Treasury Department to Propose Beneficial Ownership Reporting Rules for Real Estate

Title insurers and others may soon be required to report the identities of the beneficial owners of companies that pay cash for real estate.

The U.S. Treasury Department will propose a rule this month that will require real estate professionals to report this information to its Financial Crimes Enforcement Network (FinCEN), Reuters reported Thursday (Aug. 10), citing unnamed sources.

The Treasury Department did not immediately reply to PYMNTS’ request for comment.

The proposed rule aims to close a loophole that has allowed criminals to hide assets by making anonymous purchases of luxury homes, according to the report.

Some $2.3 billion was laundered through real estate in the country between 2015 and 2020, according to Treasury Secretary Janet Yellen, per the report.

The proposal is on the department’s regulatory agenda, but the timeline could change, according to the report.

Officials first announced plans to implement such a rule in 2021, but those efforts have been slowed by an ongoing attempt to complete a similar rule that would require disclosure of the owners of shell companies, the report said.

FinCEN issued a final rule in October 2022 that would require most corporations, limited liability companies, and other companies established or registered to do business in the U.S. to report information about their beneficial owners.

In June, lawmakers demanded greater clarity on FinCEN’s forthcoming beneficial ownership reporting requirements, saying that the agency had yet to lay out a clear plan for educating small businesses. This lack of clarity could lead to small businesses being held civilly or criminally liable for noncompliance, the lawmakers said.

The soon-to-be-proposed new rule around real estate would create a nationwide expansion of rules called geographic targeting orders (GTOs) that are already operated by FinCEN in a few cities, according to the report.

About 7% of GTO reports have identified individuals or entities connected to current cases being run by the Federal Bureau of Investigation (FBI), the Government Accountability Office (GAO) said in 2020, per the report.

The new rule would also apply to the real estate industry rules regarding the source of customer funds and suspicious transactions that are similar to those that have long been applied to the banking industry, the report said.