The submitted reports will be directed to the Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury, the overarching authority enforcing the anti-money laundering (AML) provisions of the US Banking Secrecy Act. FinCEN clarifies that the proposal specifically targets transactions with a high AML risk to minimize potential business burdens, exempting purchases made by individuals.
According to FinCEN, transactions involving 'non-financed' or 'all-cash' sales of residential real estate, i.e., those without loan assistance, often escape scrutiny from financial institutions with AML and suspicious activity report (SAR) filing requirements under the Bank Secrecy Act. Illicit actors frequently use legal entities or trusts to hold residential real estate, making these transfers susceptible to money laundering, as per FinCEN's identification.
This proposal builds upon FinCEN's real estate geographic targeting order (GTO) program initiated a decade ago. Initially temporary orders focused on high-property-value regions like Miami and Manhattan, limited to properties exceeding million-dollar thresholds, the program has now expanded nationwide. The new rules cover properties of any value and apply to all purchases without loan assistance, including reporting transfers of ownership with no value, such as gifts. Exemptions include transfers related to easements, divorce, death of the property owner, or those made to a bankruptcy estate.
Businesses involved in closing or settling non-financed sales or transfers of residential real property to entities or trusts must collect and report information to FinCEN. This encompasses details about beneficial ownership, individuals representing the transferee entity or trust, the reporting business, the residential property being sold or transferred, the transferor, and any payments made. The reporting obligation generally applies to settlement agents, title insurance agents, escrow agents, and attorneys.
However, individuals engaged in real estate closings and settlements remain exempt from the AML regulations of the Bank Secrecy Act. The reporting entity is not required to maintain an AML program, and the modified SAR used for reporting, termed a 'real estate report,' must be filed within 30 days after the property transfer, with the reporting entity keeping a copy for five years.
The proposed rule outlines the circumstances for filing a report, who is responsible for filing, the required information, including details about beneficial owners of legal entities and trusts, and the deadline for reporting the transaction. Comments on the proposal can be submitted within a 60-day period.
Contacts
If you require assistance in relation to the above and/or would like to discuss anything further, please do not hesitate to contact info@act.london or your usual A.C.T. contact.