New Federal anti-money laundering regulations for many residential real estate transfers will take effect March 1, 2026. The regulations, issued by the Financial Crimes Enforcement Network (FinCEN) require the filing of Real Estate Reports for residential real estate transactions where there is no traditional lender involved.
Transactions Covered by the Rule
The rule applies to non-financed transfers of residential real estate where the recipient is some form of entity such as a corporation, partnership, LLC, or trust. Transfers to individual persons are not subject to the new rules. Any transfers already subject to Suspicious Activity Reporting (SAR) and Anti-Money Laundering (AML) reporting requirements are also exempt. Residential real estate includes: single-family homes, condominiums, cooperative units, townhouses, and multi-family residences with up to four units. The rule also applies to purchases of land made with the intent to build a residence.
Covered transfers include: purchases made with cash or its equivalents (wire transfers, cashier’s checks, money orders, cryptocurrency, and other forms of non-bank payment), gifts, or financing with a non-traditional lender that is not subject to AML and SAR requirements.
In addition to transfers to individuals, court-ordered transfers, transfers from a decedent’s estate or trust, and uncompensated transfers to a trust created by the grantor are exempt.
Who is Required to Complete the Report
The person responsible for filing the report is determined by the “reporting cascade.” The person performing the first function of the cascade is responsible for filing the report. If there is no such person involved in the transfer, the person performing the second function is required to report, and so on. Only one report needs to be filed per transfer. The cascade starts with title company closing agents and ends with the person who prepared the deed or other transfer documents. The required reporting person will typically be a professional assisting with the closing and not the buyer or seller themselves.
The report must be filed within 30 days of the transfer. Records and supporting information must be kept by the reporting person for five years.
Information Required in the Real Estate Report
The Real Estate Report requires the property and the recipient be identified. Where the recipient is an individual, this includes the legal name, date of birth, address, and taxpayer identification number. When the purchaser is an entity, beneficial ownership information must also be reported, identifying individuals who own or control at least 25% of the entity or exercise substantial managerial authority.
The report further requires the purchase price, the method of payment, and information regarding the source of funds. This includes tracing payments through intermediary accounts and documenting funding pathways.
These regulations can carry significant penalties, and apply in many common transfers of property, such as gifts between individuals and entities, transfers to new business entities, and privately conducted cash sales, so the assistance of an attorney in real estate transactions is now more important than ever.