T
he U.S. real estate market has long been a cornerstone of the American dream, but it also provides an opportunity for illicit actors to launder dirty money into legitimate assets through all-cash deals. To address this vulnerability, FinCEN introduced the Residential Real Estate Rule (RRE Rule) in August 2024, requiring certain industry professionals to report information about non-financed transfers of residential real estate to legal entities or trusts.

    Title companies and settlement agents are now on the frontlines of the federal government's fight against real estate money laundering. The RRE Rule requires reporting persons to file a Real Estate Report with FinCEN, disclosing information such as the identities of beneficial owners, property details, and transaction details. The rule carves out several categories of low-risk or routine transactions.

    Fidelity National Financial (FNF) has filed a lawsuit in the Middle District of Florida to block the RRE Rule, arguing that it exceeds FinCEN's statutory authority under the Bank Secrecy Act. FNF contends that the rule's blanket requirement for reporting all non-financed transfers without specific indicia of suspicious activity violates this limitation.

    The RRE Rule is the latest development in a 55-year evolution of anti-money laundering laws and regulations in the United States. FinCEN has issued geographic targeting orders (GTOs) to target all-cash luxury real estate purchases in various states, which have been renewed and expanded over time.

    To prepare for the new rule, industry professionals must assess their applicability, establish internal policies and procedures, securely collect and verify information, leverage designation agreements, and prepare for regulatory scrutiny. The RRE Rule is set to take effect on December 1, 2025, and noncompliance can result in significant civil and criminal penalties.

    The evolution of FinCEN's regulation of residential real estate transactions reflects a growing recognition of the sector's vulnerability to money laundering and the need for greater transparency. Industry professionals must now play a central role in the fight against illicit finance, and waiting for legal challenges to fail is not the prudent course of action.