Reported by Robert Maddox, Jonathan “Jack” Harrington Of Bradley Arant Boult Cummings LLP

The U.S. real estate market has long been a cornerstone of the American dream—a path to stability, investment, and generational wealth. But at the margins, that same market has also provided an opportunity for illicit actors who exploit all-cash deals to quietly launder dirty money into legitimate assets. Recognizing this vulnerability, in August 2024, the Financial Crimes Enforcement Network (FinCEN) introduced a new rule aimed at shedding light on all-cash real estate transactions and closing a loophole in the fight against money laundering.

FinCEN’s Residential Real Estate Rule (the RRE Rule) requires certain industry professionals to report information to FinCEN about non-financed transfers of residential real estate to a legal entity or trust. Title companies and settlement agents are now on the frontlines of the federal government’s fight against real estate money laundering. The industry has argued that the rule will impose an undue burden on businesses and that its costs outweigh its benefits. On May 21, one of the industry’s biggest players—Fidelity National Financial (FNF)— filed a lawsuit in the Middle District of Florida to block the rule. Fidelity National Finance, Inc. et al. v. Treasury, et al., 3:25-cv-00554 (M.D.Fla. May 20, 2025). United States District Judge Wendy Berger, a Trump appointee, will now consider whether FinCEN has exceeded its statutory authority.

It is too early to predict the outcome of the FNF suit, but the issue illustrates the tension between two Trump administration priorities. On the one hand, the administration has generally advocated for a deregulatory, pro-industry agenda. On the other hand, the administration remains focused on anti-money laundering and financial crime, particularly as it relates to foreign adversaries and drug cartels who are most likely to exploit the residential real estate market to launder illicit gains. Affected businesses should be preparing to comply with the RRE Rule scheduled to take effect in December to ensure they are not caught off guard should legal challenges fail.

The RRE Rule at a Glance

The RRE Rule seeks to increase transparency in all-cash real estate transactions by requiring certain professionals to report certain information, including the identities of beneficial owners behind purchases, in the hopes of preventing money laundering through anonymous property deals.

The RRE Rule applies to all non-financed (i.e., all-cash) transfers of residential real property to legal entities (e.g., LLCs, corporations) or trusts, subject to certain exceptions. The rule requires that the “reporting person” (typically the settlement or closing agent, but determined by a cascading hierarchy) file a “Real Estate Report” with FinCEN, disclosing, among other information, (1) the identities and details of the transferor and transferee, (2) beneficial ownership information for the transferee, (3) information on individuals signing on behalf of the transferee, (4) property details, and (5) transaction details, such as the purchase price, payment method, and account information.

The rule carves out several categories of low-risk or routine transactions, including: (1) grants, transfers, or revocations of easements, (2) transfers resulting from death or divorce, and (3) transfers to bankruptcy estates. The default reporting person in the cascading hierarchy may shift the responsibility to another (e.g., the deed filer), subject to a designation agreement. In effect, parties can contract to shift the filing requirements. Notably, FinCEN has not yet published the Real Estate Report to be filed.

Reporting persons may reasonably rely on information provided by others, absent knowledge of facts that would call its reliability into question. For beneficial ownership, a written certification from the transferee or its representative is required. Reporting persons must retain copies of beneficial ownership certifications and designation agreements for five years. Reports must be filed electronically with FinCEN by the later of the last day of the month following the closing date or 30 days after the closing date. Penalties for noncompliance include civil and criminal sanctions under the BSA.

Read full report: https://natlawreview.com/article/will-there-be-light-fincens-new-reporting-rule-faces-legal-challenge?amp