By Roland Love, Independence Title Vice President and Attorney
So who is FinCEN? (Hint: it’s not a fish committing a moral lapse). What is even happening? Why would “they” do this? Will it affect me? Will it affect my clients? The answer is YES, so read on …
A brief history of FinCEN …
FinCEN is the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury. Its mission is “to safeguard the financial system from illicit activity, counter money laundering and the financing of terrorism, and promote national security through strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.” That’s a mouthful, but it essentially means FinCEN is a master data gatherer trying to create a very broad tool to stop money laundering. The agency is now taking a hard look at residential property transactions not involving a traditional lender where the purchaser is a business entity, which can be a vehicle for bad guys trying to hide or launder money.
You may recall that last year, FinCEN put forward a requirement that all business entities file a Beneficial Ownership Information (BOI) report by the end of the year, disclosing details about the individual owners. That rule was the result of legislation known as the Corporate Transparency Act, and it was not specifically directed at real estate. It was later modified to require only foreign entities to file the BOI, letting U.S. LLC’s, S-Corps, C-Corps, etc., off the hook. You may also be aware of Geographic Targeting Orders (GTO) in certain counties, which require information about a buyer of specified residential real estate. The GTO’s may well go away if the December 1 FinCEN Rule is implemented.
But wait … here comes the Real Estate Report …
A new requirement is rapidly coming down the turnpike … Introducing the Real Estate Report, effective Dec. 1, 2025, FinCEN’s latest data-gathering tool to target money-laundering via residential real estate transactions. This report will become part of the closing process, filed by title companies, attorneys, or others involved in the transaction, and is estimated to be required in about 5% of Texas property transactions.
What does this mean for the real estate industry? Here is a brief FAQ to help clarify what we know now:
Q: What is the Real Estate Report?
A: This is a report collecting details on the individual owners of a business entity purchasing a residential property. The report also includes details on the sellers of the property and must be filed within 30 days after the closing date.
Q: What transactions are subject to reporting?
A: The transfer of a residential property to a business entity not financed by a traditional lender will trigger a requirement to file the Real Estate Report. There is no threshold dollar amount, as gifts are included. (Note that transactions involving traditional lenders, sales to individuals, transfers to estate planning trusts not involving consideration where the grantor or family is also a beneficiary, and 1031 exchanges are not included.)
Q: Who reports this information?
A: If the transaction is closed by a title company, it will likely be the title company. If the transaction only involves attorneys, the responsibility cascades to them. And the duty rolls on from there, but licensed real estate agents do NOT make the list of those responsible for reporting.
Q: What data is collected?
A: There are reportedly more than 100 data points, and the extensive private information must be reported on a form adopted by FinCEN. FinCEN effectively says the transaction may not close unless the form is fully completed – no blanks allowed – or large fines and possible criminal penalties will follow.
Where do we go from here …
There are MANY unanswered questions. What happens if a party declines to provide the requested information? Does the deal ever close? Will promulgated real estate forms and/or Schedule C of the Title Commitment include this requirement? Agents may need to learn to identify transactions where this reporting is required, discuss the process with clients, and confirm their willingness to provide this information early on.
The broker-lawyer committee at TREC has already noted these concerns and is considering practical steps. Should the willingness to disclose the required information be included in a representation agreement? In the contract? Might a Seller decline to enter into a contract where the Buyer has not agreed to provide the required information?
And finally …
When will we know if this is truly happening? We have seen the Federal government back away from the Corporate Transparency Act because of alleged overreach and expense, and the President has taken steps to defund other agency efforts. The additional cost to gather information, complete, and file the report will do nothing good for affordable housing. There are also three lawsuits pending challenging the Rule and its implementation on numerous Constitutional grounds. Two are in Texas and one is in Florida. However, even if successful, the recent U.S. Supreme Court decision in Trump v. CASA may limit any injunctive relief to only the parties in the lawsuits.
Is it a good time to talk to your representatives in Congress? For sure! Might a trade association weigh in? Most already are, but continued pressure is warranted. That is unless you support the measure. It has value and rests on good principles, but it is very strong medicine for what many consider a scattering of colds. Maybe more traditional detective work is not so bad.
Stay tuned for future updates as the details evolve …
