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 (“Rule”) expanding the application of Anti-Money Laundering (“AML”) and Know Your Consumer (“KYC”) regulations. The Rule requires certain parties to report non-financed or privately financed residential property transfers involving entities or trusts to FinCen. The Rule established a new form, called the Real Estate Report, which includes detailed information about covered transfers and its parties, including the transferor, the transferee, individuals representing either the transferor or transferee, 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 upcoming change, many lenders are understandably concerned about how it will impact them and their business.
The short answer is this new rule has little impact on the lender side of real estate finance. While AML/KYC Compliance is critical for lenders, the Rule applies to buyers and sellers, and their requisite vendors, on the settlement side. Lenders who also function as transferors, such as in a seller-carryback transaction, should be cautious and consult with counsel to determine how this may apply to them. For most lenders though, creating and implementing an internal AML compliance program remains the best practice to ensure full compliance with FinCen’s AML requirements. In fact, since 2013, FINCEN has required all non-bank residential mortgage lenders and originators (including business purpose) to comply with AML KYC obligations set forth under the Bank Secrecy Act (BSA). Lenders can also choose to engage third party vendors to assist with this if an internal program is not a feasible option.
If you need assistance determining what AML/KYC requirements apply to you or have questions on this complex topic, reach out to our team to discuss Fortra’s compliance services.
