FinCEN Establishes New Requirements for Certain Residential Real Estate Transactions

New reporting requirements under the Residential Real Estate Reporting Rule for certain real estate transfers went into effect on March 1, 2026. The core purpose of the Reporting Rule is to allow the Financial Crimes Enforcement Network (FinCEN) to collect information about “Beneficial Owners” of entities acquiring residential real estate that fall under the Reporting Rule to assist with pursuing financial crimes including money laundering.

The Reporting Rule materially impacts the obligations of real estate professionals involved in non-financed transfers of residential real property. Not all details of the implementation of the law have been finalized, and real estate professionals should watch for updates. A summary of the new rule and its reporting obligations is set forth below. Note that this is only a summary and not intended to be comprehensive.

Summary of the Residential Real Estate Reporting Rule

When

The reporting persons must submit “Reportable Transfers” that occur on or after March 1, 2026. The reporting person must file the report by the final day of the month following the month in which a closing takes place, or 30 days after the date of the closing, whichever is later. Reportable Transfers are non-financed transfers of residential real property to certain types of legal entities or trusts. If any transaction information in their filed report changes, the reporting person must file an update with FinCEN within 30 days.

Who Must File

For each reportable transfer of residential real property, a reporting person must report certain information to FinCEN. Generally, reporting persons are professionals involved in real estate closings and settlements. In any given reportable transfer, the reporting person is determined through either the reporting cascade established in the Reporting Rule or pursuant to a designation agreement. This person is responsible for ensuring that a complete Real Estate Report is filed for the reportable transfer. The reporting cascade is as follows:

1. The person listed as the closing or settlement agent on the closing or settlement statement.

2. If no person described above is involved, the person that prepares the closing or settlement statement.

3. If no person described above is involved, the person that files with the recordation office the deed or other instrument that transfers ownership of the residential real property.

4. If no person described above is involved, the person that underwrites an owner’s title insurance policy for the transferee with respect to the transferred residential real property, such as a title insurance company.

5. If no person described above is involved, the person that disburses in any form, including from an escrow account, trust account, or lawyer’s trust account, the greatest amount of funds in connection with the residential real property transfer.

6. If no person described above is involved, the person that provides an evaluation of the status of the title; or

7. If no person described above is involved, the person that prepares the deed or, if no deed is involved, any other legal instrument that transfers ownership of the residential real property, including, with respect to shares in a cooperative housing corporation, the person who prepares the stock certificate.

What Must Be Reported

The required reports must include certain information about the non-financed transfers of residential real estate to legal entities and its “Beneficial Owners.” The report must include the following information:

• Information about the Reporting Person
  • Reporting person category from the reporting cascade
  • Full legal name
  • Complete current street address (principal place of business in the United States)
  • Date of closing
• Information about the transferor (seller)
  • Full legal name
  • Date of birth
  • Complete current address
  • Taxpayer identification number
• Information about the property
  • Total consideration paid
  • Address of the property
  • Method of payment
  • Whether private loans were extended
• Information about the transferee (buyer) entity or trust
  • Full legal name
  • Any trade names
  • Current address
  • State or other jurisdiction where formed or (for foreign entities) where first registered in the US
  • Taxpayer identification number
• Information about Beneficial Owners of the transferee entity
  • Legal name
  • Date of birth
  • Current address
  • Unique identifying number from a government-issued document; and
  • An image of such government issued document

“Beneficial Owners” include any individual (natural person) who, directly or indirectly, either (1) exercises “Substantial Control” (see discussion below) over the entity; or (2) owns or controls more than 25% of the ownership interests of the entity. Some individuals do not need to be reported as Beneficial Owners, including minors, nominees and agents, certain employees, heirs and certain creditors.

“Ownership Interests” in an entity must be determined with care, since they may include, in addition to equity interests, convertible instruments, options and debt instruments to the extent the holder has the right to exercise some of the same rights as the holders of equity interests.

“Substantial Control” of an entity is exercised by an individual if such individual: (1) serves as a senior officer; (2) has authority over the removal or appointment of any senior officer or a majority of the Board (or similar body); (3) has control over important decisions; or (4) has any other form of substantial control over the entity. Careful analysis of who may have Substantial Control of a Reporting Company will be required.

How Reports Are to Be Made

The BSA E-Filing System permits a reporting person to file a Real Estate Report electronically via a PDF upload, a web-based form or a batch XML file. In each case, the person who submits the Real Estate Report will first need to obtain a BSA E-Filing System account.

Who Has Access to Reported Information

FinCEN will store the reported information on a secure, non-public database. Disclosure of the information will be limited to various federal and state law enforcement agencies and financial institutions complying with government-imposed customer due diligence requirements.

Penalties

Negligent violations of the final rule could result in a civil penalty of not more than $1,394 for each violation, and an additional civil money penalty of up to $108,489 for a pattern of negligent activity. Willful violations of the final rule could result in a term of imprisonment of up to five years or a criminal fine of not more than $250,000, or both. Such violations also could result in a civil penalty of not more than the greater of the amount involved in the transaction (not to exceed $278,937) or $69,733.

Exempt Entities

A full list of entities exempt from reporting under the Reporting Rule is beyond the scope of this article, and potentially affected persons should consult their attorney. The most common exemptions are:

• Securities reporting issuer
• Financial institutions
• Governmental authorities
• Insurance companies
• Public Utilities
• Subsidiaries of exempted entities

The application of exemptions may be complicated and challenging. For instance, subsidiaries of an exempt company may be Reporting Companies if not 100% owned by exempt entities.

Does This Law Affect Me?

The breadth and reach of this law will reach many people who think they are not the target of law enforcement agencies in any respect. Real estate professionals who use entities to purchase non-financed residential real estate should either (1) determine with their attorney that they are exempt, or (2) develop a plan for compliance with the reporting requirements.

For more information, contact Brian McCool or Monica Villanueva-Nelson