In 2024, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published a final rule known as the Residential Real Estate Rule (the “Rule”), expanding the application of Anti-Money Laundering (“AML”) and Know Your Customer (“KYC”) regulations to parties who perform one of seven specified functions in the purchase or sale of residential real estate.
The Rule requires certain parties to report non-financed or privately financed residential property transfers involving entities or trusts to FinCEN. It also establishes a new reporting form called the Real Estate Report, which includes detailed information about covered transfers and the parties involved, including the transferor, the transferee, individuals representing either party, the beneficial owners of the transferee, the property being transferred, consideration for the transfer, and payments made by the transferee.
Originally set to take effect on September 30, 2025, FinCEN postponed implementation of the Rule until March 1, 2026. With this change, many private lenders focused on residential real estate loans are now facing questions from title agencies, escrow providers, and other third-party vendors regarding their FinCEN AML compliance.
So How Does This Rule Affect You, the Private Lender?
Here is the part many people miss.
Since 2014, FinCEN has required all companies that make loans secured by residential real estate to comply with most of FinCEN’s Bank Secrecy Act (BSA) reporting and filing guidelines. This includes business-purpose residential loans.
That means private lenders making loans secured by residential real estate must:
(a) Maintain a written AML/KYC compliance policy
(b) File Suspicious Activity Reports (SARs) when identifying mortgage fraud, money laundering risks, tax fraud, and identity theft with FinCEN
(c) Maintain strong KYC procedures and proper records retention
If you are unsure whether your policies align with current regulatory standards, reviewing your AML compliance services framework is a prudent first step.
In other words, AML compliance for private lenders is not new.
What is new is that this Rule expands similar Anti-Money Laundering reporting obligations to the rest of the real estate industry for non-financed transactions.
Why?
Because all-cash residential real estate transactions are a well-known hub for money laundering and fraud.
What Do You Do Next?
Be prepared to answer the questions you are going to get from title companies, escrow agents, and others involved on the settlement side.
Many private lenders already have AML/KYC policies and procedures in place. If that is you, the answer is simple: Yes, we have an AML compliance program.
For those who do not yet have formal AML/KYC policies in place, most, if not all, lenders already comply with the Know Your Customer component as part of their fraud prevention process. It is just not formalized.
If you do not currently have a documented AML/KYC compliance program, there are numerous third-party consultants who provide AML and KYC compliance services specifically for mortgage companies and private lenders. However, working with experienced legal counsel for private lenders ensures your compliance program is not only implemented, but defensible.
The key is making sure your compliance practices are documented, defensible, and aligned with FinCEN’s Bank Secrecy Act requirements before the March 1, 2026 effective date. This includes understanding your broader FinCEN reporting requirements, including beneficial ownership and Suspicious Activity Report obligations.
Questions About AML/KYC Compliance?
If you are unsure whether your AML/KYC compliance program meets FinCEN’s Bank Secrecy Act requirements, now is the time to review it.
The March 1, 2026 effective date will come quickly, and waiting until a title company or counterparty flags an issue is not a strategy.
At Fortra Law, we provide regulatory compliance guidance for mortgage companies and private lenders, helping clients assess, structure, and formalize AML and KYC compliance programs that are practical, defensible, and aligned with FinCEN regulations.
If you have questions about the Residential Real Estate Rule or want to ensure your AML compliance framework is solid, contact our team to discuss your next steps.
