Residential Real Estate Rule Explained
The U.S. Treasury Department Financial Crimes Enforcement Network has enacted the Residential Real Estate Rule which mandates reporting on certain residential real estate transactions in an effort to combat and deter money laundering.
In general terms, reporting is required when real estate ownership is transferred, and the criteria below are met.
- Transfer is to an entity such as an LLC, Corporation or Trust (with certain exceptions)
- The transfer is not secured by financing to all transferees from a lender subject to Anti Money Laundering (AML) program requirements. Examples include cash purchases, “hard money” lenders, seller financing, or other private financing.
- The real estate meets the FinCEN definition of residential property (examples include 1-4 family residential, residential condo unit, mixed use that includes 1-4 residential units, vacant land with an intent to build 1-4 unit residential)
Information must be provided about the beneficial ownership of the transferee (buying) entity and the source of the funds used to purchase the real estate.
Limited information must also be provided by the transferor (seller).
The reporting requirements fall to title insurance/settlement companies when they are involved. Land Title Services and Land Closing Services therefore must follow these requirements and cannot close on a qualified transaction until all information has been collected and certified by the necessary parties.
To assist with the data collection and report filing, Land Title Services and Land Closing Services have partnered with FinCEN Real Estate Report to collect the required information and file the reports with FinCEN.
You can access additional information on FinCEN’s website.