The Treasury Department has issued new regulations aimed at combating money laundering in residential real estate transactions. The rules, finalized on Wednesday, will require investment advisers and real estate professionals to report cash sales of residential properties to legal entities, trusts, and shell companies. These reporting requirements do not apply to sales to individuals or transactions involving financing.
The Biden administration is implementing these rules as part of a broader effort to crack down on money laundering and illicit financial activities in the United States. Cash purchases of residential real estate are considered high-risk for money laundering, as they can facilitate the movement of dirty money through the financial system.
A 2019 study conducted in Canada found that money laundering investments in real estate led to a significant increase in housing prices, ranging from 3.7% to 7.5%. By requiring professionals involved in real estate sales to report detailed information about the transactions, the new rules aim to enhance transparency and accountability in the sector.
Treasury Secretary Janet Yellen emphasized that these regulations address critical regulatory gaps and will make it more challenging for criminals to exploit the real estate and investment sectors for illicit purposes. The rules mandate reporting of seller and beneficiary information, property details, and payment specifics.
The FACT Coalition, a nonprofit organization advocating for corporate transparency, praised the regulations as much-needed safeguards in the fight against financial crime. The Biden administration's focus on increasing corporate transparency includes initiatives to prevent the abuse of anonymous shell companies by requiring small businesses to register with the government.
While these measures are seen as crucial steps in combating money laundering and enhancing financial transparency, a federal judge in Alabama ruled in March that the Treasury Department cannot compel small business owners to disclose detailed information about their ownership structure and beneficiaries.
