Based on cases reported between 2015 and 2020, more than $2.3 billion has been laundered through U.S. real estate. Now, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, has issued a final rule that extends anti-money laundering (AML) requirements to persons involved in real estate closings and settlements. This final rule is the culmination of proposed rulemaking to ban anonymous purchases of luxury homes, which allows illicit actors to conceal their identity and profits.
The rule requires certain professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real estate to legal entities or trusts. Illicit actors often favor non-financed transfers to avoid scrutiny from financial institutions that have AML/countering the financing of terrorism (AML/CFT) programs and Suspicious Activity Report (SAR) filing requirements under the Bank Secrecy Act (BSA).
The FinCEN ruling takes effect and the reporting obligations begin on December 1, 2025.
Specifics of the new real estate AML rule
Real estate is an attractive money laundering vehicle for criminals, considering the high value of properties, the ability to transact in cash, and subjective pricing. The FinCEN ruling, deemed by some as “the first ever nationwide, permanent anti-money laundering regime for U.S. real estate transactions,” is intended to make this crime more difficult.
Central to the rule is the requirement to file Real Estate Reports with FinCEN to help identify illicit financial activity. These reports are required for certain residential real estate transfers in which the purchaser or other party being transferred an interest in real property is a legal entity (Transferee Entity) or trust (Transferee Trust). Real Estate Reports are not required when an ownership interest is transferred to an individual.
Reporting is required for structures and units designed principally for occupancy by one to four families. Land on which the transferee intends to build structures and a share in a cooperative housing corporation are also included in the rule. Reportable property only includes property located in the U.S. and its territorial possessions.
There are several exemptions from reporting, including transfers resulting from the death of an owner or from a divorce as well as transfers made to a bankruptcy estate. Importantly, there are no exemptions based on the value or purchase price of the property.
Real Estate Reports must identify the beneficial owners of transferee entities and transferee trusts. Consistent with the Corporate Transparency Act (CTA), a beneficial owner of a transferee entity is an individual who, directly or indirectly, exercises substantial control over the transferee entity or owns or controls at least 25% of the ownership interests of the entity. The rule specifies several criteria to identify a beneficial owner of a transferee trust including any individual who, at the time of the real estate transfer to the transferee trust, is a trustee or a trust protector.
>> Learn five strategies for using public records to find ultimate beneficial ownership <<
There is a seven-level cascading approach to reporting obligations to identify who is responsible for filing the Real Estate Report. The reporting obligation starts with the person listed as the closing or settlement agent on a settlement or closing statement and culminates in the person who prepares the deed or other legal instrument that transfers ownership of the property.
The rule excludes financial institutions with an obligation to maintain an AML/CFT program from those responsible for filing a report because these institutions are subject to the more comprehensive AML/CFT program responsibilities and the SAR filing requirement.
The rule requires a reporting person to file the Real Estate Report with FinCEN on the final day of the following month after which a closing took place, or 30 days after the date of the closing, whichever is later. FinCEN states that omitted or inaccurate Real Estate Reports will follow the
existing civil and criminal penalty structure under the BSA.
Ensuring compliance with the AML rule
FinCEN estimates that over 170,000 reporting persons in the U.S. residential real estate sector are impacted by this new AML compliance rule.
To ensure compliance with the new reporting requirements, real estate professionals should review their existing procedures to identify how they will meet these new reporting obligations before the new ruling takes effect in December 2025. Financial institutions involved in real estate transaction financing should also review internal procedures for these transactions to determine if there are reporting requirements or if the transactions are exempt.
How Sayari helps counter real estate money laundering
Trusts and beneficial ownership are key elements of the new FinCEN ruling. Trusts pose increased risks to financial institutions and enforcement agencies for one primary reason: secrecy. Information on the ultimate beneficiaries of trusts is typically not publicly available. When trusts are used to hold assets, it can be difficult and often impossible to determine who ultimately owns or controls said assets. Determining beneficial ownership plays a critical role in supporting real estate money laundering (REML) countermeasures.
With the FinCEN ruling, reporting requirements are placed on the gatekeepers of real estate transactions. While family relatives can facilitate money laundering as proxies, they are not considered gatekeepers. Gatekeepers are professionals – such as real estate brokers, bankers, loan officers, and lawyers – who participate in real property transactions. Their involvement in real estate money laundering schemes presents additional opportunities to curb REML through regulatory reform such as the new ruling.
Sayari supports counter-REML objectives by turning 2.3B+ corporate records into an interactive map of the globe’s commercial relationships, enabling organizations and investigators to visualize cross-border corporate networks all in one intuitive platform.
Sayari Graph helps the regulators and the regulated:
- Identify beneficial owners of real estate assets by pairing corporate data with property data in one easy-to-use platform
- Analyze complex, cross-border corporate networks involved in trans-national money laundering schemes
- Monitor for REML typologies, such as real estate purchases through shell companies and third-party purchases
To learn how Sayari Graph can support your compliance and reporting objectives, read our ebook on emerging countermeasures to combat real estate money laundering.
