FinCEN Postpones Real Estate Rule Enforcement to March 2026

The Financial Crimes Enforcement Network (FinCEN) has announced that its Residential Real Estate Transfer Rule will not require mandatory reporting until March 1, 2026, granting a postponement through exemptive relief. This delay implies that professionals subject to this rule won’t need to file reports before the new date.

This regulation focuses on specific non-financed transfers of residential properties involving legal entities or trusts. Typically, "residential real property" includes one-to-four family houses, condos, cooperatives, and similar dwellings.

The rule aims to address transactions presenting potential money laundering risks due to the absence of a lending intermediary with Bank Secrecy Act (BSA) duties. Commercial real estate dealings fall outside its purview, as do transactions backed by a bank or other financial institutions. However, properties used for mixed purposes might still be involved.

Understanding the “Reporting Person” Role

A pivotal element of the rule is the “reporting person,” often the entity or individual in charge of closing or settlement services for the transaction. This could be a settlement or escrow agent, a title company, or, in certain areas, a closing attorney.

Responsibilities for reporting can be delegated through agreements, but a responsible filer should be identified ahead of closing to ensure prompt and accurate reporting.

Reporting Obligations and Key Data

The rule stipulates reporting for non-financed transfers to legal entities or trusts, which have historically been used to hide beneficial ownership. The “reporting person” must provide details about the property, transaction, transferee, and beneficial owners.

Specific data requirements are detailed in FinCEN’s Residential Real Estate Report (RER) form, including the property’s address and legal description, transfer date and amount, payment method, the transferee’s legal identifiers, beneficial ownership details, and reporting party's business information.

Timing and Deadline Compliance

Mandatory reporting begins on March 1, 2026, due to FinCEN's extension. Beyond this date, reports must be filed within the deadline specified by the rule and form instructions. It’s important for firms to scrutinize these instructions to adhere to the deadline and understand any provisions for amendments. If a submitted report contains significant errors, it should be promptly corrected according to the instructions.

Utilizing FinCEN’s Electronic Filing System

The rule envisions electronic submissions through FinCEN’s system. Reporting individuals should ensure they have the necessary access to this platform and can upload any required supporting documentation.

Maintaining Data Privacy and Security

Given the sensitivity of the personal and entity information in these filings, firms must implement data privacy and security measures, aligning with BSA standards and any applicable state regulations.

Recordkeeping Requirements

Recordkeeping forms a vital part of compliance. Filers should keep copies of the report and supporting documents for the FinCEN-specified period and be prepared to provide these records upon request.

Typical BSA recordkeeping mandates involve retaining documents for several years, so firms need to verify the exact duration and integrate it into their file management protocols. Supporting documents may include identification copies, and records related to entities or trusts, and payment methods.

Identifying Beneficial Owners

A critical component involves identifying the beneficial owners of the transferee entity or trust. The RER form requires collecting identities of individuals who control or own the transferee, in line with FinCEN’s residential context approach.

This process may involve gathering names, birth dates, addresses, and identification numbers for beneficial owners, alongside verification documents. For trusts, details about trustees and specific beneficiaries may be necessary based on the trust's structure.

Preparation Steps for Settlement Professionals

Considering the role generally falls to settlement professionals, legal and title/escrow companies should develop procedures to identify potential covered transfers early, verify who will act as the reporting person, and delegate data collection responsibilities.

Updating engagement letters and closing checklists can clarify task assignments, transferee representations about beneficial ownership, and consent for identification data collection and verification. Practicing mock filings with the RER form can help uncover workflow inefficiencies before the enforcement date.

Penalties and Compliance Measures

Non-compliance could lead to BSA civil or criminal penalties for willful violations. FinCEN has the right to enforce penalties for failure to report, keep records, or fulfill requests.

Firms should document reasonable and risk-based procedures, training, and quality controls to demonstrate sincere compliance. The final rule and Federal Register notice offer the regulatory context and enforcement details under the BSA.