Persons involved in real estate closings and settlements are now required to report on certain transfers that the Treasury Department deems high risk for illicit financial activity. Specifically, non-financed transfers of residential real property to legal entities or trusts. The rule aims to in-crease transparency in real estate transactions and help prevent the use of anonymous entities to conceal illicit funds.Reports are filed through FinCEN’s website and must include the reporting person’s identity, details of the transferor and transferee (including beneficial owners and agents), property details, and consideration paid. Reports are due by the later of 30 days post-closing or the end of the following month, and records must be kept for five years.
Responsibility to file follows a cascade ranking among transaction participants. The highest party in the ranking is the one who files, with first priority falling to the closing/settlement agent listed on the closing/settlement statement. While attorneys are considered “reporting persons,” if a title company is involved in the transfer, their obligation to report would most likely supersede that of the attorney or other real estate professional.
The AMLR includes a reasonable reliance standard which allows the reporting party to rely on information provided to them by others when completing the report, as long as there is no doubt in the accuracy of the information and it’s certified in writing. Violations of the AMLR may result in civil or, if willful, criminal penalties, including fines and imprisonment.
Exemptions to the AMLR reporting requirement include direct purchases by individuals in their own name and many transfers found in common estate planning techniques. No reporting is required for transferees that are public companies, government entities, and regulated financial or insurance institutions (except title insurance companies). Estate planning trusts (revocable trusts established for probate avoidance) are exempt if the transfer is for no consideration and made by a grantor and/or spouse to a trust of which they are the grantors. Other exemptions cover transfers by inheritance, divorce, court order, bankruptcy, or under IRC §1031.