Do you know your lender?

Question

In all fairness, I know this won't be a popular topic, and I'm going to post up and wait for replies rather than facilitate the discussion....so here goes....

I've seen a lot of advertisements, I've received a few offers, and I've seen a lot of offers for "hard money loans" or "private money lending".  On one hand, I see this as a positive for investors and folks trying to make a better life for themselves.  On the other hand, to be frank, I see this as a fabulous opportunity for money laundering.

I'm serious about this...and it's been in the back of my head for a bit.  First and foremost, if I borrow from a "hard money lender" who has funds originated from a "Drug Cartel" or an "Organization Sponsored by ISIS" or any other shady resource, how would I know?

How do you verify where your private money loans are coming from?  How do you know you aren't unintentionally committing an illegal act by borrowing from "dirty money"?

Ned Carey · Answer

I won't comment because I value my kneecaps.

Jesse Goldberg · Answer

Account Closed This is a valid question and something that can be discussed, but of course there is some discretion as we do hold investor's information private.

I'd assume that "dirty money" probably isn't common place is the majority of private money lender's investor pools, as I would assume it would not be the quickest way to launder money...but I'm not an expert on laundering and did not grow up on enough mobster movies.

The more important question I think you asked is "Do you know your lender?". I really believe, and built my company on this idea, that the relationship between borrower and lender is important in facilitating deals, and trust is earned, not given. I think it's safe to ask how a lender raises capital, if it's their own, how much is investor driven, etc. Just my two cents!

Thomas S. · Answer

The real answer is that if you do not know and could not be expected to know you should not care where it comes from. Banks also deal with laundering dirty money every day. The Vatican Bank is well known for laundering money from criminal organisations.

Once it's been washed it as clean as it needs to be.

Stephanie P. · Answer

The real answer is you wouldn't know until you miss a payment.

Account Closed

Richard Anderson · Answer

Hi Account Closed this is actually a good question. Without being able to perform a pretty comprehensive audit on your lender, you would not be able to know. And it's actually a good opportunity for someone to launder. Especially if they are involved in multiple deals and perhaps using profits to purchase properties for cash to further cleanse the funds. Treasury, and therefore FinCEN, have issued geographically based filing requirements related to cash purchases. But those are in specific markets and for large dollar amounts.

Account Closed · Answer

That may fly in Canada but here in the U.S., 18 U.S.C. Section 1956 specifically states that individuals are prohibited from engaging in a financial transaction with proceeds that  were generated from certain specific crimes, known as “specified  unlawful activities” (SUAs). Additionally, the law requires that an  individual specifically intend in making the transaction to conceal the  source, ownership or control of the funds.  It actually puts the person responsible for receiving the funds in a situation where they need to be sure of the source of the funds.

As an example, if I were to borrow from you directly, and you were laundering money, I would be held accountable for participating in your money laundering scheme.

The Vatican is in Rome.  I don't know Roman Law and it doesn't pertain to this discussion.

Do you know your lender?

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