Written by FinCrime

AML Final Rule for Real Estate – What and Who must report

Reported by Matthew C. Christoph

WHAT MUST BE REPORTED

Under subsections (d) through (h) of the Final Rule, the Real Estate Report must contain the legal name, address, and other tax or unique identifying information regarding the reporting person, the transferee entity or trust and its beneficial owners or trustees, the transferor, each signatory to the transfer, the real property, and closing date. The reporting person must report the consideration paid or to be paid by each transferee and the consideration to be paid in total for the property; the method of payment; and each payor’s financial institution and account number or the name on any wire, check, or other type of payment of any payor other than a transferee entity or transferee trust. Information concerning any hard money loans, private loans, or other lending arrangements not extended by a financial institution subject to AML and SAR requirements must also be disclosed in the Real Estate Report.[6]

Absent knowledge of facts that would reasonably call into question the information provided, reporting persons may rely on the accuracy of information provided by others for purposes of the Real Estate Report, except that the reportable information pertaining to each beneficial owner of a transferee must be certified by the person providing it that the information is accurate and complete to the best of that person’s knowledge.[7]

WHO MUST REPORT

To determine who must file, the proposed rule provides a “waterfall” of potential reporting persons “engaged within the United States in the provision of real estate closing and settlement services[.]”[8] Beginning at subsection (c)(1)(i) of the Final Rule, if a person within the given description is involved in the transaction, that person must file with FinCEN. If no person matches that criterion, a person fitting the description in (c)(1)(ii) is the reporting person, and so on. In making this determination under the Final Rule, the reporting person for a reportable transfer is

  • the closing or settlement agent listed on the closing or settlement statement;
  • if none, the person that prepared the closing or settlement statement;
  • if none of the above, the person filing the deed or instrument of transfer with the recorder’s office;
  • if none of the above, the underwriter of the owner’s title insurance policy for the transferee;
  • if none of the above, the person dispersing the greatest amount of funds related to the transfer–including from escrow, a trust account, or a lawyer’s trust account;
  • if none of the above, the person that provides an evaluation of the status of the title; or
  • if none of the above, the person that prepares the deed or other legal instrument transferring ownership.

If no person fits any of the criteria on the list, the transaction is not reportable.[9] Given the sweep of these descriptions in the Final Rule and the realities of modern transactions and industry practice, however, this result would be unlikely.

If an individual is a reporting person by virtue of employment, agency, or partnership, then the reporting person is the individual’s employer, principal, or partnership.[10] A financial institution subject to AML and SAR requirements is not a reporting person.[11]

Those who would otherwise be reporting persons involved with a transaction may designate a reporting person by written agreement, provided the agreement meets certain criteria under the Final Rule and provided that a separate agreement is executed for each reportable transfer.[12] All parties to such an agreement must retain a copy of the designation agreement.[13]

WHERE AND WHEN TO FILE A REPORT

Real Estate Reports must be filed electronically via FinCEN’s website by the last day of the month after the month in which closing took place or thirty days after the closing date, whichever is later.[14]

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[6] § 1031.320(h)(2).

[7] § 1031.320(k).

[8] § 1031.320(c)(1).

[9] § 1031.320(b)(2)(viii).

[10] § 1031.320(c)(2).

[11] § 1031.320(c)(3).

[12] § 1031.320(c)(4).

[13] § 1031.320(l).

[14] § 1031.320(k)(3).

Read full report: https://www.tuckerlaw.com/2024/09/10/a-new-federal-reporting-requirement-has-been-established-for-non-financed-transfers-of-u-s-residential-real-estate-to-a-trust-or-legal-entity/

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