FinCEN Issues Final Rule Imposing Anti-Money Laundering Reporting Requirements for Residential Real Estate Transfers

The U.S. Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN") issued a final rule (the "Final Rule") that requires certain professionals to report information to FinCEN about non-financed transfers of residential real estate to a legal entity or trust. The Final Rule is aimed at improving transparency, limiting the ability of illicit actors to anonymously launder illicit proceeds through the American housing market, and bolstering law enforcement investigations. The Final Rule will become effective on December 1, 2025.

The Final Rule largely adopts the content and structure proposed by FinCEN in February of 2024. However, FinCEN made several changes in response to public comments. These changes include (i) the adoption of a reasonable reliance standard regarding information provided by third parties, and (ii) incorporating a "cascade" system in order to determine which professional is primarily responsible for filing with FinCEN, including an option for industry professionals to designate compliance responsibilities.

The following is a summary of the Final Rule's requirements, including further discussion of the changes from the proposed rule. FinCEN has also issued a fact sheet and FAQs on the Final Rule.

Which Residential Real Estate Transfers are Covered?

The basic structure of the Final Rule is a requirement for certain persons involved in the closing and settlement of real estate transactions to file a streamlined suspicious activity report (a "Real Estate Report") within 30 days after the transfer of certain residential real estate. A transfer is reportable if it meets the following criteria: (i) the property is residential real property; (ii) it is non-financed; (iii) the property is transferred to a legal entity or trust; and (iv) no exemption applies.

Residential Real Property:

The Final Rule only covers transfers of (i) U.S. real property designed principally for occupancy by one to four families; (ii) vacant or unimproved land that is zoned, or for which a permit has been issued, for occupancy by one to four families; and (iii) shares in a cooperative housing corporation.

Non-Financed Transfer:

A reportable transfer is one that does not involve an extension of credit to all transferees that is (i) secured by the transferred property, and (ii) extended by a financial institution that is required to maintain an anti-money laundering program and report suspicious activity under the Bank Secrecy Act. Therefore, the Final Rule applies to "all-cash" purchases, as well as those financed by lenders other than regulated financial institutions.

Transferee Entity or Transferee Trust:

The Final Rule applies only to transfers to entities or trusts, not to individuals. For purposes of this rule, trusts exclude statutory trusts, a trust that is a securities reporting issuer, and a trust in which the trustee is a securities reporting issuer. Also, the following regulated entities are exempt as transferee entities in light of existing regulatory oversight.

Exemption No.	Exempt Entity
1.	Securities reporting issuer
2.	Governmental authority
3.	Bank
4.	Credit union
5.	Depository institution holding company
6.	Money services business
7.	Broker or dealer in securities
8.	Securities exchange or clearing agency
9.	Other Exchange Act registered entity
10.	Insurance company
11.	State-licensed insurance producer
12.	Commodity Exchange Act registered entity
13.	Public utility
14.	Financial market utility
15.	A registered investment company
16.	Subsidiary of an exempted entity

Notably, this list of exemptions is not the same as the list of entities that are exempt from the Corporate Transparency Act's beneficial ownership reporting regime. The Final Rule does not exempt transfers to registered investment advisors or pooled investment vehicles (or their subsidiaries) unless they are controlled or wholly owned by an exempt entity listed above.

Exemptions:

The following common "low-risk" transfers are excluded from the Final Rule:

1. an easement;
2. A transfer resulting from the death of an individual;
3. A transfer incident to divorce or dissolution of a marriage or civil union;
4. A transfer to a bankruptcy estate;
5. A transfer supervised by a court in the United States;
6. A transfer made for no consideration by an individual, either alone or with their spouse, to a trust of which that individual, their spouse, or both, are the settlor or grantor;
7. A transfer to a qualified intermediary for purposes of a like-kind exchange under Section 1030 of the Internal Revenue Code; and
8. A transfer for which there is no reporting person.

Reasonable Reliance:

The Final Rule clarifies that reporting persons may rely on information provided by third parties in order to determine whether a transfer is reportable and when collecting required information, as long as the reporting person does not have knowledge of facts that would reasonably call into question the reliability of the information. Accordingly, real estate professionals do not generally need to conduct independent due diligence for purposes of a Real Estate Report if they receive reasonable information from other persons.

Who Must File Real Estate Reports?

The Final Rule establishes a multi-step "cascade" process for determining who is the reporting person for a given reportable transfer. Specifically, the reporting person is determined in the following order, with each subsequent step only relevant if there is no such person described in the preceding steps involved in the transfer:

1. The person listed as the closing or settlement agent on the closing or settlement statement for the transfer;
2. The person that prepares the closing or settlement statement for the transfer;
3. The person that files with the recordation office the deed or other instrument that transfers ownership of the residential real property;
4. The person that underwrites an owner's title insurance policy for the transferee with respect to the transferred residential real property, such as a title insurance company;
5. The person that disburses in any form, including from an escrow account, trust account, or lawyers' trust account, the greatest amount of funds in connection with the residential real property transfer;
6. The person that provides an evaluation of the status of the title; or
7. The person that prepares the deed or, if no deed is involved, any other legal instrument that transfers ownership of the residential real property.

Additionally, any person that could be a reporting person (e.g. a settlement agent) may agree with any other person who could be a reporting person (e.g. the underwriter of an owner's title insurance property) to designate that person as the reporting transfer. Any such designation agreement must be in writing and a separate designation agreement is required for each reportable transfer.

What Information Must Be Reported?

The Real Estate Report must identify and include information on: (i) the reporting person; (ii) the legal entity or trust transferee; (iii) the beneficial owners of that transferee entity or transferee trust; (iv) the transferor; (v) the property being transferred; and (vi) the total consideration and information about any payments made.

The beneficial owners of a transferee entity are those who, on the date of closing, either directly or indirectly (i) exercise substantial control over the transferee entity, or (ii) own or control at least 25% of the transferee entity's ownership interests.

Beneficial owners of a transferee trust include the following persons, as of the time of the transfer of residential real property to the trust:

1. a trustee;
2. persons with authority to dispose of transferee trust assets;
3. beneficiary who is the sole permissible recipient of income and principal from the transferee trust or has the right to demand a distribution of, or withdraw to, substantially all of the assets of the transferee trust;
4. a grantor or settlor who has the right to revoke the transferee trust or otherwise withdraw the assets of the transferee trust; and
5. the beneficial owner of a legal entity or trust that holds one of the positions described above

In reporting beneficial ownership information of transferee entities or transferee trusts, reporting persons may only reasonably rely on information provided by the transferee or the transferee's representative and that person much certify the accuracy of the information in writing to the best of their knowledge.

The following information is required for entities:

1. Full legal name;
2. Trade name or "doing business as" name, if any;
3. The U.S. street address for an entity's principal place of business; and
4. The IRS Taxpayer Identification Number (IRS TIN) or a foreign jurisdiction tax identification number (or entity registration number) and the name of such jurisdiction.

The following information is required for trusts:

1. Full legal name;
2. Date the trust instrument was executed;
3. The street address that is the trust's place of administration;
4. The IRS TIN, or a foreign jurisdiction tax identification number (or entity registration number) and the name of such jurisdiction; and
5. Whether the trust is revocable.

The following information is required for individuals (including beneficial owners, trustees of transferee trusts, and signing individuals):

1. Full legal name;
2. Date of birth;
3. Current residential street address;
4. Citizenship; and
5. An IRS TIN or a foreign jurisdiction tax identification number (or passport number) and the name of such jurisdiction.

The following information is required about the property and transfer:

1. The street address, if any, and the legal description of the residential real property;
2. The amount of the payment, consisting of the total consideration paid by the transferee entity or transferee trust;
3. The method by which the payment was made;
4. If the payment was paid from an account held at a financial institution, the name of the financial institution and the account number;
5. The name of the payor on any wire, check, or other type of payment if the payor is not the transferee entity or transferee trust;
6. The total consideration paid or to be paid by all transferees regarding the reportable transfer; and
7. Whether the reportable transfer involved credit extended by a person that is not a financial institution with an obligation to maintain an anti-money laundering program and an obligation to report suspicious transactions under the Bank Secrecy Act.

Key Takeaways

Persons involved in the closing and settlement of real estate transactions, as well as those involved as a business in the purchase and sale of residential property, should carefully review the Final Rule and consider how they may be affected. Covered real estate professionals may consider adopting policies and procedures to identify reportable transfers, obtain the required information, and timely file Real Estate Reports. They may also discuss with other professionals how they anticipate designating filing responsibilities, although a separate designation agreement will be required for each reportable transfer. Potential reporting persons should begin this process soon as the new requirements take effect on December 1, 2025.

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