WASHINGTON, DC – On March 1, the first nationwide anti–money laundering safeguards for the U.S. residential real estate sector went into effect. The Residential Real Estate Rule (RRE Rule) requires certain professionals involved in real estate closings and settlements to submit reports to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) regarding certain non-financed transfers of residential real estate to legal entities or trusts. The activation of this rule follows years of calls by FACT Coalition members, law enforcement, and national security experts.

Ian Gary, FACT executive director, said in a statement:

The U.S. residential real estate sector has, for decades, been a magnet for the world’s dirty cash. Criminals, corrupt officials, and U.S. adversaries have been able to move their illicit funds into and through residential properties with ease. The system has been opaque for too long. FinCEN’s new reporting requirements will help deter the most egregious cases of money laundering through real estate while giving law enforcement and national security officials better tools to investigate and tackle these flows. 

Money launderers make poor neighbors and poor landlords. In turning off the spigot of dirty cash, this rule may help correct ongoing market distortions in the residential real estate sector caused by money laundering and give tenants facing negligent landlords a better chance at accountability.  

The U.S. has put this rule into effect just as it faces review by the global anti-money laundering standard setter, the Financial Action Task Force. This review has global import, as the United States is the world’s largest economy and the dollar is the world’s reserve currency. Despite several signs in the past year that the U.S. may be in retreat from the fight against illicit finance, the residential real estate rule plants a flag that the U.S. can still play an important role in combating dirty money.

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Notes to the Editor: 

• See the FinCEN rule landing page, fact sheet for professionals, and the text of the final rule. 
• In February, two district court judges ruled in favor of the government in two separate cases. On February 19, the U.S. District Court in Jacksonville, Florida, held that Treasury’s rule is authorized by the Bank Secrecy Act and does not violate either the First or Fourth Amendments. On February 25, the U.S. District Court in Lubbock, Texas, also upheld the rule as constitutional.  
• The U.S. real estate sector has long been a significant vector for financial crime. Money laundering through real estate both “distorts housing prices and threatens U.S. economic and national security,” according to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). 
• For more information and examples of money laundering through U.S. residential real estate, see FACT’s submission to FinCEN during the comment period. 
• While an important step, the U.S. still has no safeguards in place against money laundering in the commercial real estate sector, which accounts for a significant share of laundering cases. FinCEN must next take steps to address money laundering through the multitrillion-dollar commercial real estate market.