Anti-money laundering rule still on the table after FinCEN appeal

An AML rule required reporting for certain non-financed residential real estate transfers when ownership was held by an entity or trust, without geographic or price thresholds. A Texas decision vacated the rule entirely and restored the prior status quo. A plaintiff challenged the rule under the Administrative Procedure Act, arguing FinCEN lacked authority under the Bank Secrecy Act to impose broad reporting requirements, and the court agreed. A separate earlier ruling in Florida upheld the reporting requirements. Litigation in Florida began in May 2025, with Fidelity National Financial suing FinCEN and Treasury officials, and the decision was appealed to the Eleventh Circuit. FinCEN issued updated best practices, stating reporting persons are not required to file Real Estate Reports while the Texas order remains in force and are not subject to liability for failing to file during that period.

"The AML rule mandated reporting for any non-financed residential real estate transfer where ownership was held by an entity or trust with no geographic or price threshold. March's decision in Texas vacated the rule entirely and restored the status quo that existed before the regulation took effect. Flowers Title Companies, LLC, the plaintiff in Texas, successfully challenged the rule under the Administrative Procedure Act, arguing that FinCEN lacked authority under the Bank Secrecy Act to impose such sweeping reporting requirements. Kernodle agreed finding that FinCEN failed to demonstrate that non-financed residential real estate transfers to entities or trusts are categorically suspicious."

"Despite the AML rule being vacated by the Eastern District of Texas in March, a separate earlier ruling in Florida upheld the AML reporting requirements. That legal process began in May 2025 with litigation filed by Fidelity National Financial (FNF) listing FinCEN and its director Andrea Gacki, as well as the Department of the Treasury and its secretary Scott Bessent as defendants. That decision to uphold the AML rule, announced in February, has since been appealed by FNF in the Eleventh Circuit, which sets the table for possible Supreme Court intervention."

"FinCEN provided updated best practices for title insurance and real estate professionals on its website following this month's appeal. Reporting persons are not currently required to file Real Estate Reports (RRE) with FinCEN and are not subject to liability if they fail to do so while the court's order remains in force, FinCEN stated. Updates also touched on whether reporting persons are required to retroactively file reports should the rule be reinstated."

"If the court's order is overturned and the RRE Rule again becomes legally effective, reporting persons will not be required to file reports for covered transactions that would have been required to be reported while the court's order was in force, FinCEN said."

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