Anti-Money Laundering Regulations for Residential Real Estate Transfers

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>Financial Crimes Enforcement Network</SUBAGY> <CFR>31 CFR Chapter X</CFR> <RIN>RIN 1506-AB54</RIN> <SUBJECT>Anti-Money Laundering Regulations for Residential Real Estate Transfers</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Financial Crimes Enforcement Network (FinCEN), Treasury. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> FinCEN is issuing a final rule to require certain persons involved in real estate closings and settlements to submit reports and keep records on certain non-financed transfers of residential real property to specified legal entities and trusts on a nationwide basis. Transfers made directly to an individual are not covered by this rule. This rule describes the circumstances in which a report must be filed, who must file a report, what information must be provided, and when a report is due. These reports are expected to assist the U.S. Department of the Treasury, law enforcement, and national security agencies in addressing illicit finance vulnerabilities in the U.S. residential real estate sector, and to curtail the ability of illicit actors to anonymously launder illicit proceeds through transfers of residential real property, which threatens U.S. economic and national security. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Effective December 1, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> The FinCEN Regulatory Support Section at 1-800-767-2825 or electronically at <E T="03">frc@fincen.gov.</E> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Executive Summary</HD> Among the persons required by the Bank Secrecy Act (BSA) to maintain anti-money laundering and countering the financing of terrorism (AML/CFT)  <SU>1</SU> <FTREF/> programs are “persons involved in real estate closings and settlements.”  <SU>2</SU> <FTREF/> For many years, FinCEN has exempted such persons from comprehensive regulation under the BSA. However, information received in response to FinCEN's geographic targeting orders relating to non-financed transfers of residential real estate (Residential Real Estate GTOs) has demonstrated the need for increased transparency and further regulation of this sector. Furthermore, the U.S. Department of the Treasury (Treasury) has long recognized the illicit finance risks posed by criminals and corrupt officials who abuse opaque legal entities and trusts to launder ill-gotten gains through transfers of residential real estate. This illicit use of the residential real estate market threatens U.S. economic and national security and can disadvantage individuals and small businesses that seek to compete fairly in the U.S. economy. <FTNT> <SU>1</SU>  Section 6101 of the AML Act, codified at 31 U.S.C. 5318(h), amended the BSA's requirement that financial institutions implement AML programs to also combat terrorist financing. This rule refers to “AML/CFT program” in reference to the current obligation contained in the BSA. </FTNT> <FTNT> <SU>2</SU>  31 U.S.C. 5312(a)(2)(U). </FTNT> Earlier this year, pursuant to the BSA's authority to impose AML regulations on persons involved in real estate closings and settlements, FinCEN proposed a new reporting requirement. Under the proposed rule, certain persons involved in real estate closings and settlements would be required to report on certain transfers that Treasury deems high risk for illicit financial activity—namely, non-financed transfers of residential real property to legal entities and trusts. FinCEN is now issuing a final rule that adopts the proposed rule with some modifications. The final rule imposes a streamlined suspicious activity report (SAR) filing requirement under which reporting persons, as defined, are required to file a “Real Estate Report” on certain non-financed transfers of residential real property to legal entities and trusts. Transfers to individuals, as well as certain transfers commonly used in estate planning, do not have to be reported. The reporting person for any transfer is one of a small number of persons who play specified roles in the real estate closing and settlement, with the specific individual determined through a cascading approach, unless superseded by an agreement among persons in the reporting cascade. The reporting person is required to identify herself, the legal entity or trust to which the residential real property is transferred, the beneficial owner(s) of that transferee entity or transferee trust, the person(s) transferring the residential real property, and the property being transferred, along with certain transactional information about the transfer. The final rule adopts a reasonable reliance standard, allowing reporting persons to rely on information obtained from other persons, absent knowledge of facts that would reasonably call into question the reliability of that information. For purposes of reporting beneficial ownership information in particular, a reporting person may reasonably rely on information obtained from a transferee or the transferee's representative if the accuracy of the information is certified in writing to the best of the information provider's own knowledge. FinCEN has sought to minimize burdens on reporting persons to the extent practicable without diminishing the utility of the Real Estate Report to law enforcement and believes the final rule appropriately balances the collection of information that is highly useful to Treasury, law enforcement, and national security agencies against the burdens associated with collecting that information, particularly on small businesses. <HD SOURCE="HD1">II. Background</HD> <HD SOURCE="HD2">A. Addressing High-Risk Transfers of Residential Real Estate</HD> <HD SOURCE="HD3">1. Authority To Require Reports From Persons Involved in Real Estate Closings and Settlements</HD> The BSA is intended to combat money laundering, the financing of terrorism, and other illicit financial activity. <SU>3</SU> <FTREF/> The purposes of the BSA include requiring financial institutions to keep records and file reports that “are highly useful in criminal, tax, or regulatory investigations or proceedings” or in the conduct of “intelligence or counterintelligence activities, including analysis, to protect against international terrorism.”  <SU>4</SU> <FTREF/> The Secretary of the Treasury (Secretary) has delegated the authority to implement, administer, and enforce compliance with the BSA and its implementing regulations to the Director of FinCEN. <SU>5</SU> <FTREF/> <FTNT> <SU>3</SU>   <E T="03">See</E> 31 U.S.C. 5311. Section 6003(1) of the Anti-Money Laundering Act of 2020 defines the BSA as section 21 of the Federal Deposit Insurance Act (12 U.S.C. 1829b), Chapter 2 of Title I of Public Law 91-508 (12 U.S.C. 1951 <E T="03">et seq.</E> ), and 31 U.S.C. chapter 53, subchapter II. AML Act, Public Law 116-283, Division F, section 6003(1) (Jan. 1, 2021). Under this definition, the BSA is codified at 12 U.S.C. 1829b and 1951-1960, and 31 U.S.C. 5311-5314 and 5316-5336, including notes thereto. Its implementing regulations are found at 31 CFR Chapter X. </FTNT> <FTNT> <SU>4</SU>  31 U.S.C. 5311(1). </FTNT> <FTNT> <SU>5</SU>  Treasury Order 180-01, Paragraph 3(a) (Jan. 14, 2020), <E T="03">available at https://home.treasury.gov/about/general-information/orders-and-directives/treasury-order-180-01.</E> </FTNT> The BSA requires “financial institutions” to establish an AML/CFT program, which must include, at a minimum, “(A) the development of internal policies, procedures, and controls; (B) the designation of a compliance officer; (C) an ongoing employee training program; and (D) an independent audit function to test programs.”  <SU>6</SU> <FTREF/> The BSA also authorizes the Secretary to require financial institutions to report any suspicious transaction relevant to a possible violation of law or regulation. <SU>7</SU> <FTREF/> Among the financial institutions subject to these requirements are “persons involved in real estate closings and settlements.”  <SU>8</SU> <FTREF/> <FTNT> <SU>6</SU>  31 U.S.C. 5318(h)(1)(A)-(D). </FTNT> <FTNT> <SU>7</SU>  31 U.S.C. 5318(g). </FTNT> <FTNT> <SU>8</SU>  31 U.S.C. 5312(a)(2)(U). </FTNT> In particular, section 5318(g) of the BSA authorizes the Secretary to require financial institutions to report, via SARs, any “suspicious transactions relevant to a possible violation of law or regulation.”  <SU>9</SU> <FTREF/> However, the BSA affords the Secretary flexibility in implementing that requirement, and indeed directs the Secretary to consider “the means by or form in which the Secretary shall receive such reporting,” including the relevant “burdens imposed by such means or form of reporting,” “the efficiency of the means or form,” and the “benefits derived by the means or form of reporting.”  <SU>10</SU> <FTREF/> A provision added to the BSA by section 6202 of the Anti-Money Laundering Act of 2020 (AML Act) further directs FinCEN to “establish streamlined . . . processes to, as appropriate, permit the filing of noncomplex categories of reports of suspicious activity.” In assessing whether streamlined filing is appropriate, FinCEN must determine, among other things, that such reports would “reduce burdens imposed on persons required to report[,]” while at the same time “not diminish[ing] the usefulness of the reporting to Federal law enforcement agencies, national security officials, and the intelligence community in combating financial crime, including the financing of terrorism[.]”  <SU>11</SU> <FTREF/> <FTNT> <SU>9</SU>  31 U.S.C. 5318(g)(1)(A). </FTNT> <FTNT> <SU>10</SU>  31 U.S.C. 5318(g)(5)(B)(i)-(iii). </FTNT> <FTNT> <SU>11</SU>   <E T="03">See</E> AML Act, section 6202 ( <E T="03">codified at</E> 31 U.S.C. 53 ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 287k characters. 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