New FinCEN Residential Real Estate Reporting Rule
Are you prepared?

On August 29, 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued the Residential Real Estate Reporting Rule (“RRE Rule”) under the Bank Secrecy Act (“BSA”).

Background

Effective March 1, 2026, the RRE Rule imposes new reporting obligations on certain professionals involved in residential real estate transactions. Specifically, the RRE Rule requires designated reporting persons to identify and report reportable transfers. The rule mandates the submission of a Real Estate Report through the BSA E-Filing System and outlines specific data collection and reporting procedures. FinCEN’s Final Rule emphasizes the necessity of reporting such transactions to enhance transparency and deter illicit financial activities. Noncompliance with the RRE Rule may result in civil or criminal penalties.

Overview of the RRE Rule

The RRE Rule imposes new reporting requirements for any non-financed/cash purchases of residential real property by legal entities or trusts (subject to exceptions and exemptions). The reporting responsibility is determined by a cascading hierarchy, with the settlement agent listed at the top. Alternatively, the responsibility can be transferred through a transaction specific Designation Agreement.

What is a Non-Financed Transfer?

A non-financed transfer is a transfer that does not involve the extension of credit to all transfers that is both (1) secured by the transferred property and (2) extended by a financial institution subject to the Anti-Money Laundering (“AML”) program requirements and Suspicious Activity Report (“SAR”) reporting obligations. Transfers that are financed by a lender without an obligation to maintain an AML program and a requirement to file SARs are treated under the final rule as non-financed transfers that must be reported (e.g., private financing, owner financing).

What is a Transfer of Residential Real Property?

A transfer of residential real property is any transfer of an ownership in residential real property that is demonstrated through a deed or, for an interest in a cooperative housing corporation, through stock, shares, membership, certificate, or other contractual agreement evidencing ownership. This definition includes purchases of residential real property for any amount, as well as transfers of ownership for which no consideration is exchanged, such as a gift.

Definition of Residential Real Property

Residential real property includes single-family homes, townhouses, condominiums, and cooperatives, including condominiums and cooperatives in large buildings containing such units, as well as entire buildings for occupancy by one to four families. These properties are reportable even if there is also a commercial element; for example, a single-family residence that Is located above a commercial enterprise. Certain types of land, on which a residence is not yet built, are also included. More specifically, property may fall within the parameters of the rule in one of four ways:

1. Real property located in the United States that includes a structure designed principally for occupancy by one to four families;
2. Land in the United States on which the transferee intends to build a structure designed principally for occupancy by one to four families;
3. A unit designed principally for occupancy by one to four families within a structure on land located in the United States; and/or
4. A share in a cooperative housing corporation for which the underlying property is located on land within the United States.

What Must be Reported?

The RRE Rule requires the reporting of the transferor and transferee involved in the transaction, the property details, any individuals responsible for signing documents on behalf of the entity or trust regarding the specific transfer, and all beneficial ownership information. The beneficial ownership is the personal identifying information of the individuals with significant control or ownership interests of entities. For trusts, the beneficial owners are the trustees, individuals with authority to dispose of transferee trust assets, beneficiaries, and grantors with revocation rights.

Transferee Entity

A transferee entity is any person other than a transferee trust or an individual. For example, a transferee entity may be a corporation, partnership, estate, association, or limited liability company. However, certain regulated entities are exempt.

Entity Exemptions:

Transferee Trust

A transferee trust is any legal arrangement created when a grantor or settlor places assets under the control of a trustee for the benefit of one or more beneficiaries or for a specified purpose and includes most trusts and similar foreign legal arrangements. A trust is a transferee trust regardless of whether the residential real property is in the name of the trust itself or in the name of the trustee. However, certain types of trusts are exempt.

Trust Exemptions:

What Types of Transfers Are Not Considered Reportable?

1. A transfer that is a grant, transfer, or revocation of an easement.
2. A transfer resulting from the death of an individual, whether pursuant to the terms of a will, the terms of a trust, the operation of law (such as transfers resulting from intestate succession, surviving joint owners, and transfer-on-death deeds) or by contractual provision (such as transfers resulting from beneficiary designations).
3. A transfer incident to divorce or dissolution of marriage or civil union (such as transfers required by a divorce settlement agreement).
4. A transfer made to a bankruptcy estate.
5. A transfer supervised by a court in the United States.
6. A transfer for no consideration made by an individual, either alone or with their spouse, to a trust of which that individual, that individual’s spouse, or both, are the settlors or grantors.
7. A transfer to a qualified intermediary for the purposes of a like-kind exchange for purposes of Section 1031 of the Internal Revenue Code.
8. A transfer for which there is no reporting person.

Determination of Reporting Persons

Only one person or business is the reporting person and required to file a report. The reporting person is identified in one of two ways:

1. By way of the reporting cascading hierarchy as described below:
   • Closing or Settlement Agent
   • Settlement Statement Preparer
   • Deed Filer
   • Title Insurance Underwriter
   • Largest Fund Disburser
   • Title Evaluator
   • Deed or Legal Instrument Preparer
2. By way of a written “Designation Agreement” between the real estate businesses described in the cascading reporting order.

Designation Agreements allow a person further down the reporting cascade to perform the reporting function. A person that performs a function described in the reporting cascade may choose to enter into a written agreement that designates another person that performs a function described in the reporting cascade as the reporting person. A separate designation agreement is required for each reportable transfer. The reporting person is not required to file the Designation Agreement, but all parties to the agreement are required to retain a copy for a period of five (5) years.

Reasonable Reliance Standard

The final rule adopts a Reasonable Reliance Standard that allows reporting persons to reasonably rely on information provided by other persons.

The Standard:

The Reasonable Reliance standard permits reporting persons to depend on information provided by other parties during a reportable transaction, provided there is no knowledge of facts that would reasonably question the reliability of that information.

General Application:

Reporting persons can rely on details obtained from involved parties without independent verification, unless there are red flags or inconsistencies that suggest the information might be inaccurate.

If relying on information provided regarding the Beneficial Ownership Information (“BOI”), the reporting persons must get certification in writing from the transferee or their authorized representative.

When do you Report?

The later of the last day of the month following closing or thirty calendar days after closing.

Resources:

• Financial Crimes Enforcement Network: https://www.fincen.gov/
• Financial Crimes Enforcement Network Residential Real Estate Frequently Asked Questions: https://www.fincen.gov/rre-faqs#B_4
• Residential Real Estate Reporting Rule: https://www.federalregister.gov/documents/2024/08/29/2024-19198/anti-money-laundering-regulations-for-residential-real-estate-transfers