New Money Laundering Rules Make Agents Report Cash Home Sales

The Treasury Department has issued regulations aimed at making it harder for criminals to launder money by paying cash for residential real estate.

Under rules finalized just before the Labor Day weekend, investment advisers and real estate professionals will be required to report cash sales of residential real estate sold to legal entities, trusts and shell companies. The requirements won’t apply to sales to individuals or purchases involving mortgages or other financing.

The new rules come as part of a Biden administration effort to combat money laundering and the movement of dirty money through the American financial system. All-cash purchases of residential real estate are considered a high risk for money laundering.

The Treasury’s Financial Crimes Enforcement Network, also known as FinCEN, will administer the rules.

Money laundering in residential real estate can also drive up housing costs – and rising home prices are one of the big economic issues in this year’s presidential campaign. A 2019 study on the impact of money laundering on home values in Canada, conducted by a group of Canadian academics, found that money laundering investment in real estate pushed up housing prices in the range of 3.7 percent to 7.5 percent.

Under the new rules, the professionals involved in the sale will be required to report the names of the sellers and individuals benefitting from the transaction. They will also have to include details of the property being sold and payments involved, among other information.

Treasury Secretary Janet Yellen said in a news release that the new rules address some of the nation’s biggest regulatory deficiencies.

“These steps will make it harder for criminals to exploit our strong residential real estate and investment adviser sectors,” she said.

Some industry representatives welcome the new rules.

Tori Syrek, a spokesperson for the National Association of Realtors, said FinCEN’s final rule is a pragmatic approach to combating money laundering and other crimes.

“Bad actors are exploiting the current vulnerabilities,” Syrek said. “FinCEN’s final rule is a pragmatic, risk-based approach to combating money laundering and these other crimes.”