On February 7, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking for the stated purpose of combatting money laundering in residential real estate transactions. You can review the proposed rule and a related fact sheet here.
The proposed rule would require certain professionals, including attorneys, involved in real estate closings to report information to FinCEN about cash transfers of residential real estate to legal entities and trusts. The agency’s press release indicates the proposal is tailored to target transfers that are high-risk for money laundering. No reporting would be required for transfers to individuals.
The information to be reported would include:
- Beneficial ownership information for the legal entity or trust receiving the property;
- Information about individuals representing the transferee legal entity or transferee trust;
- Information about the business filing the report;
- Information about the real property being sold or transferred;
- Information about the seller; and
- Information about any payments made.
A Geographic Targeting Order program has been in place for several years requiring this type of reporting in certain high-priced locations. The new rule would replace the Geographic Targeting Order with nationwide reporting.
FinCEN recognizes that the beneficial ownership information required under this proposed rule is also collected under the new Corporate Transparency Act, but states that the information will serve two different purposes.
The proposed rule would require reporting on single-family houses, townhouses, condominiums and buildings designed for occupancy by one to four families. It would also require reporting on transfers on unimproved land that is zoned or permitted for occupancy by one to four families.
Transfers would be reportable regardless of price. Gifts and other transactions where no consideration is exchanged are reportable. Exempted transactions include easements, transfers resulting from the death of the property owner, transfers resulting from divorce, and transfers made to a bankruptcy estate.
The agency encourages written comments in response to the proposed rule for 60 days. Closing lawyers, I encourage you to read the information at the links above and to make comments.