling the fire, the International Monetary Fund last month urged the United States to raise the minimum wage or risk even slower economic growth.

“If workers have more money, businesses have more customers,” Hanauer wrote. “The middle class creates us rich people, not the other way around.”