Cash Buyer, Beware of New Reporting Requirements

FinCEN’s creation of a new information repository “forebodes increased enforcement efforts,” write Muthyvala (pictured) and Barnes.

NEW YORK CITY—In an effort to curtail money laundering and track down ill-gotten gains, the US Treasury Department has imposed new rules requiring title companies to identify and disclose the beneficial owners of any corporate entity behind high-value, all-cash purchases of residential real estate in certain highly desirable metropolitan areas across the country.

The new regulations by the Financial Crimes Enforcement Network (FinCEN), a division of the Treasury Department, target the approximately 22% of real estate transactions that are not subject to existing anti-money laundering requirements because they take place without mortgages and the heavily regulated financial institutions that provide them. While the precise impact of the reporting requirement remains to be seen, the creation of a new repository of information on luxury real estate purchases forebodes increased enforcement efforts against buyers of luxury real estate and the need for increased due diligence on the part of the real estate agents, lawyers, bankers, and LLC formation agents who arrange such purchases.