Real estate agents and brokers occupy a unique position in the AML regulatory landscape - subject to some obligations but not others. Here's the current state of AML requirements for real estate professionals.
Real estate agents and brokers are not currently required to maintain formal AML programs under the BSA
Real estate agents and brokers occupy an unusual position in the BSA regulatory landscape. Unlike title companies, which are explicitly covered by FinCEN's AML program regulations, real estate agents and brokers are not currently required to maintain formal AML programs under the BSA. However, they are subject to Geographic Targeting Order obligations in covered markets, and FinCEN has been explicit about its intention to extend formal AML requirements to the real estate sector.
GTO obligations apply to real estate professionals in covered markets for all-cash transactions above thresholds
The GTO obligations that apply to real estate professionals in covered markets are the most immediate compliance concern. In markets covered by FinCEN's GTOs, real estate professionals involved in all-cash residential purchases above specified thresholds must collect and report beneficial ownership information about the purchasing entity. This obligation applies to agents and brokers who are involved in covered transactions, not just title companies.
FinCEN's proposed rule would extend formal AML requirements to real estate professionals
FinCEN's proposed rulemaking to extend AML program requirements to real estate professionals has been in development for several years. The proposed rule would require real estate professionals involved in non-financed residential and commercial real estate transactions to implement written AML programs, conduct customer due diligence, and file suspicious activity reports. The final rule has not yet been published, but the direction is clear.
Voluntary AML controls are prudent for professionals in high-risk markets regardless of current requirements
Even without a final rule, real estate professionals who work in high-risk markets - South Florida, New York, Los Angeles, and other markets with significant international capital flows - should be implementing voluntary AML controls. The reputational and legal risk of facilitating a money laundering transaction is significant, and the regulatory requirements are clearly moving toward formal obligations. Professionals who have compliance infrastructure in place when the final rule is published will face a much smoother transition.
Red flag recognition and CDD for high-value transactions are the practical starting points
The practical starting point for real estate professionals is to implement a red flag recognition program and a customer due diligence process for high-value transactions. This means training staff to recognize the red flags specific to real estate money laundering, implementing a process for collecting and verifying buyer information on all-cash transactions, and documenting compliance activities in a way that would satisfy examination scrutiny.
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Regulatory Compliance Advisor · Soflo Consulting
Marcus Reid is a Regulatory Compliance Advisor at Soflo Consulting focused on MSB compliance, fintech regulatory strategy, and state money transmitter licensing. He works with early-stage fintech companies, established money services businesses, and digital payment platforms to build compliance infrastructure that scales with their business.
5 sections
Key Takeaways
- 1Real estate agents and brokers are not currently required to maintain formal AML programs under the BSA
- 2GTO obligations apply to real estate professionals in covered markets for all-cash transactions above thresholds
- 3FinCEN's proposed rule would extend formal AML requirements to real estate professionals
- 4Voluntary AML controls are prudent for professionals in high-risk markets regardless of current requirements
- 5Red flag recognition and CDD for high-value transactions are the practical starting points
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