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Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules
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approximately $350,000 for both new and existing homes as of July 2021,44
the total value of U.S. residential real estate sales is expected to exceed approximately $2.31 trillion in 2021.
Although a significant portion of those residential real estate transactions are financed by regulated RMLOs, GSEs, and depository institutions, nonfinanced real estate transactions can largely avoid financial institutions that are subject to AML/CFT requirements.
As previously noted, other businesses and professions involved in real estate transactions, such as real estate brokers and agents, title company representatives, and closing agents including attorneys when involved, currently are not subject to AML/CFT
reporting obligations, and some of these, such as title insurance and real estate agents, are not mandatory in many transactions.
According to figures published by NAR, in both 2020 and 2021, approximately 19% of existing residential home sale were non-financed transactions.45 The Census Bureau has further estimated that approximately 4.4% of new home sales are nonfinanced transactions.46 Given that existing home sales comprise approximately 90% of the residential real estate market in the United States, FinCEN estimates that the all-cash purchase rate of real estate transactions in the United States is approximately 18.5%. Based on the NAR estimates of total home sales and median sale prices, this means that approximately 1.21
million residential real estate transactions, with an approximate value forecast-summit-international-transactions-in-usresidential-real-estate-lawrence-yun-presentationslides-07-26-2021.pdf; Monthly New Residential Sales, U.S. Census Bureau, Release CB21155
Sep. 24, 2021, https www.census.gov/
construction/nrs/pdf/newressales.pdf.
44 Existing-Home Sales Climb 2.0% in July, National Association of Realtors, Aug. 23, 2021, https www.nar.realtor/newsroom/existing-homesales-climb-2-0-in-july; Monthly New Residential Sales, August 2021, U.S. Census Bureau, Release CB21155 Sep. 24, 2021, https www.census.gov/
construction/nrs/pdf/newressales.pdf; see also Summary of August 2021 Existing Home Sales Statistics, National Association of Realtors Sep.
22, 2021, https cdn.nar.realtor/sites/default/files/
documents/ehs-08-2021-summary-2021-09-22.pdf.
45 Lawrence Yun, 2021 International Transactions in U.S. Residential Real Estate, National Association of Realtors Jul. 21, 2021, https cdn.nar.realtor/sites/default/files/
documents/2021-07-26-nar-real-estate-forecastsummit-international-transactions-in-us-residentialreal-estate-lawrence-yun-presentation-slides-07-262021.pdf.
46 New Houses Sold by Type of Financing Table Q7, U.S. Census Bureau 2021, https
www.census.gov/construction/nrs/pdf/
quarterlysales.pdf.

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of $463 billion, likely proceed without any AML reporting obligations.47
The types of AML/CFT vulnerabilities in these reports led FinCEN to begin issuing Geographic Targeting Orders GTOs in January 2016 Real Estate GTOs. The Real Estate GTOs required title insurance companies to file reports and maintain records concerning allcash purchases of residential real estate above a certain threshold in select metropolitan areas of the United States.
Under 31 U.S.C. 5326, FinCEN may issue such GTOs that impose additional reporting or recordkeeping requirements on financial institutions and nonfinancial trades or businesses in a geographic area for a limited period of time, if FinCEN has reasonable grounds to conclude that such requirements are necessary to carry out the purposes of the BSA or to prevent evasions thereof.48 The Real Estate GTOs initially required some of the largest title insurance companies in the United States to report beneficial ownership 49 information on legal entities 50 used to purchase residential real property 51 in Manhattan and Miami in Covered Transactions.52 The information that 47 Other businesses in the real estate industry have estimated even higher rates of non-financed transactions. For instance, Redfin, a nationwide real estate brokerage, reported that 30% of home sales were all-cash transactions between January and April 2021. Share of Homes Bought With All Cash Hits 30% for First Time Since 2014, Redfin.com Jul. 15, 2021, https www.redfin.com/news/allcash-home-purchases-2021/; see also Buying a house? Heres where all-cash deals are most competitive, CNBC.com Dec. 12, 2020, https
www.cnbc.com/2020/12/11/buying-a-house-hereswhere-all-cash-deals-are-most-competitive.html reporting that Realtor.com, a nationwide real estate listing website, indicated that 36 percent of home sales in the U.S. were non-financed. Accordingly, the use of the NAR and Census Bureau estimates are therefore conservative, and if anything, the scope of the money laundering vulnerability they create is much worse.
48 See 31 U.S.C. 5326; 86 FR 62914 Nov. 15, 2021.
49 For the GTO, beneficial owner has been defined as an individual who, directly, or indirectly, owns 25 percent or more of the equity interests of the legal entity that purchased the residential property. For the purposes of this ANPRM the term beneficial owner refers to that term as defined in the Real Estate GTOs and not the term as defined by the Corporate Transparency Act, Title LXIV of the AML Act.
50 For the purposes of the 2016 Real Estate GTO, legal entity meant a corporation, limited liability company, partnership, or other similar business entity, whether formed under the laws of a state or of the United States or a foreign jurisdiction. In later Real Estate GTOs, FinCEN excluded from the definition of legal entity any entity for which the shares are publicly traded on a U.S. stock exchange.
51 For purposes of the Real Estate GTOs, residential real property means real property including individual units of condominiums and cooperatives designed principally for the occupancy of from one to four families.
52 Here, Covered Transaction means a transaction reportable under the GTO. The 2016

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the GTOs required the title insurance companies to report included: i Information about the transaction, including the price and address of the real estate purchased; and ii beneficial ownership informationsuch as name, social security number, and ID number and typefor the beneficial owners of certain legal entities purchasing property in Covered Transactions. The responsibility for reporting information to FinCEN was placed on title insurance companies because the title insurance industry is concentrated among a limited number of participants and title insurance companies play a central role in the vast majority of real estate transactions. This allowed FinCEN to streamline implementation of the GTOs and the collection of information.53
The Real Estate GTOs issued in 2016
provided FinCEN and law enforcement with new data that connected nonfinanced residential property purchases with the individuals who were the beneficial owners of the legal entities making those purchases. FinCEN began to receive feedback from law enforcement partners that the information was useful for generating new investigative leads, identifying new subjects in ongoing cases, and informing forfeiture efforts, among other things. To further understand the links between opaque transactions and individuals engaged in potentially illicit activity, and to give law enforcement more time to analyze and use the newly collected data, FinCEN renewed the initial GTOs and included additional metropolitan areas.
Since 2016, and most recently in October 2021, FinCEN has renewed the Real Estate GTOs multiple times collectively, the Real Estate GTO
program and made modifications to their terms to address perceived gaps in the data collected. The number of GTO defined Covered Transactions as transactions involving a covered business where: i A legal entity; ii purchased residential real property; iii located in the Borough of Manhattan in NY, or Miami-Dade County in Florida; iv for a total purchase price of $1,000,000 or more in Miami, or $3,000,000 or more in Manhattan; v the purchase was made without a bank loan or other similar financing; and vi the purchase was made, at least in part, using a monetary instrument e.g., a cashiers check, currency or a money order. Later Real Estate GTOs changed the parameters of Covered Transactions to include new geographic areas, modify the reporting threshold, and cover additional payment methods.
53 Such reports were made to FinCEN by submitting existing BSA reporting forms. Initially title insurances companies reported GTO
information to FinCEN via FinCEN Form 8300
Report of Cash Payments Over $10,000 Received in a Trade or Business. Later iterations of the Real Estate GTO required the GTO information to be reported via FinCEN Form 104 Currency Transaction Report.

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