Residential Real Estate Rule – FinCen Reporting Starting March 1st

In 2024, the U.S. Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN") issued the Anti-Money Laundering Regulations for Residential Real Estate Transfers (the "RRE Rule") requiring the reporting of non-financed transfers of residential real property to certain legal entity and trust transferees. The RRE Rule seeks to "curtail the ability of illicit actors to anonymously launder illicit proceeds through transfers of residential real property, which threatens U.S. economic and national security." Reporting under the RRE Rule began on March 1, 2026.

What Transfers Are Affected?

The RRE Rule applies if all the following conditions are met and an exception does not apply:

• the property is Residential Real Property
• the transaction is a non-financed transfer (i.e., the transfer does not involve an extension of credit to all transferees secured by the transferred Residential Real Property and extended by a financial institution having both an obligation to maintain an anti-money laundering program and an obligation to report suspicious transactions under the RRE Rule)
• the property is transferred to a qualifying legal entity (such as an association, corporation, estate, limited liability company, or partnership) or qualifying trust

"Residential Real Property" means property located in the United States and is (1) real property containing a structure designed principally for occupancy by one to four families; (2) land 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; or (4) shares in a cooperative housing corporation. In certain instances, apartments, condominiums, timeshares, undeveloped land, and vacant lots may be considered Residential Real Property.

Who Must Report?

Real estate professionals involved in the transaction of the Residential Real Property are required to file the reports, home buyers are not required to file unless they are involved in the functions listed below. There is only one reporting person for a transaction of Residential Real Property, the first person performing one of the following functions is required to report:

1. the person listed as the closing or settlement agent on the closing or settlement statement for the transfer;
2. if no person described above is involved in the transfer, then the person that prepares the closing or settlement statement for the transfer;
3. if no person described above is involved in the transfer, then 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 in the transfer, then the person that underwrites an owner's title insurance policy for the transferee with respect to the transferred Residential Real Property;
5. if no person described above is involved in the transfer, then the person that disburses in any form, including from an escrow account, trust account, or lawyers' trust account, the greatest amount of funds in connection with the Residential Real Property transfer;
6. if no person described above is involved in the transfer, then the person that provides an evaluation of the status of the title; or
7. if no person described above is involved in the transfer, then 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.

The persons described above may enter into an agreement to designate which person will be the reporting person with respect to the reportable transfer. The person designated by such agreement shall be treated as the reporting person with respect to only a specific reportable transfer. If the above persons decide to use designation agreements, a separate agreement is required for each reportable transfer.

When is the Deadline for the Real Estate Report?

The Real Estate Report must be filed by the later date of either the final day of the month following the month in which closing occurred or thirty calendar days after the date of closing.

What Is Reported?

FinCEN requires the submittal of the Real Estate Report. The Real Estate Report includes the following information (as applicable):

• reporting person – full legal name, category of reporting person (items no. 1 through 7 above), and street address of principal place of business in the United States
• transferee entity – full legal name, trade name or "doing business as" name, if any, street address of principal place of business, and Internal Revenue Service ("IRS") tax identification number (if none, foreign jurisdiction tax identification number or, if none, foreign jurisdiction entity registration number)
  • beneficial owner (if any) – full legal name, date of birth, residential street address, citizenship, and IRS tax identification number (if none, foreign jurisdiction tax identification number or non-expired passport number)
• transferee trust – full legal name (full title of the agreement establishing the trust), date trust instrument was executed, IRS tax identification number (or, if none, foreign jurisdiction tax identification number), and whether the trust is revocable
  • trustee – full legal name, trade name or "doing business as" name, if any, street address of principal place of business, and IRS tax identification number (if none, foreign jurisdiction tax identification number or, if none, foreign jurisdiction entity registration number)
    • A trustee will be treated as a beneficial owner of a trust and must also report the information below
  • beneficial owner (if any) – full legal name, date of birth, residential street address, citizenship, and IRS tax identification number (if none, foreign jurisdiction tax identification number or non-expired passport number), and the category of beneficial owner
• transferor individual – full legal name, date of birth, residential street address, and IRS tax identification number (if none, foreign jurisdiction tax identification number or non-expired passport number)
• transferor entity – full legal name, trade name or "doing business as" name, if any, street address of principal place of business, and IRS tax identification number (if none, foreign jurisdiction tax identification number or, if none, foreign jurisdiction entity registration number)
• transferor trust – full legal name (full title of the agreement establishing the trust), date trust instrument was executed, and IRS tax identification number (or, if none, foreign jurisdiction tax identification number)
  • individual trustee – full legal name, residential address, and IRS tax identification number (if none, foreign jurisdiction tax identification number or non-expired passport number)
  • entity trustee – full legal name, trade name or "doing business as" name, if any, street address of principal place of business, and IRS tax identification number (if none, foreign jurisdiction tax identification number or, if none, foreign jurisdiction entity registration number)
• individual executing on behalf of transferee entity or trustee and transferor trustee – full legal name, date of birth, residential street address, IRS tax identification number (if none, foreign jurisdiction tax identification number or non-expired passport number), capacity of authorization, and, if the individual is acting in such capacity as employee, agent, or partner, the name of the individual's employer, principal, or partnership
• Residential Real Property – street address, legal description (such as section, lot, and block), and date of closing
• any payments made – amount (including total consideration), method, whether held at a financial institution (name of such institution and account number), and the name of payor
• any credit extended by a person or entity that is not a financial institution with an obligation to maintain an anti-money laundering program and obligation to report suspicious transactions under the RRE Rule

The RRE Rule impacts a number of common transactions, such as donations of real estate, transfers to revocable trusts, formations of joint ventures where real estate is involved, subdivision planning by real estate developers, cash sales of real estate where banks are not involved, and many others. Additionally, the RRE Rule captures many non-taxable transactions as well as taxable transactions which would already be reported to the IRS. For example, if an individual, entity, or trust loans a family entity or trust money to buy a house, this transaction must now be reported to the government pursuant to the RRE Rule.

As a result of the RRE Rule, the professionals handling Residential Real Property transactions are now required to report information to FinCEN or otherwise face penalties. Despite concerns as to the privacy of information of United States citizens, the government did not repeal or limit the scope of the RRE Rule as it did with the Corporate Transparency Act. Any entity or trust entering into a transaction closing on or after March 1, 2026, for the transfer of Residential Real Property, and the individuals providing transactional services to them, such as lawyers, title underwriters, title examiners and other persons handling real estate transactions, should keep in mind the RRE Rule.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.