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  • Mary Anne Harris

U.S. Treasury Issues Proposed Anti-Money Laundering Rule

FinCEN rule will impose additional reporting requirements on title companies

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking (NPRM) in February that would extend the reach of their Geographic Targeting Orders nationwide.

Since 2016, FinCEN has issued GTOs for markets considered high risk for illicit actors who were seeking to launder money through the vehicle of real estate transactions. Over the past seven years, those GTOs have been expanded – most recently in October 2023 – to include markets in 13 states and the District of Columbia.

The proposed rule expands the reporting requirement nationwide for all-cash sales involving legal entities and trusts.

“Illicit actors often favor non-financed transfers or all-cash sales of residential real estate that avoid scrutiny from financial institutions that have anti-money laundering (AML) programs and Suspicious Activity Report (SAR) filing requirements under the Bank Secrecy Act,” FinCEN noted in the NPRM announcement. “In an effort to obscure their identities, illicit actors often hold residential real estate in the name of a legal entity or trust. These types of transfers have been identified as vulnerable to money laundering, and FinCEN believes that the risk of illicit activity is sufficient to require reporting.”

Title companies and real estate attorneys will have to keep their eyes on this new regulation, as it will increase reporting requirements and will potentially be an additional component of the auditing process with regard to recordkeeping.

FinCEN called for a 60-day comment period, which ended on April 15.

Cost of implementation

FinCEN has estimated that the rule would result in 800,000 – 850,000 filings annually and could cost a forecasted $245 – $454 million per year for the industry, with the cost to file an individual report estimated at $193 – $244.

Training staff on how to identify which transactions require reporting and how to gather the information and submit it to FinCEN is expected to require an initial investment of $40 million and an annual investment of $20 – $27 million for a 30-minute refresher course.

It is anticipated this new reporting requirement could potentially become part of the American Land Title Association (ALTA) Best Practices regime.

Minimizing the impact

Diane Tomb, ALTA’s chief executive officer, noted in the organization’s release in the wake of the NPRM that the association is hoping to minimize the impact of this proposed rule. “We intend to continue the ongoing dialogue with FinCEN to craft a tailored approach limiting the transactions that must be reported to those of the greatest concern and providing avenues to help reduce the compliance burden on title and settlement companies," Tomb said in its February blog.

The proposed rule expands on the GTOs, in several ways, including:

  • Reporting will be required nationwide

  • There is no dollar threshold

  • FinCEN is intending to provide a specific real estate report form for electronic filing

Being able to electronically file the report assuages some industry concerns, but ALTA is also calling on FinCEN to finalize regulations for the development of a beneficial ownership database before taking further actions as this too could reduce the burden on the title insurance industry.

At Positively Balanced, we follow all legislative and regulatory updates impacting our clients to ensure we are properly assisting with all of your compliance needs when it comes to helping you prepare for an upcoming audit. Contact us to learn more!


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