Agents are on edge as FinCEN fights for the real estate rule

With the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) appealing the overturning of the real estate anti-money laundering rule, closing and settlement agents will not be responsible for reporting purchases from legal entities and trusts made without financing or through an unregulated lender.

“Reporters are not currently required to file property reports with FinCEN and will not be liable if they fail to do so while the court’s order remains in effect,” FinCEN’s updated FAQ was read on Wednesday. “If the court’s order is reversed and the RRE rule becomes legally effective again, reporting parties will not be required to file reports for covered transactions that should have been reported while the court’s order was in effect. If the order is reversed, FinCEN will provide further guidance on when reporting is required.”

An earlier Inman article explained the ins and outs of the rule, which requires agents to document the legal entity or trust involved in a real estate transaction. Agents must also document the owners of that entity, any individuals signing documents on behalf of the entity, the seller, the property being transferred, Social Security numbers, information about payments made, and more. Reports must be filed no later than the last day of the month following the month in which the transaction occurred, or no later than 30 days after the closing date, whichever is later.

The Ministry of Finance first proposed the new reporting rules in early 2024. They were initially due to come into effect in December 2025, but were postponed to give the sector ‘more time to comply’.

The Pacific Legal Foundation (PLF), a Public interest law firm located in Sacramento, California, the opportunity to files a lawsuit on behalf of Celia Flowers in April 2025a Texas title company owner. Flowers said FinCEN’s rule, which requires closing and settlement agents to report purchases from legal entities and trusts made without financing or through an unregulated lender, imposes unnecessary “costly new compliance obligations” and “severe penalties” for reporting errors.

The PLF argued that the rule exceeded FinCEN’s authority under the Foreign Transactions Reporting Act, also known as the Bank Secrecy Act. The 1970 law requires tracking and reporting large cash transactions over $10,000. The law, PLF said, also gives “full discretion to the Secretary of the Treasury to decide whether and when systematic collection of information and reporting on consumer transactions is required.”

However, PLF said the depth of record keeping required by FinCEN’s new rule was time-consuming and violated the Fourth Amendment by requiring closing and settlement agents to “exercise government surveillance of their customers by reporting private information from legitimate transactions.”

U.S. District Judge Jeremy Kernodle sided with PLF in March, saying the U.S. Treasury Department failed to “explain or demonstrate how unfinanced residential real estate transactions are categorically ‘suspicious’.” President Donald Trump, who appointed Kernodle in 2018, has steadily weakened FinCEN’s regulatory powers by removing several Biden-era money laundering regulations.

FinCEN has never included brokers in the reporting process. However, the National Association of Realtors had begun educating real estate agents about the new rule, as about 28 percent of sales by 2025 would be cash-only. A further 22 percent of transactions involved a legal entity, including trusts.

Email Marian McPherson