Update on Anti-Money Laundering Regulations for Residential Real Estate Transactions
By Ellen Savino, Esq., Partner, Julianne Bonomo, Esq., Associate, Sahn Ward Braff Coschignano, PLLC.
New federal regulations will impact the reporting requirements for some residential real property transactions. The new “Anti-Money Laundering Regulations for Residential Real Estate Transfers” imposed by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) which was originally to become effective on December 1, 2025 has been postponed, with a new compliance date of March 1, 2026.
Background & Scope
FinCEN issued the regulations under the authority of the Bank Secrecy Act (“BSA”). The Bank Secrecy Act is intended to combat money laundering, the financing of terrorism and other illicit financial activity. THE BSA requires financial institutions to keep records and file reports that are useful in criminal, tax or regulatory activities or proceedings. The new FinCEN regulations were implemented to enhance transparency and to target non-financed transfers of residential real property in the U.S. Transactions that are covered under this rule include those in which residential real estate is transferred without bank-type financing (namely, all-cash or privately financed) to an entity or trust. These transactions are historically vulnerable to use of illicit funds, given that traditional financing channels and controls are bypassed.
“Residential real property” is defined under the regulations to include one-to-four-family homes, condominium and cooperative units designed for one-to-four-family occupancy, vacant land intended for residential construction, and certain mixed-use properties with a residential component. Transactions made directly to an individual, as well as certain transfers commonly used in estate planning are not covered by this Rule. Other exemptions include transfers resulting from death, divorce, dissolution and bankruptcy, certain court-supervised transactions, 1031 Exchanges, certain transfers for no consideration made by an individual or their spouse, to a trust of which those individuals are the settlers or grantors, and transfers in which there is no reporting person.
Key Reporting Obligations
The regulations require a “reporting person” — typically a closing or settlement agent, title insurer, attorney involved in the closing, or other designated party — to file a “Real Estate Report” (“Report”) with FinCEN for each reportable transfer. The Report must include the following:identification of the reporting person;
- details of the property transferred;
- information about the transferor;
- information about the transferee entity or trust and the individuals representing the transferee entity or trust;
- beneficial owners of the transferee entity/trust; and
- total consideration paid for the property and certain payment details (for example, bank account information for sourcing of funds).
The filing of this Report must be made within either (a) the final day of the month following the month of closing or (b) 30 calendar days after the date of closing, whichever is later.
Compliance with the new FinCEN regulations is mandatory. Anyone involved in a real estate transaction, whether as a buyer, seller, or private lender should ensure that there is compliance with these new reporting requirements. It is prudent to address this new regulation at the onset of the transaction and as a part of due diligence, and to incorporate compliance into the contract, so there is a smooth closing. Our attorneys at Sahn Ward regularly handle these transactions and keep informed of the most updated rules and regulations. If you are entering into a real estate transaction, whether residential or commercial, our attorneys are available for a consultation.
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