On Wed., Aug. 28, 2024, the Financial Crimes Enforcement Network (FinCEN) announced its Final Rule regarding Transparency in Residential Real Estate Transfers (Final Rule). Beginning Dec. 1, 2025, the Final Rule requires, subject to several exceptions, that the beneficial owners associated with all “non-financed” residential real estate transactions be reported to FinCEN.
The Final Rule’s purpose is to combat and deter money laundering through the residential real estate sector and dovetails with the existing compliance framework of the Corporate Transparency Act (CTA). The CTA, subject to certain exceptions, requires all entities registered in the US to register beneficial owners with FinCEN by the end of 2024.
What are next steps for compliance with the Final Rule?
Before the Dec. 1, 2025, compliance start date, FinCEN will be releasing the disclosure form known as a “Real Estate Report,” which will be subject to comment and finalization.
What is “residential real property?”
Only “residential real property” is subject to the Final Rule. Residential real property includes single-family houses, townhouses, condominiums, cooperatives, buildings (including mixed-use buildings) designed for occupancy by one to four families, and land on which the buyer intends to build a structure designed principally for occupancy by one to four families.
Note: The Final Rule does not include commercial properties. A similar reporting rule applying to commercial properties is expected to be proposed and released for comments next year.
What is “non-financed?”
For purposes of the Final Rule “non-financed” means:
1. Transactions with no consideration (for example, a gift)
2. Cash transactions
3. Transactions involving an extension of credit unless the credit is:
· Extended by a covered financial institution that is subject to an anti-money laundering program and suspicious activity reporting, and
· Secured by the transferred property
Which transfers are exempt from reporting?
1. The granting, transferring or revoking of an easement
2. Transfers resulting from the death of an individual, by will, trust, intestate, etc.
3. Transfers resulting from divorce
4. Transfers to bankruptcy estate
5. Transfers supervised by a court
6. Transfers resulting from an estate planning tool e.g., a transfer from an individual to a trust in which the individual and/or spouse is the settlor(s)/grantor(s)
7. Transfers to a qualified intermediary for a § 1031 like-kind exchange
8. Transfers with no Reporting Persons or Professionals
Who must file the Real Estate Report?
Only one person must file the Real Estate Report for each reportable transaction. The Reporting Person must be a professional, or professional’s employee, involved in the transaction. The Final Rule provides the following cascade of responsibility to file the Real Estate Report: settlement agents, preparers of settlement statements, filers of deeds or other transferring instruments, title insurance underwriters, persons distributing funds for the transfer, persons preparing status of titles and persons preparing deeds.
If a settlement agent is involved in the transaction, the settlement agent is the required Reporting Person. If no settlement agent is involved, then the required Reporting Person is the next professional listed.
What information must be disclosed in the Real Estate Report?
1. The “beneficial owner” of the buyer, which has the same meaning used in the CTA and would therefore require identifying the human who either directly or indirectly exercises “substantial control” over the transferee entity or who owns or controls at least 25% of the transferee entity’s ownership interests.
2. Information regarding individuals or entities representing the buyer
3. The legal identity of the seller, including the trustee and beneficiaries of a trust, which is a seller
4. The Reporting Person
5. The address of the subject property
6. The date of closing
7. Payments made, including the amount of payment and total consideration; method of payment; the accounts used; and payor, if not transferee entity or trust
8. Information about hard money or loans, including extension of credit by a person who is not a financial institution required to maintain anti-money laundering program and required to report suspicious transfers
When must the Real Estate Report be filed?
The later of:
1. 30 calendar days after date of closing
2. The final day of the month following the month in which the reportable transfer occurred
The Final Rule and its reporting requirements can be complicated. Entities would be well advised to confer with legal counsel before submitting Final Rule documentation to ensure requirements are met, correctly reported and future problems alleviated. To learn more about the Final Reporting Rule or related matters, send an email to JPok@parsonsbehle.com or call 801-536-6792.
Jazmynn B. Pok is a member of Parsons’ Real Estate practice team where she serves a variety of clients in matters relating to land use, entitlements, leasing, real property and renewable energy transactions.
Emma Dugenske is an associate attorney awaiting licensure from the Montana State Bar.
