FinCEN’s New Real Estate Rule: What CPAs and Attorneys Need to Know About BOI Filing Requirements

The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, has recently introduced significant changes that will affect professionals managing Beneficial Ownership Information (BOI) filings. On August 29, 2024, FinCEN adopted the final “Real Estate Rule,” which will impose new reporting requirements for non-financed residential real estate transfers. The rule, published under 31 CFR 1031.320, is set to take effect on December 1, 2025. This change aims to close gaps in the current reporting system that have been exploited by illicit actors.?

For CPAs and attorneys working with clients in real estate transactions, these new reporting requirements will add a layer of responsibility that goes beyond traditional financial scrutiny. The rule is designed to combat money laundering schemes by requiring transparency on beneficial ownership in high-risk, non-financed property transfers.?

Let’s explore the critical elements of the new Real Estate Rule and how CPAs and attorneys can prepare their clients to comply.?

Background on the Real Estate Rule?

FinCEN’s focus on residential real estate transactions is not new. Under the Bank Secrecy Act (BSA), FinCEN has previously issued Residential Real Estate Geographic Targeting Orders (GTOs) requiring title insurance companies to report beneficial ownership information for certain high-value, non-financed real estate transactions. These GTOs, however, were limited to specific jurisdictions, and while they targeted illicit activities, they lacked a nationwide enforcement structure.?

The Real Estate Rule is a nationwide extension of these GTOs and will cover all residential real estate transactions across the United States that meet the reporting criteria. This means any non-financed real estate transfer involving a legal entity or trust as the transferee will require reporting—regardless of the property’s value or location.?

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Understanding Illicit Activities in Real Estate Transactions?

Illicit actors have historically used non-financed real estate transactions, such as all-cash deals, to evade anti-money laundering (AML) scrutiny. By avoiding financial institutions that are required to file Suspicious Activity Reports (SARs) and maintain AML programs, criminals can obscure their involvement in property deals. Furthermore, the use of legal entities or trusts allows these actors to hide their true identities and ownership interests, making it challenging for law enforcement to trace illicit proceeds.?

FinCEN’s new rule seeks to close these loopholes by requiring detailed information about the beneficial owners of the entities involved in residential real estate transactions. This information is crucial for identifying the real individuals behind these entities, thereby preventing bad actors from using real estate to launder money or finance terrorism.?

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Key Provisions of the Real Estate Rule?

Here are the key elements that CPAs and attorneys should familiarize themselves with:?

1. Reportable Transfers?

A transfer is considered reportable if it meets the following criteria:?

• The property is residential real property.?

• The transfer is non-financed (does not involve an extension of credit secured by the property from a financial institution with AML obligations).?

• The transferee is a legal entity or trust.?

• No exemption applies.?

Gift transfers and other types of non-financed transactions are also covered under this rule, even when the transfer is made for no consideration.?

2. Definition of Residential Real Property?

The rule applies to various types of residential properties, including:?

• Single-family homes, townhouses, condominiums, and cooperatives.?

• Apartment buildings designed for occupancy by one to four families.?

• Vacant or unimproved land intended for residential development.?

Mixed-use properties, such as residences located above commercial enterprises, may also fall under this rule if the residential portion is the primary use of the property.?

3. Non-Financed Transfers?

A transfer is classified as non-financed if it does not involve a loan secured by the property from a financial institution subject to AML and SAR obligations. Private lenders, who are not required to follow these obligations, make their transactions eligible for reporting under this rule. CPAs and attorneys should be aware of this definition when advising clients involved in such transfers.?

4. Transferee Entities and Trusts?

Reporting is mandatory when a legal entity or trust is involved in the transfer as the transferee. This includes entities such as:?

• Limited liability companies (LLCs)?

• Corporations?

• Partnerships?

• Domestic and foreign trusts?

Highly regulated entities, such as publicly traded companies and government agencies, are exempt from reporting due to their low risk for illicit activities. However, the majority of private entities will fall under this requirement, and CPAs and attorneys must ensure the proper reporting takes place.?

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Exemptions from Reporting?

Certain types of transactions are exempt from the Real Estate Rule, including:?

• Transfers resulting from death, divorce, or bankruptcy.?

• Transfers supervised by U.S. courts.?

• Transfers made by an individual to a trust where the individual or their spouse is the settlor or grantor.?

• Transfers related to Section 1031 exchanges under the Internal Revenue Code.?

CPAs and attorneys should ensure their clients are aware of these exemptions to avoid unnecessary filings.?

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The Reporting Person’s Role?

Under the Real Estate Rule, the responsibility for filing the report rests with the “reporting person.” This will typically be one of the professionals involved in the transaction, such as:?

• Settlement agents?

• Title insurance agents?

• Escrow agents?

• Attorneys?

FinCEN has introduced a "reporting cascade" to identify the responsible party. This cascade lists various functions, and the professional performing the highest-listed function will be required to file the report. If no individual higher on the cascade is involved, the responsibility moves down the list.?

Real estate professionals also have the option to agree among themselves about who will file the report, providing some flexibility in multi-party transactions.?

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Required Information for Reporting?

The Real Estate Rule requires the reporting person to provide the following information:?

• Information about the transferee entity or trust.?

• Beneficial owners of the transferee entity or trust.?

• Individuals signing on behalf of the transferee entity or trust.?

• Information about the transferor (seller).?

• Details about the property and any payments made.?

Beneficial owners are defined as individuals who either exercise substantial control over the entity or own at least 25% of its ownership interests. This aligns with the definition of beneficial owners in FinCEN’s BOI Reporting Rule under 31 CFR 1010.380.?

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Next Steps for CPAs and Attorneys?

The new Real Estate Rule takes effect on December 1, 2025, but CPAs and attorneys should begin preparing their clients for compliance now. This includes identifying upcoming transactions that will be subject to reporting and educating clients on the required information they will need to provide.?

Staying ahead of this regulation is essential for mitigating risk and ensuring your clients are compliant with FinCEN’s new transparency standards.?

For more detailed guidance on how the Real Estate Rule may impact your practice, visit FinCENAdvisors.com.?