Proposed 2024 FinCEN Rule For Cash Transactions

The proposed rule affects certain entities and trusts

On February 16, 2024, the Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking titled Anti-Money Laundering Regulations for Residential Real Estate Transfers. This proposed rule imposes reporting and record keeping requirements on certain persons involved in real estate closings and settlements for non-financed residential real estate transactions.

FinCEN’s proposal is tailored to target residential real estate transfers considered to be high-risk for money laundering, and would not require reporting of transfers made to individuals.

“Illicit actors are exploiting the U.S. residential real estate market to launder and hide the proceeds of serious crimes with anonymity, while law-abiding Americans bear the cost of inflated housing prices,” according to FinCEN Director Andrea Gacki.

The proposed rule describes the circumstances in which a report would be filed; who would file a report; what information would need to be provided, including information about the beneficial owners of the legal entities and trusts; and when a report about the transaction would be due.

Reportable Transfers of Residential Real Property

• The proposed rule would require reporting on various types of residential real property transfers, including transfers of single-family houses, townhouses, condominiums, and cooperatives, as well as buildings designed for occupancy by one to four families. It would also require reporting on transfers of land that is vacant or unimproved, but that is zoned, or for which a permit has been issued, for occupancy by one to four families.

• In the case of reportable purchases, there is no threshold purchase price for the transfer; in other words, the transfer would be reportable irrespective of purchase price. Likewise, transfers of ownership for which no consideration is exchanged, such as a gift, would need to be reported.

• Exempted types of transfers would be those involving an easement, that occur as the result of the death of the property’s owner, that are the result of a divorce, or that are made to a bankruptcy estate.

• For a transfer to be reportable, it would need to be non-financed, meaning that it does not involve an extension of credit that is secured by the transferred property and extended by a financial institution subject to AML program and SAR reporting obligations. Transfers financed by private lenders that do not have an obligation to maintain an AML program and a requirement to file SARs would be covered by the reporting requirement.

As proposed, a transfer of residential real property would be reported only if at least one of the new owners of residential real property is a “transferee entity” or “transferee trust.” These categories are defined broadly to capture a wide variety of legal vehicles used to own property, such as limited liability companies, corporations, partnerships, and trusts. Both domestic and foreign entities and trusts would be covered by the reporting requirement.

• Certain definitional exceptions would apply for highly regulated types of entities and trusts that are less likely to be used by illicit actors to launder money through residential real property.

Data from the reports would assist the Department of the Treasury and its law enforcement and national security partners in addressing vulnerabilities perceived to expose the U.S. residential real estate market to abuse by illicit actors.

The proposed rule is consistent with the Bank Secrecy Act’s longstanding directive to extend anti-money laundering measures to the real estate sector and builds on the success of FinCEN’s Real Estate Geographic Targeting Order program, which has demonstrated the need for increased transparency and further regulation of this sector nationwide.

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