In 2022, FinCEN proposed extending formal AML requirements to real estate professionals involved in non-financed transactions. Here's what the proposed rule would require and how the industry should prepare.
FinCEN's proposed rule would extend formal AML requirements to real estate professionals nationally
In December 2021, FinCEN issued an Advance Notice of Proposed Rulemaking signaling its intention to extend formal AML requirements to real estate professionals involved in non-financed residential and commercial real estate transactions. In 2022, FinCEN continued developing the proposed rule, gathering industry comment and refining the regulatory framework. The proposed rule represents the most significant expansion of BSA requirements to the real estate sector since the Geographic Targeting Order program began in 2016.
The rule would apply to all non-financed transactions - broader than the existing GTO program
The proposed rule would require real estate professionals - including agents, brokers, title companies, settlement agents, and others involved in covered transactions - to implement written AML programs, conduct customer due diligence, and file suspicious activity reports. The rule would apply to non-financed transactions - all-cash purchases and transactions financed through non-traditional means - which are the transactions most commonly associated with real estate money laundering.
Covered professionals would need written AML programs, CDD procedures, and SAR filing capability
The scope of the proposed rule is broader than the existing GTO program. While GTOs apply only to specific metropolitan areas and specific transaction types, the proposed rule would apply nationally to all non-financed residential and commercial real estate transactions above specified thresholds. This represents a fundamental shift from a targeted, market-specific approach to a comprehensive national framework.
The proposed rule represents a shift from targeted GTOs to a comprehensive national framework
For real estate professionals, the proposed rule creates both compliance obligations and business implications. Implementing a formal AML program requires investment in training, procedures, and documentation. Customer due diligence for all-cash buyers - particularly those using shell companies or trusts - requires asking questions that some buyers may find intrusive. And SAR filing obligations require staff who can identify suspicious activity and document it in a way that satisfies FinCEN's standards.
Building compliance infrastructure before the final rule is published is the prudent approach
The practical preparation for real estate professionals is to begin building compliance infrastructure now, before the final rule is published. This means implementing red flag recognition training, developing customer due diligence procedures for high-value transactions, and documenting compliance activities in a way that would satisfy examination scrutiny. Professionals who have this infrastructure in place when the final rule is published will face a much smoother compliance transition than those who are starting from scratch.
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Compliance Program Specialist · Soflo Consulting
Sofia Delgado is a Compliance Program Specialist at Soflo Consulting with expertise in mortgage lender AML requirements, Florida-specific regulatory obligations, and small business compliance program design. She works with non-bank mortgage lenders, title companies, and real estate professionals to build practical, examiner-ready compliance programs.
5 sections
Key Takeaways
- 1FinCEN's proposed rule would extend formal AML requirements to real estate professionals nationally
- 2The rule would apply to all non-financed transactions - broader than the existing GTO program
- 3Covered professionals would need written AML programs, CDD procedures, and SAR filing capability
- 4The proposed rule represents a shift from targeted GTOs to a comprehensive national framework
- 5Building compliance infrastructure before the final rule is published is the prudent approach
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