ALTA Recommends Changes to FinCEN’s Proposed Anti-Money Laundering Rule

April 18, 2024

ALTA submitted a letter April 16 outlining the industry’s concerns with FinCEN’s proposed anti-money laundering rule that would require certain people involved in real estate closings and settlements to report information to the agency about all-cash residential transactions nationwide involving legal entities and trusts.

ALTA suggested several changes to the scope of the rule and data requested that will make it more effective and manageable for those responsible for reporting and improving the value of reports for law enforcement. ALTA also recommended a full-year implementation period from the date of publications of the final rule. ALTA also requested the ongoing Geographic Targeting Orders (GTOs) not be expanded during this rulemaking process.

“As the title industry has done since 2016, it stands ready to help law enforcement in investigating the use of real estate for money laundering,” said Steve Gottheim, ALTA’s general counsel. “While no one is happy to spend more money on nonrevenue producing requirements, we have been heartened to hear the value of the data provided by the industry has been to law enforcement. Obviously, this value will decrease as the rule expands to the whole country and must make sure this rule is carefully tailored to ensure the cost is equivalent to any public benefit.”

ALTA is concerned about FinCEN’s underestimated expense the rule will cost the industry. According to FinCEN, the rule will cost the industry $453.9 million annually ($476.2 million in the first year. This equates to almost $500 per real estate report based on FinCEN’s estimate that 850,000 reports will be filed annually. ALTA’s letter said these amounts are excessive both in total and on a per transaction basis.

Additionally, ALTA said the analysis fails to capture accurate training expenses. FinCEN estimates initial year training costs at $44.3 million or 75 minutes per employee. ALTA believes the initial year’s cost estimates are too low because employees will need two levels of training: one level on learning the rule requirements and another level on how to complete the reports. The industry will also need to train real estate agents.

“When factoring in these realities, the cost of upfront training is likely to more than double,” ALTA said.

FinCEN also doesn’t estimate any technology expenses. Given the scope of the rule, industry likely will need new code and technology to flag potentially reportable transactions and to collect sensitive data from customers. Since settlement agents will need to rely on real estate agent partners to collect much of the data, new technologies and processes will likely be necessary to reduce the risk of sensitive information being shared via potentially unsecured email.

Below is a summary of ALTA’s recommended changes to the proposed rule:

Exempt Certain Low-risk Transfers
  • ALTA suggested excluding low-risk transactions such as gratuitous or zero-dollar transfers and estate planning transactions.
  • Reporting these transactions is likely duplicative since the mechanics of these deals mean that they are connected to another transfer that was subject to a mortgage company’s or bank’s anti-money laundering (AML) obligations or Suspicious Activity Reporting (SARs).
  • FinCEN should add a nominal dollar threshold (such as $1,000) since a majority of these transactions are gratuitous. A single national price is easier to implement than differing thresholds across the country.
  • FinCEN should include exemptions for both a transfer where the transferor is the managing or sole member of a transferee entity and a transfer where the transferor is the settlor of a transferee trust. We suggest adding the following exclusions:
    • A transfer where the transferor is the managing or sole member of a transferee entity
    • A transfer where the transferor is the settlor of a transferee trust
    • The recordation of a deed or other document in the public record to correct an error in
    • an existing public record or a cloud on the title
    • A transfer where the transferee is a qualified intermediary
Eliminate the Need to Report Redundant Information

There are four areas where FinCEN should reduce the cost and burden of reporting by altering its requirements in a manner that will improve law enforcement’s ability to utilize the data.

  1. The requirement to report beneficial ownership information (BOI) that is already being collected by FinCEN pursuant to the Corporate Transparency Act (CTA) should be removed.
  2. The trust reporting requirement should be aligned with the data typically found on a trust certificate issued under state law.
  3. The payments related information should be altered to align with the information typically provided by a financial institution, such as a receipt of a wire transfer. Under the proposed rule, the reporting person must provide the total purchase price for the real estate and the amount, method, financial institution, payor and account number for each individual payment accepted for settlement. State laws limit the types of payment methods settlement agents can accept when conducting a real estate transaction.
  4. The reporting of seller or transferor data under this proposal should be eliminated. It’s unclear why this data would be valuable to law enforcement.
Provide an Explicit Good Faith Attempt Protection

Under the GTO regime, title companies have found it’s not always easy to collect information from a buyer and their representatives when there is not a direct legal obligation for them to provide such information. Non-financed transactions typically have shorter periods between execution and settlement of the purchase and sale agreement. This makes it difficult to collect information prior to the settlement since the majority of data required under the GTO (i.e. beneficial ownership information) is not needed for the settlement or the underwriting of title insurance. Title companies have received informal guidance from FinCEN to submit incomplete reports under the GTOs without the risk of penalty under the Bank Secrecy Act.

  • ALTA urged FinCEN to provide an explicit provision in this proposal outlining a similar good faith attempt protection.
Additional Clarifications
  • FinCEN should update the rule to utilize the definition of the term “residential real property.” The rule in its current form is confusing and contains typographical errors. Further, it is odd to have a definition of residential real property and not use it in the proposed rule’s core coverage provision.
  • The rule needs to limit the determination of whether a property is residential to the information contained in the real estate purchase contract.
  • ALTA recommends changing the requirements for entering into a designation agreement. The drafted provision is unworkable because it requires entering into a separate agreement for each individual transaction. For agents to have some level of cost savings for using an agreement, they need to have a level of certainty about the volume of transactions another party will report under an agreement. This is best done by allowing companies to enter blanket agreements with partners to cover transactions where they are likely to be in the reporting cascade such as a title insurer agreeing to do reports for an agent if they are providing title insurance in the transaction.
  • FinCEN should allow the reporting person to rely on a representation from the transferee entity that the transferee entity is subject to one of the rule’s exemptions.
  • FinCEN should provide guidance about the reporting of beneficiary information when a beneficiary is a minor.

“We believe these changes outlined in the letter significantly move in this direction,” ALTA wrote. “We look forward to working with FinCEN as it works to produce a regime that is clear, not unduly burdensome or duplicative, and safeguards United States real estate.”


Contact ALTA at 202-296-3671 or [email protected].