FinCEN, the Financial Crimes Enforcement Network, is a bureau within the U.S. Department of the Treasury. It aims to safeguard our financial systems from activities like money laundering, terrorist financing, and other illicit financial threats. The bureau carries out this mission by collecting, analyzing, and disseminating financial data.
Effective March 1, 2026, FinCEN will begin enforcing a new Residential Real Estate Rule that real estate attorneys, agents, and other real estate professionals need to know about. Read on below to learn more about this rule, why it’s important for the real estate industry, what kinds of transactions need to be reported, and how to file a report.
What is the Residential Real Estate Rule?
According to the FinCEN website, “The Residential Real Estate Rule requires professionals involved in real estate closings and settlements to submit reports to FinCEN regarding certain non-financed transfers of residential real estate to legal entities or trusts.” In plain language, this means that certain all-cash or privately financed residential deals will now need to be reported to the agency.
The purpose of this new rule is to increase transparency in the U.S. housing market and to combat money laundering schemes. By reporting certain transactions to the bureau, it will be harder for illicit actors to manipulate the financial system through residential real estate purchases.
What is money laundering in real estate?
Money laundering is a process by which the origins of illegally-obtained funds are concealed or disguised, often by transferring funds through an otherwise legitimate business or financial transaction. Real estate transactions are popular avenues for laundering money because they involve large sums of money, allowing significant amounts of illegally obtained money to be transferred in a single transaction. Additionally, buyers can use trusts or other third-party entities to purchase real estate, allowing for transactions to take place semi-anonymously.
What transactions does this rule apply to?
Under this new rule, any transaction that transfers residential real estate (a) without the involvement of a bank or other financial institution and (b) where the buyer is an entity or a trust, needs to be reported. Covered properties include single-family homes, townhouse units, condominiums, cooperatives, and parcels of land intended for up to four family residences. Some properties with mixed or commercial use may also qualify, provided the structure contains a residential unit.
Who is responsible for filing the report?
According to FinCEN, the “reporting person” is determined by a “reporting cascade,” or a series of seven different functions a real estate professional may perform. The order of responsibility begins first with the closing or settlement agent, then to the person who prepared the closing or settlement statement, and so on. You can view the full list here, under section C2 of the Residential Real Estate Frequently Asked Questions.
Work with a trusted title partner for a smooth closing
When new rules or legislation impact the real estate industry, it’s essential to work with a trusted title company like Landtrust Title. We act as a knowledgeable, neutral third party, ensuring that your transaction is compliant with all applicable regulations and moves forward in a timely manner. No matter the size or complexity of your sale, Lantrust is there to help you solve problems quickly and efficiently.
If you have questions about how FinCEN regulations will affect your transaction, reach out to the trusted title professionals at Landtrust Title Services today.