New Rule Aims to Unveil Hidden Mechanisms in Real Estate Transactions

The U.S. Treasury Department has unveiled new federal rules aimed at curbing money laundering in real estate transactions, sparking debate about their potential impact on the housing market and individual privacy.

At a Glance

New rules require reporting of non-financed residential property transfers to legal entities or trusts
Regulations target high-risk, all-cash property transactions effective December 1, 2025
Real estate professionals must report buyer details, property information, and payment data
Critics argue the rules could increase costs and infringe on privacy rights

Treasury Department Targets Real Estate Loopholes

The U.S. Treasury Department has introduced new regulations designed to combat money laundering through cash purchases of residential real estate. These rules, set to take effect on December 1, 2025, will require real estate professionals to report details of non-financed property transfers to legal entities or trusts to the Financial Crimes Enforcement Network (FinCEN).

Treasury Secretary Janet Yellen emphasized the importance of these measures in addressing regulatory deficiencies and preventing criminal exploitation of the U.S. financial system. The rules are part of the Biden-Harris administration’s broader strategy to counter corruption and increase transparency in financial transactions.

New Federal Rule Targets Money Laundering in Residential Real Estate

Criminals, corrupt officials, and terrorists have exploited legal entities and trusts to launder money via real estate deals, the U.S. Treasury says.
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— The Epoch Times (@EpochTimes) September 3, 2024

Implications for Real Estate Professionals and Buyers

Under the new regulations, real estate agents, brokers, and other professionals involved in property sales must report the names of sellers and beneficiaries, property details, and payment information for certain transactions. These requirements apply specifically to all-cash purchases of residential real estate by legal entities, trusts, and shell companies, which are considered high-risk for money laundering activities.

“The Treasury Department has been hard at work to disrupt attempts to use the United States to hide and launder ill-gotten gains,” said US Secretary of the Treasury Janet Yellen. “That includes by addressing our biggest regulatory deficiencies, including through these two new rules that close critical loopholes in the US financial system that bad actors use to facilitate serious crimes like corruption, narcotrafficking, and fraud. These steps will make it harder for criminals to exploit our strong residential real estate and investment adviser sectors,” she said.

It’s important to note that these rules do not apply to sales to individuals or purchases involving mortgages or other financing. The primary goal is to bring transparency to transactions that have historically been vulnerable to abuse by criminals seeking to launder illicit funds.

Industry Response and Concerns

The National Association of Realtors (NAR) has responded favorably to the final residential real estate rule, viewing it as a pragmatic approach to combating money laundering. However, some industry professionals have expressed concerns about the potential burden and costs associated with compliance.

The NAR says that, “obtaining source of fund information from consumers or clients can put real estate professionals in a precarious situation and extremely dangerous situation by requiring real estate professionals to serve in a law enforcement or work in an investigatory capacity.”

The American Land Title Association has noted that the rule could increase costs for real estate businesses by up to $500 million annually. This has raised questions about how these additional expenses might impact the housing market and potentially be passed on to consumers.

Broader Implications for the Housing Market

While the primary aim of these regulations is to prevent criminal activity, there are potential implications for the broader housing market. A 2019 Canadian study found that money laundering in real estate increased housing prices by 3.7% to 7.5%, highlighting the tangible impact of illicit financial activities on housing affordability.

As the rules take effect, it remains to be seen how they will influence market dynamics, particularly in areas where all-cash transactions are more common. Some experts argue that increased transparency could lead to a more stable and fair housing market, while others worry about potential unintended consequences for legitimate investors and privacy concerns.

“Another reason all-cash deals are more common is that investors are purchasing a record high share of real estate,” Chief Economist Danielle Hale at Realtor.com says.

As the December 2025 implementation date approaches, real estate professionals and investors will need to prepare for these new reporting requirements. The success of these measures in curbing money laundering while maintaining a robust and accessible housing market will likely be a topic of ongoing discussion and analysis in the coming years.