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  • Writer's pictureDr. Mark Lee Levine, Professor

Real Estate Reporting Now May Cover Money Laundering



Under a Notice of Proposed Rulemaking issued by the US Department of the Treasury, under its Financial Crimes Enforcement Network (FinCEN), issued 2/7/2024, the Government is now requiring more reporting on residential real estate matters. 


Under this new Notice, some professionals dealing with real estate as to closings and settlement documents must now report specific information to the government.  The new required reports, which are still being developed as to the format, are designed to combat, so we are told, money laundering. The Rule will require specified professionals to report information to FinCEN dealing with what the Rule labels as non-financed sales and transfers. 


The idea is that an all-cash transactions in residential sales often are not examined by financial institutions and thus they do not generate further inquiry because of a SAR or Suspicious Activity Report that might be filed as required under the Bank Secrecy Act. 


Thus, there is concern that these transactions may be used to launder money. 


The Notice states that often those acting improperly hold residential real estate in the name of a legal entity, such as an LLC or a trust.  


Apparently, the information to be reported will include who the beneficial owners are of the legal entity holding title, parties involved in the real estate transfer, certain price information, etc.  (A good deal of the information that will be required on the forms for reporting is being developed at this time, along with public comments on this new Rule.) The Rule will apply, it appears, to most transfers of single-family houses, townhouses, condos, cooperatives and apparently one to four family properties.  Even vacant land seems to be covered in this net of application if the property is zoned for one to four family

units. 


It also appears that there will be, at this time, coverage under this Rule regardless of the price of the property.  Transfers by gift would also be covered.  There will be, so it appears, some exemptions where the matter deals with transfers of real estate involving death,

divorce, bankruptcy, and certain other cases that do not appear to have a setting for money laundering. 


The transfer would appear not to be covered by this Rule unless it was non-financed, that is, no credit was involved or if there was financing by a private lender.  It appears the thought is that there is sufficient oversight when a regular financing institution is loaning funds and thus, this type of setting is not covered by the new reporting requirements under this Rule. 


Anyone reading this quick Tip should have many questions. I think we all do.  This is only the beginning of the set-up for this new Rule. 


Look for more announcements by the Government on these new reporting requirements. 

By 

Professor Mark Lee Levine 

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