The U.S. Treasury Department has issued a new rule that aims to prevent nefarious actors from using residential real estate deals for money laundering.
The final rule issued on Wednesday will require real estate professionals to report the true identity of all-cash homebuyers who use shell companies or other legal entities to purchase residential property in the U.S. While those buyers can remain publicly anonymous, the rule requires the disclosure of their identity to the Financial Crimes Enforcement Network.
The purpose of the new rule is to prevent illicit actors such as drug cartels, international criminals, or sanctioned foreign oligarchs from laundering money through the housing market using anonymous transactions. Similar reporting rules already apply to banks and other mortgage lenders.
“The Treasury Department has been hard at work to disrupt attempts to use the United States to hide and launder ill-gotten gains,” said Treasury Secretary Janet L. Yellen in a statement. The new requirements will “close critical loopholes in the U.S. financial system that bad actors use to facilitate serious crimes like corruption, narcotrafficking, and fraud.”
A separate final rule that the Treasury Department also issued on Wednesday adds certain investment advisers to the list of financial professionals who are required to notify FinCEN about suspicious transactions.
The new reporting rule for all-cash real estate deals will take effect on Dec. 1, 2025, while the new rule for investment advisers kicks in on Jan. 1, 2026.
“These steps will make it harder for criminals to exploit our strong residential real estate and investment adviser sectors,” said Yellen.
All-cash real estate deals are on the rise
A growing share of residential real estate deals in the U.S. is being conducted in cash, although there is likely nothing nefarious or illegal about the vast majority of them.
In January, 32% of home sales were conducted in cash, the highest share in nearly a decade, according to the National Association of Realtors®.
Amid higher mortgage rates, many homebuyers with the means to do so have turned to cash deals to avoid paying punishing interest on home loans.
Migration patterns after the COVID-19 pandemic also likely spurred more cash sales: Families moving away from higher-priced states such as California and New York often netted such high profits from the sale of their old house that they were able to buy a new house in a lower-priced area outright.
Realtor.com® Chief Economist Danielle Hale says that record-high equity levels have enabled the surge in cash deals, especially for buyers who are downsizing to a smaller home or lower-cost market.
“Another reason all-cash deals are more common is thatinvestors are purchasing a record high share of real estate,” she says. Investors, who are nearly twice as likely as other homebuyers to use cash, are buying fewer homes than they did a few years ago, but account for a higher share of all real estate deals as total transactions have slumped to historic lows.
The purpose of the new Treasury reporting rule isn’t to discourage or penalize cash deals for homes, but rather to bring transparency by requiring disclosure of the buyer’s true identity.
That’s because cash real estate deals have long been known as a potential vehicle for money launderers or other illicit actors. Criminals or foreign entities otherwise barred from the U.S. financial system have been known to use illicit funds to purchase homes, and use them to generate seemingly legitimate funds through rental income or flipping.
Other schemes involve the purchase of lavish homes in the U.S. as a form of bribery, with the true source of funds and beneficial owner cloaked in secrecy.
In one recent case, the Justice Department seized a mansion in the upscale Holmby Hills section of Los Angeles that prosecutors say was purchased for the family of a former Armenian government minister as a bribe.
The 11-bedroom chateau-style mansion was purchased in 2011 for $14.4 million by a trust benefiting the sons of Gagik Khachatryan.
The sons claimed the purchase was financed by loans from an Armenian businessman. Prosecutors say the loans, repeatedly extended without repayment, were a concealed bribe to Khachatryan, who was at the time in charge of taxes and customs in Armenia.
Last month, the DOJ finalized a civil forfeiture settlement that gives the U.S. possession of the mansion. The property is currently listed for $39.7 million.
How the new rule will work
Under the new rule, one of the real estate professionals involved in an all-cash home sale to a shell company or trust will have to file a report with FinCEN naming the beneficial owner behind the legal entity buying the home.
The closing agent, an independent third party who facilitates many closings, is the primary person tasked with making the report. If there is no closing agent, the reporting duty falls to a “cascading” list of professionals involved in the title transfer process, but only one report needs to be filed for each transaction.
Those reports must contain certain information about the buyer, the seller, the property in question, and the total amount of the sale. FinCEN does not require the reports for certain common, low-risk title transfers, such as those that stem from death, divorce, bankruptcy, or transfer into a trust for estate planning.
A similar rule has applied since 2016 to cash deals above a certain threshold in Miami and Manhattan, which are popular markets for wealthy foreign buyers. Several other major cities have also been added under so-called geographic targeting orders since then.
The new regulation applies to transactions nationwide. The Treasury Department, after receiving feedback from the real estate industry, somewhat relaxed its final rule, allowing the reporting person to reasonably rely on information about the buyer provided by other parties, so long as they aren’t privy to facts that call that information into question.
The American Land Title Association, an industry group representing title insurers, said that it was still reviewing the new rule, but that “it appears the agency incorporated several important industry recommendations to streamline the regulation and reduce some of the burden on real estate professionals.”
However, the group added that the new regulation could increase costs for the businesses involved in real estate transactions by up to a half-billion dollars annually.
“We share the goal of protecting the U.S. real estate market from money laundering and intend to work collaboratively with FinCEN, as we have effectively for the past eight years, to reduce the cost of this regulation and impact on our small businesses—estimated at more than $500 million annually—while providing law enforcement with the information necessary to do their jobs,” said ALTA in a statement to Realtor.com.
