The Treasury Department has issued regulations to combat money laundering in residential real estate transactions. The rules, which were finalized recently, will require investment advisers and real estate professionals to report cash sales of residential real estate to legal entities, trusts, and shell companies. The regulations are not applicable to sales to individuals or purchases involving mortgages or other financing options.
These initiatives are part of the Biden administration’s efforts to deter money laundering and prevent the circulation of illicit funds through the U.S. financial system. Cash purchases of residential real estate are considered high-risk activities for money laundering and can also contribute to escalating housing costs, which is a significant concern in the current presidential campaign.
A study conducted by Canadian academics in 2019 found that money laundering investment in real estate can increase housing prices by 3.7% to 7.5%. As per the new rules, professionals involved in the real estate sale must disclose the names of the sellers and beneficiaries, property details, and payment information, among other data.
Treasury Secretary Janet Yellen highlighted that these regulations address critical regulatory gaps and aim to prevent criminals from exploiting the real estate and investment sectors. Executive director of the FACT Coalition Ian Gary praised the regulations as vital safeguards in the battle against illicit money in the United States. He indicated that after years of advocacy efforts, there seems to be an end to financial secrecy and impunity for financial criminals in the nation.
The new rules align with the Biden administration’s commitment to enhancing corporate transparency and preventing the misuse of anonymous shell companies. Although the Treasury Department faced a setback when an Alabama federal district judge ruled in March that small business owners are not obligated to report details about their business owners and beneficiaries.
