Federal Court Vacates FinCEN Real Estate Reporting Rule Obligations

On March 19, 2026, Judge Jeremy Kernodle of the US District Court for the Eastern District of Texas issued an opinion in Flowers Title Cos., LLC v. Bessent vacating the Financial Crimes Enforcement Network’s (FinCEN) final rule extending anti-money laundering requirements to persons involved in certain real estate closings and settlements (Real Estate Reporting Rule). The final rule went into effect on March 1, 2026, and required the reporting of information of certain residential real estate transfers in which the purchaser or other recipient of an interest in real property is a legal entity (Transferee Entity) or trust (Transferee Trust). Each report was required to be electronically submitted to FinCEN and include information concerning the transferred property and identifying information for the Transferee Entity or Transferee Trust and its beneficial owners, the transferor, and the person filing the real estate report.

Judge Kernodle’s memorandum opinion and order held that FinCEN, in issuing the Real Estate Reporting Rule, exceeded its authority under the Bank Secrecy Act of 1970 (BSA) (31 U.S.C. §§ 5311 – 5336) on two grounds. First, although FinCEN may require reporting of “suspicious” transactions, the court concluded that non-financed residential real estate transactions to legal entity or trust recipients are not categorically suspicious. Second, although the BSA contains § 5318(a)(2), the court concluded that this language only authorizes FinCEN to require procedures that include reporting information; it does not authorize FinCEN to require the reports mandated by the Real Estate Reporting Rule. This order stops all reporting obligations under the Real Estate Reporting Rule.

FinCEN has updated its website to clarify that the filing of real estate reports is not required at this time, providing: “In light of a federal court decision, reporting persons are not currently required to file real estate reports with FinCEN and are not subject to liability if they fail to do so while the order remains in force.”

The government may appeal Judge Kernodle’s ruling to the US Court of Appeals for the Fifth Circuit and may seek a stay of his order. As of the date of this publication, the government has not filed a notice of appeal but has 60 days from the date of the order to do so. If Judge Kernodle’s order is stayed, enforcement of the Real Estate Reporting Rule may continue pending a final decision by an appellate court on FinCEN’s authority to issue the Real Estate Reporting Rule.

We will continue to monitor any developments related to this case and other relevant cases and whether the US Department of the Treasury or FinCEN engage in any regulatory action.

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.