February 20, 2024
Needham, MA--On Feb. 7, The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking (NPRM) that would extend the requirement to report all-cash residential transactions involving legal entities and trusts nationwide.
Since 2016, FinCEN has issued Geographic Targeting Orders (GTOs) for specific markets that were deemed to be rife with efforts to launder money through real estate transactions. The GTOs required that title, closing and escrow agents in specific regions report specified data for all-cash sales that exceeded a specific amount. The NPRM would expand reporting requirements to the entire country and delineate additional information that would have to be included in the submission.
Affected businesses are encouraged to respond to the NPRM during the 60-day comment period.
Although the American Land Title Association (ALTA) has actively worked with FinCEN in its efforts to identify and report illicit actors in the real estate space, the organization remains concerned about the burden the new regulation would put on small businesses and is communicating with FinCEN to identify ways to minimize the anticipated financial burden.
“We are still reviewing the proposed rule and will work to ensure that FinCEN considers the information they are collecting under the new Beneficial Ownership rule, among other things, so as not to be unnecessarily duplicative and also provide clarity regarding the obligations of all real estate parties under the rule,” said Diane Tomb, ALTA’s chief executive officer said in the organization’s February blog. “We intend to continue, the ongoing dialogue with FinCEN to craft a tailored approach limiting the transactions that must be reported to those of the greatest concern and providing avenues to help reduce the compliance burden on title and settlement companies."
Information that must be collected under the proposed rule includes:
- Name of reporting person and contact information
- Address and legal description for the property
- Name, contact information and TIN for transferee and transferor
- Beneficial owner information for the transferee
- Names, date of birth (DOB), addresses and TINs for anyone signing the transfer document
- Name, DOB, address and TIN for all transferors on title or the beneficial owners if the seller is an entity
- Information about the payments made by or on behalf of the transferee
- Information about any hard money or other lender not subject to anti-money laundering rules that engaged in the deal
FinCEN has estimated that the rule would result in 800,000 – 850,000 filings annually. In addition, the agency forecasted the following economic impact:
- First year costs: $267 - $476 million
- Subsequent year costs: $245 – $454 million
- Estimated industry investment for initial training: $40 million
- Estimated industry cost for annual 30-minute refresher training: $20 – $27 million
- Cost to file an individual report: $193 – $244
FinCEN indicated it will develop a specific real estate report form for electronic filing, which ALTA is hopeful will address many of the issues the industry experienced with the GTO reporting.
At Kriss Law/Atlantic Closing & Escrow, we are dedicated to staying on the forefront of state and federal legislative and regulatory changes that impact the real estate industry. Contact us to learn more about our services and expertise.
< Back