FinCEN Issues Two New Rules to Combat Illicit Finance in Real Estate

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) recently issued two rules that aim to safeguard the residential real estate and investment adviser sectors from illicit finance.

Final residential real estate rule

• Certain persons involved in real estate closings and settlements must report specified transfers of residential real estate to FinCEN. This rule will apply to non-financed transfers to legal entities or trusts. Exemptions will include transfers due to death, divorce, bankruptcy, and certain other lower-risk scenarios.
• The rule describes the circumstances in which a report must be filed, who must file a report, what information must be provided, and when a report is due. Reporting persons include settlement agents, title insurance agents, escrow agents, and attorneys. Required information includes details about the reporting person, transferee entity or trust, beneficial owners, transferor, property, and total consideration.
• Transfers made directly to an individual are not subject to the rule.
• Effective December 1, 2025.

Final investment adviser rule

• This regulation applies to certain investment advisers who may be at risk for misuse by money launderers, terrorist financers, or other actors who seek access to the U.S. financial system for illicit purposes.
• Under the Bank Secrecy Act’s implementing regulations, “investment adviser” will be added to the definition of “financial institution” and will be described as either:
  • Registered investment advisers (RIAs) — Investment advisers registered with or required to register with the U.S. Securities and Exchange Commission (SEC) ¹
  • Exempt reporting advisers (ERAs) — Investment advisers that report information to the SEC ²

• RIAs and ERAs will both be required to:
  • Implement a risk-based anti-money laundering/countering the financing of terrorism program
  • File certain reports with FinCEN (i.e., Suspicious Activity Reports)
  • Retain certain records, such as those regarding the transmittal of funds
  • Fulfill obligations that are applicable to financial institutions subject to the BSA and FinCEN’s implementing regulations (i.e. special information sharing procedures)
• Effective January 1, 2026.

Public feedback was solicited, and consultations were held with industry groups, intergovernmental partners, and other key stakeholders as part of the rulemaking process. Significant consideration was also given to the potential burdens these new rules would place on businesses, including small businesses.

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1) Investment advisers generally must register with the SEC if they have over $110 million in assets under management (AUM).

2) ERAs are investment advisers that advise only private funds and have less than $150 million in AUM in the U.S. or advise only venture capital funds. ERAs are exempt from SEC registration, but pursuant to existing SEC regulations, are required to file certain information with the SEC.