Real estate professionals to report cash home sales
The US Treasury Department has finalized regulations aimed at curbing money laundering in the real estate sector by making it harder for criminals to use cash to purchase homes.
These rules, issued on Wednesday, will require investment advisers and real estate professionals to report cash sales of residential properties when they are purchased by legal entities, trusts, or shell companies. Transactions involving individuals or those financed through mortgages will not be subject to these requirements.
This move is part of the Biden administration’s broader effort to combat money laundering and prevent the flow of illicit funds through the American financial system. The Treasury’s Financial Crimes Enforcement Network (FinCEN) will be responsible for enforcing these new regulations.
“These steps will make it harder for criminals to exploit our strong residential real estate and investment adviser sectors,” Treasury Secretary Janet Yellen said in a statement.
All-cash purchases of residential real estate have long been considered a high-risk method for laundering money.
The new rules aim to close loopholes that allow criminals to use real estate transactions to clean their money, which can also have the side effect of driving up housing prices. A 2019 study by Canadian academics found that money laundering in real estate could push housing prices up by 3.7% to 7.5%, a significant concern as rising home prices continue to be a major issue in the US.
Under the new regulations, professionals involved in the sale of real estate will be required to report the identities of sellers and the individuals who benefit from the transaction. They will also need to provide detailed information about the property and the payments involved.
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Ian Gary, executive director of the FACT Coalition, a nonprofit organization advocating for corporate transparency, praised the new rules.
“After years of advocacy by lawmakers, anti-money laundering experts, and civil society, the era of unmitigated financial secrecy and impunity for financial criminals in the US seems to finally be over,” Gary said.
The real estate industry has generally responded positively to the new regulations.
Tori Syrek, a spokesperson for the National Association of Realtors, described FinCEN’s final rule as a “pragmatic, risk-based approach to combating money laundering and other crimes.” Syrek acknowledged that “bad actors are exploiting the current vulnerabilities” and expressed support for the new measures.
The Biden administration has prioritized increasing corporate transparency as part of its broader agenda. This includes efforts to prevent the misuse of anonymous shell companies, such as requiring millions of small businesses to register with the government to avoid criminal exploitation.
However, these efforts have faced legal challenges, with an Alabama federal district judge ruling in March that the Treasury Department cannot require small business owners to report details about their owners and beneficiaries
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