Miami is blessed with year-round warm weather, beautiful beaches, cultural and ethnic diversity, and fortunate geography between the Americas and Europe. The central location makes Miami one of the country's busiest trade and logistics hubs supporting $80 billion in transported goods each year. With a robust warehouse, transportation and fulfillment infrastructure creating half-million good jobs for the local economy, international trade is helping fuel Miami's growing economy.

Miami's emergence as a global trade hub and its decades-long reputation for high-end real estate investment has collided to create a perfect storm for the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Department of Treasury.

Related: Porsche Design Tower Pops Up in $1.2B Venezuelan Oil Scheme, Feds Charge

FIU professor of finance John S. Zdanowicz explained the rise of trade-based money laundering in the South Florida Business Journal. “Criminals and tax evaders have discovered that laundering money through the banking system is dangerous, especially with the new financial institution reporting requirements under the Patriot Act and other banking regulations,” Zdanowicz said. “However, moving money through international trade can be virtually undetectable.”

For the last two years, Miami (including Broward and Palm Beach) has been the subject of geographic targeting orders (GTO) for trade-based money laundering through not only the electronics and apparel industries, but also in residential real estate with six other U.S. cities (Los Angeles, San Antonio, New York City, Honolulu, San Francisco, San Diego). This past spring, GTOs were renewed for residential real estate to continue targeting these cities for another six months. FinCen reported in 2017 that GTOs had been successful in netting meaningful leads in its fight against money laundering within the real estate industry; thus, the recent renewal was expected. Some believe that reporting on the beneficial owners of shell companies used in residential real estate transactions may become a permanent feature of that industry.

While the real estate industry, specifically title insurance industry, is aware of the requirements of the GTO, it remains to be seen if the success of this focus on title insurers will be expanded to include other professionals that handle large real estate transactions, namely commercial brokers, bankers, accountants and attorneys.

In addition, the 2,500-plus South Florida businesses involved in global trade of some sort must also be aware that GTOs can be expanded in the future to their particular industry, as they were for electronics exporters in the Doral area, and be ready to protect themselves. But that's not all; laundered money, whether through banks or trade, can show up anywhere. Freight forwarders, customs brokers, importers, exporters … anyone who transacts business with foreign entities should have protocols and procedures in place to protect their business.

The complexity of global trade can easily obscure the origin of monetary proceeds. Funds from trade-based money laundering can easily move through financial institutions via wire transfers as typical buyer to seller payments, or through other bank services. Here's a real example of a local exporter that learned the hard way about the opacity of money laundering through the routine buying and selling of goods in an import/export transaction. For those that think using third-party wire transfers solves the problem, think again.

A legitimate electronics importer in Bogota, Colombia ordered approximately $1.5 million worth of electronics over a two-year period from an electronics exporter in Miami. On each purchase, the Colombian electronics importer paid the Miami exporter by wire transfer from a U.S. bank. However, the wire's origin was always a third party's bank account in the United States, not the Colombian importer.

The Colombian importer was purchasing U.S. dollar wire transfers in exchange for Colombian pesos from a registered money broker located in the same office building in Bogota. However, unbeknownst to both he and the Miami exporter, the Bogota money broker was working in Colombia's parallel currency market, known as the Black-Market Peso Exchange, and was an intermediary for a drug cartel. The broker would receive legitimate Colombian pesos from importers in Colombia, and in exchange would arrange U.S. dollar wire transfers to U.S. exporters from a U.S. bank account, containing funds originating from the cartel, to pay for importers' purchases. So, the Colombian importer gets his goods, the money broker in Colombia receives clean pesos for his cartel client, while the Miami exporter receives the cartel's “dirty” drug proceeds. The cartel's funds are now laundered through a legitimate export of electronics.

The Miami exporter wrongly believed receiving wire transfers, as opposed to cash or money orders, was a safe way to receive payments for its overseas sales of goods. Unfortunately the third party who owned the U.S. bank account was a person who either did not really exist, used an alias or was otherwise untraceable. The exporter learned that third party wire transfers are a common method of trade-based money laundering. The export company and its president were indicted for money laundering conspiracy. Ultimately, they were acquitted at trial, but only because the government could not prove beyond a reasonable doubt that the president knew the wire transfers were in fact drug proceeds and the funds were not traceable to a specific drug transaction.

Turning back to the real estate industry, for real estate professionals, title insurers, bankers, attorneys and accountants it is important to realize that once the illicit money is made, the actors will try to invest and launder the funds through legitimate means, such as the purchase and sale of residential real estate. Pay attention to these red flags for real estate transactions which may indicate illegal financing or money laundering schemes:

• Geographic risk: Are funds being sourced from entities related to countries or persons native to those countries which are subject to U.S. sanctions? Examples of sanctioned countries or citizens thereof are Iran, Cuba, Syria, North Korea and Venezuela.
• Customer risk: Is there an unexplained geographic distance between buyer and the property? Are there unexplained involvements of third parties in the transaction? Titling residential properties in the name of third parties or business entities that obscure the identity of persons who control or own them without a legitimate business explanation?
• Politically sensitive persons such as high ranking foreign political figures or their families are involved, directly or indirectly, in the transaction. May be indicative of a transaction involving public corruption proceeds.
• Transaction risk: No common bank or financial institution financing; unusual sources of funding; use of large amounts of cash, money orders or cashier's checks; third party wire transfers; buyer paying way over asking price for the property, or simply disinterested in price; amount of purchase inconsistent with apparent income of the buyer; no viewing of property prior to purchase.

For all professionals, it is important to know your customers well by undertaking the necessary training and due diligence to mitigate the risk that a transaction is money laundering. Training will help your team be able to identify red flags, such as modified documents, inconsistent invoices, suspicious third party wire transfers, repetitive sales, over valuation of goods. When red flags are identified, be sure to obtain reliable documentation as to the identity of the buyer; obtain beneficial ownership information and documentation for corporations or LLCs involved in the transaction; and be sure to have rational explanations when features of the transaction appear to have no economic or business purpose.

With a fast-paced, bustling economy and booming real estate market, professionals must be especially diligent to ensure transactions are not used to facilitate trade-based money laundering. Follow these common sense principles to protect your professional licenses and livelihood.

Robert J. Becerra of Becerra Law in Miami is a Florida Bar board-certified specialist in international law and serves as secretary of the bar's international law section.