Fincen’s New Residential Real Estate Rule

Anti-Money Laundering Regulations for Residential Real Estate Transfers

In August 2024, FinCEN announced a final rule, now known as the “Residential Real Estate Rule,” designed to combat and deter financial crimes/money laundering by increasing transparency in the U.S. residential real estate industry (https://www.federalregister.gov/public-inspection/2024-19198/anti-money-laundering-regulations-for-residential-real-estate-transfers).

Reportable Transfers of Residential Real Property: Specifically, transfers are reportable when they meet the following criteria:

Overview: The final rule requires “reporting persons” performing specified closing or settlement functions in certain reportable transfers of residential real property to report specified information to FinCEN about the transfer.

The property is residential real property
The transfer is non-financed
The property is transferred to a legal entity or trust
An exemption does not apply.

Transfers meeting the rule’s requirements must be reported regardless of purchase price or the value of the property. Gift transfers are thus subject to the rule.
For a transfer to be reportable, it must be non-financed, meaning that it does not involve an extension of credit to all transferees that is both (1) secured by the transferred property and (2) extended by a financial institution subject to an AML program and Suspicious Activity Report (SAR) obligations. A transfer of residential real property must be reported if at least one of the new owners of residential real property is a “transferee entity” or “transferee trust.”

Determination of Reporting Persons

FinCEN expects that the obligation to file reports will generally rest with settlement agents, title insurance agents, escrow agents, and attorneys. There is only one reporting person for any given reportable transfer. The reporting person is determined by one of the following ways:

Reporting cascade: The reporting cascade consists of a list of seven different functions that a real estate professional may perform in a transfer of residential real property, with the reporting obligation for any such transfer applying to the professional that performed a function that appears highest on the list.
Real estate professionals decide: Designed to provide flexibility to the industry and reduce potential burden, the real estate professionals that perform the functions described in the cascading list may enter into a written agreement with each other to designate the professional that will file the report for the transfer.

Required Information

The final rule requires that a reporting person provide information about the transfer of residential real property identifying the following:

The reporting person;
The legal entity (transferee entity) or trust (transferee trust) receiving ownership of the property;
The beneficial owners of the transferee entity or transferee trust;
Certain individuals signing documents on behalf of the transferee entity or transferee trust during the reportable transfer;
The transferor (e.g., the seller);
The residential real property being transferred; and
Total consideration and certain information about any payments made.

Deadline

A report must be filed by the later date of either:

The final day of the month following the month in which the reportable transfer occurred; or
30 calendar days after the date of closing.

End of RRE Rule