2024-08-29
Bad actors often favor non-financed residential real estate transfers (including “all-cash” sales) to avoid scrutiny from financial institutions that have anti-money laundering and countering the financing of terrorism (AML/CFT) program and Suspicious Activity Report (SAR) filing requirements under the Bank Secrecy Act (BSA), and obscure their identities and ownership interests by holding the residential real estate in the name of a legal entity or trust.
FinCEN issued final rules that will take effect on December 1, 2025, to increasing transparency to combat and deter money laundering by requiring certain professionals involved in “reportable” real estate closings and settlements that are a high risk for illicit finance to report information to FinCEN on a nationwide basis about specified transfers of residential real estate. In general, a transfer will be reportable under the new rule if:
- the property is residential real property located in the United States (including vacant or unimproved land on which the transferee intends to build a structure designed for occupancy by one to four families, and mixed-use property);
- the transfer is “non-financed” (i.e., the transfer does not involve an extension of credit to all transferees that is both secured by the transferred property, and extended by a financial institution subject to an AML program and SAR obligations);
- the property is transferred to a legal entity or trust; and
- an exemption does not apply.
The rules apply regardless of the purchase price or value of the property, so gift transfers will be subject to the reporting rules.
Transfers made directly to an individual are not covered by final rules. There are also exemptions for certain common lower-risk transfers, including transfers of an easement, transfers resulting from the death of an individual, and transfers incident to divorce.
Settlement agents, title insurance agents, escrow agents, and attorneys are subject to the reporting obligation, and include a “cascade” system for determining which professional has primary filing responsibility, with a flexible option for industry professionals to designate compliance responsibilities.
The final rules also include a reasonable reliance standard with respect to information provided by others.
FinCEN Final Rule RIN 1506-AB54
Real Estate Reports: Frequently Asked Questions
Fact Sheet: FinCEN Issues Final Rule toIncrease Transparency in Residential Real Estate Transfers