The US Department of the Treasury’s Financial Crimes Enforcement Network has issued a notice of proposed rulemaking aimed at preventing money laundering in the residential real estate sector.
The proposed rule, which falls within the mandate of the Bank Secrecy Act, aims to increase transparency in the real estate sector by requiring certain professionals to report to FinCEN about a subset of closings and settlements: those involving cash transfers of residential real estate to legal entities or trusts (but not transfers to individuals). Because such transactions do not involve financing through financial institutions, they are not subject to the scrutiny normally applied under the institutions’ anti-money laundering and suspicious activity report-filing programs implemented pursuant to the Bank Secrecy Act.
Building on the success of FinCEN’s residential real estate geographic targeting order (GTO) program, which imposes reporting requirements on title insurance companies in selected jurisdictions, the proposed rule would expand reporting requirements to the entire nation, and effectively replace the GTO program. It would apply to businesses, attorneys and other real estate professionals, and require the reporting of beneficial ownership information about the transferee entity, payments, and identifying information about the residential real property, the transferor, and the reporting professional.
The Fact Sheet published in connection with announcement of the proposed rule highlights the objectives and efficiencies to be achieved, outlining in particular a streamlined reporting framework. The Fact Sheet lists the categories of persons and transactions covered by the rule, while emphasizing that professionals involved in real estate closings and settlements would remain exempt from the anti-money laundering compliance program requirements of the Bank Secrecy Act.
FinCEN will be accepting comments for 60 days after publication of the proposed rule in the Federal Register, scheduled for February 16, 2024.