/>iEffective 1 December 2025, the Financial Crimes Enforcement Network (FinCEN) has implemented comprehensive nationwide regulations aimed at increasing transparency and combating money laundering in the United States residential real estate sector. These regulations were set forth in the final rule 89 Fed. Reg. 70258 (Final Rule) published on 29 August 2024, by the US Department of the Treasury.
Historically, the US residential real estate market has been vulnerable to exploitation by illicit actors who purchase residential real estate in nonfinanced (i.e., all-cash) transactions under the veil of legal entities or trusts. Such transactions are an attempt to obscure the illicit actor’s identity and to evade scrutiny from financial institutions that have anti-money laundering and countering the financing of terrorism programs (AML/CFT) and Suspicious Activity Report (SAR) requirements in place. These nonfinanced transactions have allowed criminals to integrate ill-gotten gains into the legitimate economy, posing significant threats to national security and economic integrity.
The Final Rule mandates that certain individuals in real estate closings and settlements report specific information to FinCEN about nonfinanced transfers of residential real estate to legal entities or trusts. The reporting of these transfers is an attempt to curtail the anonymous laundering of illicit proceeds by increasing transparency of nonfinanced purchases of residential real property. The Final Rule applies nationwide and is designed to address transactions that present a high risk for illicit financial activity.
A transaction becomes reportable under the following conditions:
Property Type
The property involved is residential real estate located within the United States. Under the Final Rule, residential real estate means (a) real property containing a structure designed principally for occupancy by one to four families, which includes single-family houses, townhouses, and entire apartment buildings; (b) vacant and unimproved land on which the transferee intends to build a structure designed principally for occupancy by one to four families; (c) a unit designed principally for occupancy by one to four families within a structure (e.g., a condominium); or (d) shares in a cooperative housing corporation. Additionally, a transfer of mixed-use property may be reportable if a portion is considered residential real estate (e.g., a single-family residence located above a commercial enterprise).
Financing
The transfer is nonfinanced, meaning it does not involve a loan or other forms of financing from a financial institution subject to AML/CFT programs and SAR requirements. All-cash transactions and transfers that are financed only by a lender without an obligation to maintain such programs and requirements (e.g., a nonbank private lender) are treated as nonfinanced transfers.
Transferee
The property is transferred to a legal entity or trust, rather than an individual.
Exemptions
The transaction does not fall under any specified exemptions outlined in the Final Rule—such exemptions include transfers associated with an easement, death, divorce, or bankruptcy or that are otherwise supervised by a court in the United Sates, as well as certain no consideration transfers to trusts, transfers to a qualified intermediary for purposes of 1031 Exchanges, and any transfer for which there is no reporting person.
The Final Rule identifies “reporting persons” as individuals responsible for performing specific closing or settlement functions in covered transactions. These individuals are required to submit detailed reports to FinCEN, including information about the parties involved, the property itself, and information concerning payments. To provide flexibility and reduce compliance burdens, the Final Rule incorporates a “cascade” system to determine primary filing responsibility and allows industry professionals to designate compliance duties among themselves. To illustrate this system, the reporting person may be the closing or settlement agent, or if there is no such person then the person listed to prepare the closing or settlement statement for the transfer, or if there is no such person then the person that files the deed or other transferring instrument with the recordation office, and so forth.
There has been legislative activity aimed at overturning FinCEN’s upcoming rule. On 5 February 2025, Senator Mike Lee introduced Senate Joint Resolution 15 to nullify FinCEN’s rule by expressing congressional disapproval of the Final Rule. Similarly, on 12 February 2025, Representative Andrew S. Clyde introduced House Joint Resolution 55 with the same objective. If either is passed by both the House and Senate and signed by the president, the rule on anti-money laundering regulations for nonfinanced residential real estate transactions would be rendered without force or effect.
The regulatory development outlined herein represents a significant shift in the US residential real estate sector’s approach to anti-money laundering compliance.
