Last week, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule under the Bank Secrecy Act meant to deter criminals from laundering money by paying cash for residential real estate. The rule, which will become effective on Dec. 1, 2025, will require real estate professionals to submit reports about cash sales of residential real estate sold to legal entities, trusts and shell companies, The Washington Post reported.
Specifically, the rule will require professionals involved in the sale to report the names of the sellers and individuals benefitting from the transaction. They will also have to report details about the property being sold and the payments involved, as well as other information.
The final real estate rule doesn’t apply to sales to individuals or those involving mortgages or other financing—only cash sales to entities.
“The Treasury Department has been hard at work to disrupt attempts to use the United States to hide and launder ill-gotten gains,” said U.S. Secretary of the Treasury Janet L. Yellen in a statement. “That includes by addressing our biggest regulatory deficiencies, including through ... new rules that close critical loopholes in the U.S. financial system that bad actors use to facilitate serious crimes like corruption, narcotrafficking, and fraud. These steps will make it harder for criminals to exploit our strong residential real estate and investment adviser sectors.”
FinCEN also issued FAQs and a fact sheet about the real estate final rule.
FinCEN proposed the rule in February, the Associated Press reported. The rule, when proposed, noted,“ Although certain information collected under this proposed rule may also be available to law enforcement, in some instances, through the new beneficial ownership reporting requirements imposed by the Corporate Transparency Act (CTA), the CTA’s reporting regime and this proposed rule serve different purposes.”
The Corporate Transparency Act aims to deter money laundering, corruption and other forms of criminal activity by shell companies by requiring certain companies to disclose information about who actually owns or controls them, known as beneficial ownership information (BOI). Companies existing before Jan. 1, 2024, will have one year to report BOI, while companies created or registered after Jan. 1 will be required to report BOI within 90 calendar days of their creation or registration. FinCEN) started accepting BOI reports at a new online registry that opened on Jan.1.
The Biden administration has working to fight money laundering and the movement of criminal proceeds through the American financial system, and the final real estate rule is part of that effort, the Post reported. All-cash purchases of residential real estate are deemed to be a high risk for money laundering.
The Post also reported that money laundering in residential real estate can increase housing costs . A 2019 study on the impact of money laundering on home values in Canada, conducted by three Canadian professors, found that money laundering investment in real estate pushed up housing prices in the range of 3.7 to 7.5 percent.
Ian Gary, executive director of the FACT Coalition, a nonprofit that promotes corporate transparency, told the Post that the rule provides “much-needed safeguards” to fight dirty money. “After years of advocacy by lawmakers, anti-money laundering experts and civil society, the era of unmitigated financial secrecy and impunity for financial criminals in the U.S. seems to finally be over,” Gary said.
Last Week, FinCen also issued a final investment adviser rule, which will, it said, "apply anti-money laundering/countering the financing of terrorism (AML/CFT) requirements—including AML/CFT compliance programs and suspicious activity reporting obligations—to certain investment advisers that are registered with the U.S. Securities and Exchange Commission (SEC), as well as those that report to the SEC as exempt reporting advisers. The rule will help address the uneven application of AML/CFT requirements across this industry." The rule is scheduled to be published on Sept. 4.
FinCEN reported that, as part of its rulemaking process, “Treasury carefully considered public feedback and consulted extensively with industry groups, intergovernmental partners, and other key stakeholders—including through listening sessions during the public comment periods—to develop rules that will be both effective and administrable while reducing potential burdens on businesses, including small businesses.”