NEW FINCEN’S RESIDENTIAL REAL ESTATE REPORTING RULE

The Treasury’s Financial Crimes Enforcement Network (“FinCEN”) is implementing a new rule (the “Rule”) to track potential money laundering in the U.S. residential real estate sector. This rule is designed to increase transparency and to combat and deter money laundering. It specifically targets “all-cash” (non-financed) residential sales in which no lender with an anti-money laundering program is involved, and the buyer is an entity or a trust. The rule applies nationwide.

A Real Estate Report must be filed for any reportable transfer with a closing date occurring on or after March 1, 2026. The reports will be submitted to FinCEN through FinCEN’s Bank Secrecy Act (“BSA”) E-Filing System.

Failure to comply with the rule can result in civil penalties, including fines up to $1,394 per violation, with higher penalties for negligence. Willful violations can trigger criminal penalties, including up to five years in prison and $250,000 in criminal fines.

Who May be Affected?
The Rule requires disclosure of the beneficial owners of the transferee entity or trust, including corporations, partnerships, estates, associations, and limited liability companies, involved in all-cash or privately financed residential real estate transactions.

What Transactions Are Reportable?
“Reportable transfer” meets all of the following criteria:

• A transfer is any transfer of an ownership interest in residential real property that is accomplished through a deed, stock, shares, membership, a certificate, or other contractual agreement evidencing ownership, as well as a gift. Exempt transfers include transfers resulting from death, court-supervised transfers, 1031exchange transfers, and transfers to an estate planning trust.

• The property is a residential property (including single-family homes, condos, co-ops, and buildings designed for 1–4 families, as well as unimproved land intended for these types of homes) located in a State of the United States, the District of Columbia, Indian lands, Puerto Rico, the United States Virgin Islands, Guam, and any other territory or possession of the United States.

• The transaction doesn’t involve a mortgage from a traditional bank thatalready has anti-money laundering obligations. Private loans, seller financing, and all-cash deals where the buyer is not using a regulated lender need to be reported.

• The buyer is an entity such as a corporation, LLC, partnership, association, estate, or trust (with a few exceptions for highly regulated entities like banks, insurance companies, statutory trusts, etc.). The beneficial ownership of a buyer entity is determined as of the date of closing.

What if the Transfer is Partially Financed?
A partially financed transfer involving one transferee who makes a down payment and obtains a mortgage to finance the remaining amount is not reportable. However, a partially financed transfer involving multiple transferees, where relevant financing is secured by some, but not all, of the transferees, would be reportable with respect to each transferee that did not secure such financing.

Is A Transfer of An Assignment Contract Reportable?
The transfer of an interest in a contract of sale, in which a person contracts with a property owner to purchase residential real property and then assigns their rights in that contract to a third party who intends to fulfill the contract by purchasing the property, is not itself reportable. However, the ultimate purchase of the property by the third-party assignee in accordance with the contract of sale may be reportable, because a transfer of an ownership interest demonstrated by a deed has occurred.

When is The Report Due?
The report must be by the later of (1) the final day of the month following the month when the closing occurred, or (2) 30 calendar days after the date of closing.  

What Information Must Be Reported?

• Beneficial Owner Information: The names, addresses, and tax IDs of anyone who owns at least 25% of the buying entity or exercises “substantial control” over it.
• Transaction Details: The property address, the total price paid, and the method by which the payment was made.

Who Has to File the Report?
The rule uses a “reporting cascade” to decide which professional is responsible for filing. The primary responsibility for filing is allocated to the settlement agents and escrow providers. Although buyers and sellers are generally not responsible for filing the report, they must provide accurate and timely information required for the Real Estate Report.

TRANSFERS OF UNIMPROVED LAND

When Is a Transaction Involving Future Development of Unimproved Property Reportable?

A developer uses a transferee entity to purchase multiple vacant lots in a non-financed transfer. The vacant lots will be developed as a community and eventually a single- family home will be built on each lot. However, the developer will not be the eventual builder; the builder will be a third party. Do the vacant lots meet the definition of residential real property? 

Yes. If the developer, as a transferee, intends to retain ownership of the lots while the builder builds single-family homes, then the properties are residential real property.

A developer uses a transferee entity to purchase one large parcel of land in a non-financed transfer. At the time of the purchase, the developer intends to subdivide the land in order to build a community with single-family homes. Does the large parcel of land meet the definition of residential real property? 

Yes. At the time of the transfer, the developer (i.e., the transferee) intended to build at least one such structure on the property, therefore the parcel of land meets the definition of residential real property.

What If The Buyer Is Undecided On How The Vacant Land Will Be Used?
If a transferee has no intent at the time of the transfer to build a structure designed principally for occupancy by one to four families, the vacant land does not meet the definition of residential real property.

We will continue to monitor FinCEN guidance and implementation developments related to the Rule.

DISCLAIMER: This client alert for general information purposes only. It is a summary, not a full analysis, of the topic. It is not intended, and should not be construed, as legal advice, and may not be used or relied upon as a substitute for legal advice by a qualified attorney regarding a specific matter.