FinCEN Anti Money Laundering Real Estate Rule for Entities – By Cindy Immonen

FinCEN Anti Money Laundering Real Estate Rule for Entities – By Cindy Immonen

Cindy Immonen

1970 – Bank Secrecy Act passed requiring anti-money laundering and countering financing of terrorism programs for financial institutions.
1988 – “Persons involved in real estate closings and settlements” were included in 1988’s Anti-Drug Abuse Act but were excepted from rulemaking.
2024 – FinCEN creates final Residential Real Estate Rule that requires settlement agents and attorneys to report specific information or be subject to civil and criminal penalties which would include imprisonment.

• First, the definition of “cash purchase” includes not only all-cash sales, but also transactions involving private or seller-financing. It also includes sale transactions or lines of credit involving a loan by a bank, mortgage broker or mortgage banker or other source that is not required to have an anti-money laundering program. You will want to ask if the lender has an NMLS number.
• Next, the definition of “residential real estate” includes existing residential 1-4 family properties, co-ops, condominiums, and mixed use and apartment buildings.  It also includes vacant land on which the buyer intends to build a residential structure primarily for occupancy by 1-4 families.  Includes sales anywhere in the US (50 states), DC, Puerto Rico, overseas territories, and Indian lands.
• Third, if the real estate transaction Buyer is an entity (corporation, partnership, LLC, etc.) or trust.

To comply with the reporting requirements, there is a cascade of who must report which could be the settlement agent or an attorney preparing a deed. The information requested includes:

• Reporting person information
• Closing date
• Property address and full legal description
• Transferee/Buyer information
• Person(s) associated with the transferee (authorized signers and beneficial owners)
• Transferor/Seller information
• If the Transferor is Trust, provide the trustee’s information
• Purchase price
• Payment Information, including bank account details for sourcing funds
• Detailed payment information for payments made on behalf of the Transferee/Buyer
• There will be 111 data points to be reported.

This information is required by FinCEN with a limited time for filing post-closing (30 to 45 days).

FinCEN (the Financial Crimes Enforcement Network) is requiring that persons involved in real estate closings and settlements submit reports and keep records on certain transfers of residential real property to legal entities and trusts. All-cash purchases, purchases funded by private and hard money lenders, and certain transfers for no consideration must be reported to FinCEN, including the identity of the buyer and seller, the lender (if applicable), the source of the funds, including bank information, and the beneficial owners of any buyer entity or trust.

FinCEN’s Real Estate Reporting Final Rule (the “Rule”) takes effect on December 1, 2025. Reports must be submitted no later than the final day of the month following the date of closing or thirty calendar days after the closing, whichever is later. Persons responsible for reporting can prepare for the reporting effective date by reviewing the FinCEN reporting requirements and preparing policies and procedures for reporting.

The Rule states that title companies fall under the category of “persons involved in real estate closings and settlements” and are included in the category of “financial institutions” in the Bank Secrecy Act (“BSA”), which established FinCEN. Under the BSA, “financial institutions” are required to maintain Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) programs, including reporting “suspicious transactions” to the Secretary of the Treasury. The Rule establishes the procedures for such reporting.

Title companies are not required to independently verify the information collected but must use “reasonable reliance” in gathering the requested information. This means that the person gathering the information may rely on information provided by third parties so long as the reporting person does not have knowledge of any facts that would call into question the reliability of the information provided by the third party. Information on beneficial ownership of buyer entities or trusts must be accompanied by a certification that the information provided is accurate and be signed by the party providing the information. Title companies must retain these certifications in their files for five years.

• Grant, Transfer, or revocation of an easement
• Transfer resulting from the death of an individual, whether under a will, trust, by operation of law or contract
• Transfer incident to divorce or dissolution of marriage
• Transfer to a bankruptcy estate
• Transfer ‘Supervised by a court’
  – Mortgage foreclosure? Judicial vs. non-judicial
  – Quiet Title final judgment?
• Transfer for no consideration to certain trust
• Transfer from an individual, their spouse, or both of them, to a trust of which the same individual(s) are the settlor / grantor
• Transfer to a QI for purposes of a Sec. 1031 exchange
• ‘Corrective’ deeds are “not transfers” and therefore not reportable.

The Rule will be subject to legal challenges and differing interpretations. FNF MI Agency is committed to providing guidance to their authorized Title Companies for compliance as changes develop. FNF MI Agency currently has published checklists for use in implementing a reporting process.

It’s time to work together on processes so compliance with this new rule for your transactions can be as smooth as possible.

NOTE: This information is for your reference only and is not intended to represent the only approach to any particular issue. These guidelines should not be construed as legal, financial or business advice. We recommend you consult your legal counsel and subject-matter experts to determine appropriate policies, procedures and strategies applicable to your office or organization.