New federal rule targets money laundering in U.S. real estate

The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) has introduced a new reporting requirement aimed at combating money laundering in the residential real estate sector. Set to take effect on December 1, 2025, this rule targets non-financed transfers of residential properties to legal entities and trusts, which have been exploited by criminals and corrupt officials for illicit financial activities. The rule mandates that individuals involved in these transactions file a 'Real Estate Report' to enhance transparency and accountability in the market. FinCEN has acknowledged the risks posed by opaque legal structures in real estate, which can facilitate money laundering and other illegal activities. The Treasury Department emphasizes that such illicit practices threaten both economic and national security, potentially disadvantaging legitimate businesses and individuals seeking to operate fairly in the real estate market. U.S. Secretary of the Treasury Janet L. Yellen has stated that the department is committed to disrupting the use of the U.S. financial system for hiding and laundering illicit gains. To ease the burden on reporting individuals, the final rule allows them to rely on information from other parties involved in the transaction. However, the National Association of Realtors (NAR) has raised concerns about the potential for the rule to overreach, particularly regarding the requirement for real estate professionals to disclose the source of funds for non-financed transactions. They argue that this could place professionals in precarious situations, effectively making them act as law enforcement agents. Overall, the new rule represents a significant step towards increasing oversight in the real estate sector, aiming to deter bad actors and promote a fairer market environment. The implementation of these measures reflects a broader commitment to addressing the challenges posed by illicit financing in the U.S. economy.