US Court Strikes Down Rule Mandating Disclosure in Cash Real Estate Deals
A US district court has struck down a Treasury Department rule that sought to curb money laundering in the real estate sector by mandating the disclosure of beneficial owners in all-cash property transactions.
The rule was introduced in 2024 by the Financial Crimes Enforcement Network (FinCEN) to address concerns that criminals were using real estate purchases to park illicit funds anonymously. It aimed to expand earlier limited disclosure requirements, known as geographic targeting orders, which had been in place since 2016 in select cities such as New York and Miami, to a nationwide level.
The case was brought by lawyers representing the Pacific Legal Foundation, who argued that FinCEN had exceeded its statutory authority in introducing such a sweeping rule. The court agreed with this position, with US District Judge Jeremy Kernodle ruling in favor of the foundation.
In his decision, the judge stated that the agency had failed to demonstrate how non-financed residential real estate transactions could be broadly classified as suspicious. He further noted that the rule lacked sufficient justification to impose blanket reporting requirements across the country.
The ruling highlights a regulatory gap in the US real estate sector. While banks are required to verify the source of funds and report suspicious transactions under anti-money laundering laws, similar nationwide obligations have not been applied to real estate deals, especially those conducted without financing.
According to past statements by former Treasury Secretary Janet Yellen, around USD 2.3 billion was laundered through US real estate between 2015 and 2020, underscoring the scale of the issue that regulators have been attempting to address.
FinCEN had sought to tighten oversight by expanding its earlier framework, which focused on specific high-risk regions. The now-struck-down rule would have significantly widened the scope of monitoring across the country, particularly targeting all-cash transactions that are often seen as higher risk.
An advocacy group supporting the regulation, the FACT Coalition, indicated that it expects the government to challenge the ruling. Its executive director stated that the court's decision effectively sided with illicit financial actors, including money launderers and hostile entities, and expressed confidence that the decision would be overturned on appeal.
