FINCEN – Oh No It’s Back Again – Sort Of

Some time ago the Financial Crimes Enforcement Network arm of the United States Department of the Treasury – “FINCEN” for short – exempted “domestic reporting companies” such as limited liability companies and privately held corporations from the requirement to submit information about their beneficial owners. BUT, beginning March 1, 2026, a new requirement will take effect. Settlement agents, such as escrow companies, a lawyer who records a deed for a covered transaction or distributes the greatest amount of money from a lawyers’ trust account when an escrow company is not handling the transaction, the title insurer when the previous actors are not involved in the transaction or the person that prepares the deed in descending and cascading order will be required to prepare and submit a new report called the “Real Estate Report.”

The report will only be required for certain types of real estate transferred in a limited category of transactions to entities or trusts. The types of property covered are:

• Real property located in the United States containing a structure designed primarily for occupancy by one to four families;
•  Land located in the United States on which the transferee intends to build a structure designed primarily for occupancy by one to four families;
• A unit designed principally for occupancy by one to four families within a structure in the United States;
• Shares in a cooperative housing corporation for which the underlying property is located in the United States.

So, single family homes, townhouses, condominiums, apartments for occupancy by less than five families and cooperatives are included.

The types of transactions included are transfers to an entity or a trust that are either:

• An all-cash deal
•  A transaction where part of the financing takes the form of a carryback by the seller if the seller is not a party that has an obligation to maintain an anti-money laundering program and a requirement to file Suspicious Activity Report. Accordingly, financing from a bank insured by the Federal Deposit Insurance Corporation, credit unions, savings and loan associations, mortgage companies and mortgage brokers, the Federal National Mortgage Association (Fannie Mae); and the Federal Home Loan Mortgage Corporation (Freddie Mac) take the transaction out of the reporting requirement.
• A transfer to a trust as part of an estate plan.
•  A gift of residential property as defined above.

Excluded are:

• Purchases that are financed by lender that has an obligation to maintain an anti-money laundering program and a requirement to file Suspicious Activity Reports like the lending institutions mentioned above.
• If the transferee is a securities reporting issuer, a governmental authority, a bank, credit union, depositary institutions, a securities broker or dealer, insurance companies, state licensed insurance producers, or a public utility.
• Transfers resulting from death, incident to a divorce, to a bankruptcy estate, supervised by a court or for no consideration to a trust of which the individual transferor or the individual transferor and the transferor’s spouse are the settlors or grantors.

The report must be filed on, or before, the last day of the calendar month following the month in which the transfer occurs. It includes: (1) the name of the person submitting the report, the category in which the person falls, whether it is a legal entity, the street address of the reporting person’s principal place of business in the United States and the date of the closing; (2) the street address and legal description of the property being transferred; (3) the name and tradename, if any, of the transferee entity or transferee trust; (4) the amount of consideration paid, the current street address of its principal place of business, a unique identifying number of the entity such as its tax identification number; (5) identifying information regarding the beneficial owners of the transferee entity or transferee trust, namely those owning 25% or more or the entity or trust or having a position of control of the entity such as the manager of a limited liability company that does not own an interest in it; (6) identifying information of the trustee of the transferee trust and the trust; (7) identifying information of the transferor; (8) identifying information of any person signing the document of transfer such as a deed.

Identifying information for the reporting individual and beneficial owners must include their full legal name, date of birth, complete residential street address, country or countries of citizenship, a unique identifying number and for beneficial owners of a trust the category of beneficial owner that they are (e.g., trustee, beneficiary). Information about the transferor must include their full legal name, date of birth, complete residential street address, and a unique identifying number. Transferors that are a trust must also include the full legal name of the trust, date of the trust instrument, a unique identification number, if any, and for individuals that are trustees their full legal name, current residential street address, and a unique identifying number, like their social security number. Entities that are trustees must report their full legal name and trade name, if any, the current address of its principal place of business in the United States and a unique identifying number if any.

Negligent violations of the rule could result in a civil penalty of up to $1,430 for each violation and an additional civil money penalty of up to $111,308 for a pattern of negligent activity. Criminal violations could result in imprisonment of up to five years and a criminal fine of not more than $250,000.

Determining whether a report needs to be filed can be tricky. Hymson Goldstein Pantiliat & Lohr, PLLC is here to help with determining whether the report is required and assisting in completing it. After all, “Our Business is Your Peace of Mind ®.”

Written by Attorney David B. Goldstein,dbg@hgplaw.com.

The information contained herein is general information not legal advice. E-mailing attorneys from this website does NOT establish an attorney/client relationship. A formal attorney/client relationship begins after a conflicts check and engagement agreement are signed.