T
he U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) has recently announced two new rules aimed at combating money laundering in real estate transactions and investment advisory services. These rules are part of a broader plan by the Biden administration to curb corruption.
The first rule requires certain industry professionals to report information about non-financed transfers of residential real estate to legal entities or trusts to FinCEN if they present a high risk for illicit finance. This new regulation is designed to increase transparency, limit the ability of illicit actors to anonymously launder money through the American housing market, and enhance law enforcement investigative efforts.
In addition to this rule, a new requirement has been established for certain persons involved in real estate closings and settlements to report specified transfers of residential real estate to FinCEN if they are at high risk for illicit finance. This rule will take effect on Dec. 1, 2025.
The second rule targets investment advisers and includes minimum standards for anti-money laundering (AML) and countering the financing of terrorism (CFT) programs. Registered investment advisers (RIAs) and exempt reporting advisers (ERAs) must report suspicious activity to FinCEN under provisions of the Bank Secrecy Act. This rule will take effect on Jan. 1, 2026.
After receiving input from trade groups, the rules were "loosened" to make them less burdensome for industry professionals. Despite this, the final version of the rule for investment advisers was reportedly an improvement over the department's 2015 proposal, according to The Wall Street Journal.
In terms of the real estate rule, a new flexibility has been added to make the requirements less burdensome. Parties to a real estate transaction can now adopt a written agreement that designates a particular individual with the duty to report. Additionally, a standard of reasonability has been adopted that allows the person reporting a transaction to rely on information provided by another party, as long as they have no reason to suspect the reliability of the information.
U.S. Treasury Secretary Janet Yellen emphasized that her department's efforts are aimed at disrupting attempts by bad actors to use the U.S. as a hiding and laundering place for ill-gotten gains. Addressing regulatory deficiencies is part of this effort. Yellen believes that these steps will make it more difficult for criminals to exploit the strong residential real estate and investment adviser sectors in the U.S.
