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What is the FinCEN Real Estate Report?
New FinCEN reporting requirements combat money laundering through real estate transfers. These requirements apply to certain residential real estate transfers. They begin on March 1, 2026.
Similar to Corporate Transparency Act reporting requirements, these new FinCEN rules aim to increase transparency and combat financial crimes in real estate transactions.
Under What Circumstances Does the Rule Apply?
The report must be filed on any "reportable transfer." This is a non-financed transfer to a transferee entity or transferee trust. It involves ownership in residential real property.
What is Residential Real Estate Under the Requirements?
Four types of real estate are included:
- Real property located in the US. It includes a structure designed for occupancy by one to four families.
- Land in the US where the transferee intends to build. The structure will be designed for occupancy by one to four families.
- A unit designed for occupancy by one to four families. It's within a structure on land in the US.
- A share in a cooperative housing corporation. The underlying property is located in the US.
Real estate professionals familiar with New Jersey's controlling interest transfer tax will recognize that property transfers often trigger multiple reporting obligations at both state and federal levels.
What is a Non-Financed Transfer?
A non-financed transfer does not involve an extension of credit to all transferees. The credit must be secured by the transferred property. It must also be extended by a financial institution. That institution must have AML program requirements and SAR reporting obligations.
Note: if credit is extended but the lender has no AML/CFT program obligation, the transaction is non-financed. The same applies if the lender has no SAR filing obligation.
Who is Required to File FinCEN Real Estate Reports?
Parties to a transaction can enter into a written "designation agreement." This agreement designates one person to perform the reporting function. If no designation agreement exists, there is a "reporting cascade" as follows:
- The person listed as the closing or settlement agent on the statement.
- If no such person is involved, the person that prepares the closing or settlement statement.
- If no such person is involved, the person that files the deed with the recordation office. This includes other instruments that transfer ownership of the residential real property.
- If no such person is involved, the person that underwrites an owner's title insurance policy. This policy is for the transferee with respect to the transferred property.
- If no such person is involved, the person that disburses the greatest amount of funds. This includes disbursement from an escrow account, trust account, or lawyers' trust account. It's in connection with the residential real property transfer.
- If no such person is involved, the person that provides an evaluation of title status.
- If no such person is involved, the person that prepares the deed. If no deed is involved, this includes any other legal instrument transferring ownership. For shares in a cooperative housing corporation, this means the person who prepares the stock certificate.
Penalties for Not Filing Real Estate Reports
Penalties for not filing FinCEN real estate reports can be significant. Civil penalties can reach up to $5,000 per day for each violation.
Negligent violations bring a penalty of up to $1,394 per violation. An additional civil penalty of up to $108,489 may apply if part of a pattern.
The penalty for willful violations can be significant. It can reach the greater of the transaction amount or $69,733. Criminal penalties of up to 5 years in prison could apply. A fine of up to $250,000 for willful violations is also possible.
The criminal penalties highlight how seriously regulators treat violations, as money laundering and related financial crimes can result in significant prison time and substantial fines.
There is much more to these rules than what is written here. This includes definitions of transferee entities and transferee trusts. It also includes a list of exemptions for each. Information on what to report and recordkeeping requirements is also included.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
