New Timeline for FinCEN's Real Estate Reporting Rule

The Financial Crimes Enforcement Network (FinCEN) recently announced an extension on implementing its Residential Real Estate Transfer Rule, now effective from March 1, 2026. This delay allows professionals in the field extra time to align with the new requirements.

Understanding the Rule

This rule mandates disclosures for certain non-financed residential real estate transfers, specifically targeting transactions without a lender's involvement, thus potentially at risk for money laundering. Residential properties under this rule encompass single to four-family homes, condominiums, and similar properties. Note, commercial properties are excluded unless they are mixed-use, and loans managed by financial institutions aren't the focus of this rule.

Who Are the Reporting Agents?

The "reporting person" is typically the individual or entity responsible for closing services—commonly a settlement or escrow agent, title company, or closing attorney. Agreements can assign this responsibility, but clear identification should occur before closing to ensure precise reporting.

Key Reporting Mandates

Upon executing a non-financed transfer to a legal entity or trust, the reporting agent must disclose detailed information regarding the property, transfer specifics, and beneficial owners. The FinCEN Residential Real Estate Report (RER) form outlines necessary data including property address, transfer details, payment methods, and information about the transferee and beneficial owners.

Compliance Timeline

While the obligation kicks in March 1, 2026, firms must review the rule's requirements and form instructions closely post-deadline. Any inaccuracies in filings should be promptly corrected as per the given procedures.

Digital Reporting System

Electronic filing is required through FinCEN's designated platform. Reasonable security measures must be upheld to protect sensitive information, aligning with BSA guidelines and pertinent state laws.

Recordkeeping Requirements

Maintaining copies of reports and associated documentation for the duration specified by FinCEN is crucial. Generally, records are retained for multiple years—firms should adjust their policies accordingly to incorporate these timelines and manage documents like identification and payment records effectively.

Identifying Beneficial Owners

A vital step involves identifying individuals who ultimately own or control the transferee. This includes gathering names, dates of birth, and identification numbers. For trusts, data about trustees and certain beneficiaries may be essential.

Operational Preparations

It's crucial for law firms and title companies to create protocols for identifying potential covered transfers early, assigning reporting duties, and updating engagement letters to include the necessary tasks and responsibilities. Testing mock filings could be beneficial to unveil any procedural gaps ahead of time.

Consequences of Non-compliance

Failure to adhere to these requirements can lead to BSA civil or criminal penalties. FinCEN's authority includes enforcing reporting, record maintenance, and response requirements. Hence, firms should maintain detailed procedures and training programs to showcase compliance efforts.

Implementing these steps and guidelines ensures firms are prepared for when the rule becomes effective, safeguarding against potential compliance issues.