A federal district judge has struck down a federal anti-money laundering rule that required residential real estate buyers to be disclosed in all-cash transactions.
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The Treasury Department's Financial Crimes Enforcement Network introduced the rule in 2024 to prevent criminals from using anonymous entities or trusts to conceal fraudulent funds being used to buy U.S. property. Beneficial owners’ personal information, including addresses and Social Security numbers, were required to be reported to FinCEN.
FinCEN first imposed similar disclosure rules for high-risk areas, such as Manhattan and Miami, in 2016. Reporting was only required for purchases above $300K.
The 2024 rule expanded those mandates nationwide and eliminated the minimum transfer value, with limited exceptions.
Attorneys at the Pacific Legal Foundation sued Treasury Secretary Scott Bessent last year on behalf of a Texas-based title agency. The complaint asserted that the new requirement was overly burdensome, especially as migration from other states led to an uptick in cash purchases in Texas.
Not only does the mandate force business owners to perform "government surveillance on its clients," but it is also creates a "rat’s nest of constitutional problems," according to the Pacific Legal Foundation.
Specifically, the group argued that the Treasury Department had exceeded its statutory authority and had singled out real estate transactions without enough evidence that such purchases are used to shield ill-gotten gains.
"The agency fails to explain or show how non-financed residential real estate transactions are categorically 'suspicious,'" U.S. District Judge Jeremy Kernodle, an appointee of President Donald Trump, wrote in his decision Thursday.
Reuters first reported Kernodle’s decision.
In 2025, roughly 28% of buyers did not finance their home purchase, according to the National Association of Realtors. Additionally, nearly 22% of residential purchases were by a corporate entity such as an LLC.
In unveiling the rule change, then-Treasury Secretary Janet Yellen said that as much as $2.3B was laundered through U.S. real estate between 2015 and 2020.
FinCEN estimated that more than 800,000 transactions annually would be subject to the new reporting rules. The change was set to go into effect in December but was postponed to this month to give the industry more time to comply.
"Over the last few weeks, many of our clients have expressed discomfort with their personal information residing in a federal database," attorneys for Bowditch, a firm specializing in sophisticated transactions, wrote in a blog post. "While money laundering is a serious problem, we echo our clients’ concern with this tool."
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