What Is Going on with FinCEN's Residential Real Estate Rule?

The Financial Crimes Enforcement Network (FinCEN) on March 1, 2026, implemented the Residential Real Estate Rule (RRE Rule), which requires certain real estate professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real estate. As described below, FinCEN is not yet requiring real estate professionals to comply with the RRE Rule due to an order issued in a lawsuit challenging the RRE Rule.

A Closer Look at the RRE Rule

The RRE Rule is designed to combat and deter money laundering by increasing transparency in the U.S. residential real estate sector. Transfers,¹ including purchases and gifts, irrespective of amount, are reportable when four conditions are satisfied:

1. The property is residential real estate located in the U.S.²
2. The transfer is non-financed.³
3. The property is transferred to a transferee entity⁴ or transferee trust.⁵
4. An exemption does not apply.⁶

The RRE Rule includes a ranked list of seven functions performed by real estate professionals, referred to as a reporting cascade. The "Reporting Person" who must file the Real Estate Report is the real estate professional who performs the highest ranked function in the reporting cascade⁷ or, alternatively, that person may enter into a "designation agreement," which is a written agreement with any other person performing a function described in the reporting cascade identifying that other person as the "Reporting Person."

The Reporting Person must file online a Real Estate Report (containing 111 distinct fields) using the FinCEN.gov Home portal by the later of two dates: 1) the final day of the month following the closing or 2) 30 calendar days after the date of closing.

The Reporting Person must gather, obtain and report a tremendous amount of information about 1) itself, 2) the residential real property, 3) the transferee entity or transferee trust (including each beneficial owner of a transferee entity or beneficial trust, each signing individual of a transferee entity or transferee trust, and each trustee of a transferee trust that is a legal entity), 4) the transferor (individual, legal entity or trust) and 5) any payments made.

As the Reporting Person will not have access to all of the information required to be reported – and incomplete reports are not allowed – the RRE Rule provides a reasonable reliance rule to encourage the sharing of information.

That rule has two components:

1. The general reasonable reliance rule states that the Reporting Person may rely on information provided by any other person for purposes of reporting information or to make a determination necessary to comply with the RRE Rule, but only if the Reporting Person does not have knowledge of facts that would reasonably call into question the reliability of the information.
2. The reasonable reliance rule with regard to the beneficial ownership information of transferee entities or transferee trusts is more limited. It applies only to information provided by the transferee or the transferee's representative – and only if the person providing the information certifies the accuracy of the information in writing to the best of their knowledge. The certification may be collected using a form of the Reporting Person's choosing and may be incorporated into existing closing documents used by the Reporting Person.

With respect to the identification of beneficial owners of transferee entities or transferee trusts, the RRE Rule borrows the concepts of substantial control and the 25 percent ownership interest test of the Corporate Transparency Act, with certain modifications.

The Reporting Person is not required to retain a copy of the Real Estate Report but must retain for five years a copy of any certification, signed by the transferee or a transferee's representative, certifying the transferee's beneficial ownership information. Also, the parties to the designation agreement must keep copies of the designation agreement for five years.

The RRE Rule does not contain specific guidance on potential penalties that may arise for not filing or for filing inaccurate reports because the imposition of penalties is already governed by the Bank Secrecy Act (BSA) reporting provisions that discuss criminal and civil penalties for violating a BSA agreement. There are differing monetary penalties, such as for negligent violations, a pattern of negligent activity, civil penalty not greater than the amount involved in the transaction and willful violations (including imprisonment and criminal fines).

FinCEN will maintain the information on a secure database, accessible by authorized users such as law enforcement, intelligence and national security but not by the public. The Real Estate Report will be consolidated with other BSA reports. This is important for law enforcement purposes, as it will allow law enforcement to cross-reference information. There will be strict limits on the use and re-dissemination of BSA information by law enforcement and other authorized users of the system.

It is anticipated that the RRE Rule will have broad application. FinCEN estimates that there will be approximately 172,753 Reporting Persons who could be affected by the RRE Rule. Between 800,000 and 850,000 Real Estate Reports will be filed annually. More than 642,000 personnel of Reporting Persons will need to be trained on an annual basis to perform reporting.

What May Be Next?

Although no federal law currently extends the new residential real estate transfer reporting rule to commercial real estate, this is a topic of discussion among regulators. FinCEN specifically focused on residential real estate for its current rule, leaving the door open to future regulations for commercial properties.

Commercial real estate presents its own complexities, including financing structures, due diligence requirements and the need for accurate title searches to identify potential issues and liens. The complexity of commercial real estate transactions is due to their larger scale, diverse property types and the potential for intricate legal and financial structures, which often exceed the scope of residential property transfers.

Pending Litigation

There are four lawsuits challenging the RRE Rule currently pending in federal courts. Two of the cases have upheld the constitutionality of the RRE Rule; one, as mentioned, ultimately holds that FinCEN exceeded its authority and vacated the rule; and the last is on pause. Chronologically, the cases are as follows:

• Fidelity National Financial Inc. v. Secretary Scott Bessent⁸ was adjudicated on February 19, 2026, in Florida. This case involved an action under the Administrative Procedure Act (APA) challenging the RRE Rule on the basis that the rule exceeded FinCEN's statutory authority, is arbitrary and capricious, and violates the First and Fourth Amendments to the U.S. Constitution. The magistrate judge found that the RRE Rule is statutorily authorized, not arbitrary or capricious, and does not violate the First or Fourth Amendments. The recommendations of the magistrate judge were adopted by the federal district court judge. The plaintiffs have appealed this ruling.
• Corley v. U.S. Department of the Treasury⁹ was adjudicated on February 25, 2026, in the U.S. District Court for the Northern District of Texas, Lubbock Division. The Corley plaintiffs argued that the RRE Rule regulated inherently intrastate activity and was therefore an impermissible expansion of the federal government's authority. The court disagreed and held that the RRE Rule was constitutional according to binding precedent interpreting the commerce clause of the Constitution¹⁰ and binding precedent interpreting the Necessary and Proper Clause of the Constitution, and it granted summary judgment upholding the RRE Rule.
• Flowers Title Companies LLC v. Bessent¹¹ was adjudicated on March 19, 2026, in the U.S. District Court for the Eastern District of Texas, Tyler Division. Like the plaintiffs in Fidelity, the plaintiff in Flowers argued that the RRE Rule was unlawful under the APA, as it was an invasive surveillance measure and exceeded the authority of FinCEN under the BSA. The federal district court judge found that the RRE conflicted with the BSA and ordered the RRE Rule vacated, determining that Congress did not authorize FinCEN to require all businesses to collect and submit such reports under the BSA. The U.S. Department of Justice (DOJ) has appealed the decision to the U.S. Court of Appeals for the Fifth Circuit.
• Puerto Rico Privacy Association Inc. v. U.S. Department of the Treasury was filed on February 25, 2026, in the U.S. District Court for the District of Puerto Rico. The plaintiffs argue that the RRE Rule lacks statutory authority and violates the Fourth Amendment. Plaintiffs and FinCEN jointly requested a stay to pause proceedings pending the outcome of the Flowers appeal in the Fifth Circuit.

In response to the ruling in Flowers, FinCEN published the following alert on its website:

On March 19, 2026, the U.S. District Court for the Eastern District of Texas issued an order vacating the Residential Real Estate Rule. The Financial Crimes Enforcement Network (FinCEN), in conjunction with the Department of Justice, has appealed the decision. While the court's order remains in force, reporting persons are not required to file Real Estate Reports with FinCEN and are not subject to liability if they fail to do so.

When there are conflicting decisions in federal district or appellate courts in different circuits on the same issue, the decision of one court does not override the other. In effect, the law of the case only applies in the circuit in which the case was adjudicated. In these situations, the U.S. Supreme Court may resolve conflicting circuit court decisions but is not obligated to do so.

What Persons Impacted by the RRE Rule Should Do Now

First, closely follow developments. This can be done by frequently consulting the FinCEN RRE Rule webpage and other relevant sources.

Second, there are various approaches as to whether impacted persons should continue to collect the information required under the RRE Rule in the event the rule is later reinstated.

• Some have counseled that impacted persons should continue to collect the information that would be required for reporting in the event the RRE Rule is later reinstated.
• Others are of the view that any restoration of the RRE rule would have only prospective effect.

These courses of action must be evaluated based on the specific factors applicable to potential reporting persons.

Notes

¹ A transfer of an ownership interest in real property is demonstrated through a deed or an interest in a cooperative housing corporation through stock, shares, membership, a certificate or other contractual agreement evidencing ownership. Importantly, transfers are reportable only if a Reporting Person (i.e., settlement agents, title insurance agents, escrow agents, attorneys) is involved in the transfer and the transferee is either a legal entity or trust. Transfers between individuals are not reportable.

² Residential real property includes structures designed principally for occupancy by one to four families to include single-family houses, townhouses, condominiums, cooperatives and buildings; land, vacant or unimproved, on which the buyer intends to build a structure designed for occupancy by one to four families; a unit designed principally for occupancy by one to four families within a structure, such as a mixed-use property; and a cooperative.

³ A non-financed transfer of residential real property is a transfer that does not involve an extension of credit that is both 1) secured by the transferred property and 2) extended by a financial institution subject to anti-money laundering (AML) program requirements and Suspicious Activity Report (SAR) obligations. Thus, non-financed transfers include all cash transactions, as well as financing by lenders not subject to FinCEN's AML and SAR obligations.

⁴ A transferee entity is a legal entity such as a corporation, partnership, estate, association or limited liability company. The RRE Rule exempts 16 types of entities such as a securities reporting issuer.

⁵ A transferee trust is any legal arrangement created when a grantor or settlor places assets under the control of a trustee for the benefit of one or more beneficiaries or for a specified purpose, whether formed under the U.S. or a foreign jurisdiction. The RRE Rule exempts four types of trusts such as a statutory trust.

⁶ The RRE Rule contains eight exemptions: 1) a transfer of an easement, 2) a transfer resulting from the death of an individual, whether pursuant to the terms of a decedent's will or terms of a trust, operation of law or by contractual provision, 3) a transfer incident to divorce or dissolution of a marriage or civil union, 4) a transfer to a bankruptcy estate, 5) a transfer supervised by a court in the U.S., 6) a transfer made for no consideration by an individual, either alone or with their spouse, to a trust of which that individual, their spouse or both of them are the settlor or grantor, 7) a transfer to a qualified intermediary for purposes of a like-kind exchange under Section 1031 of the Internal Revenue Code and 8) a transfer for which there is no Reporting Person.

⁷ The seven functions are 1) the closing or settlement agent, 2) preparer of the closing or settlement statement, 3) person who files the deed or ownership transfer document with the recordation office, 4) title insurance company underwriting the owner's policy, 5) person who disburses the greatest amount of funds for the transaction, e.g., via an escrow account, 6) person who provides title evaluation services, and 7) person, e.g. an attorney, who prepares the deed or other transfer document.

⁸ No. 3:25-CV-554-WWB-SJH, 2025 WL 4477503, at *1 (M.D. Fla. Dec. 9, 2025), report and recommendation adopted sub nom. Fid. Nat'l Fin., Inc. v. Bessent, No. 3:25-CV-554-WWB-SJH, 2026 WL 472350 (M.D. Fla. Feb. 19, 2026).

⁹ No. 5:25-CV-086-H.

¹⁰ The court determined that the four substantial-effect factors outlined in United States v. Morrison, 529 U.S. 598, 609-13, favor upholding the Treasury Department's challenged rule as constitutional under binding precedent interpreting the Commerce Clause.

¹¹No. 6:25-CV-127-JDK, 2026 WL 782283, at *1 (E.D. Tex. March 19, 2026).

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.