New regulations were issued by the Treasury Department, which aim to curb money laundering activities by criminals. Under these regulations, real estate purchases will now be made in cash.
According to the rules finalized Wednesday, real estate sales to shell companies, trusts, and legal entities must be reported by real estate professionals. However, this requirement will not apply if the property buyer is an individual. Purchases made via financing or through a mortgage will also not be subject to the same rules.
The new regulations are part of President Joe Biden's administration's goal to prevent laundered money from flowing through the U.S. financial system. Large cash purchases, such as those used to buy real estate, are viewed by authorities as carrying a high risk of underlying money laundering transactions.
"These steps will make it harder for criminals to exploit our strong residential real estate and investment adviser sectors," said Treasury Secretary Janet Yellen in a report by Realtor.com.
These new rules will fall under the purview of the Financial Crimes Enforcement Network (FinCEN) of the Treasury Department, the Associated Press reported. Their administration will also be handled by the same department.
Real estate professionals who facilitate transactions will now be required to report the names of the sellers and the individuals who stand to benefit from such transactions. Additionally, they must disclose other information, including property details and payment specifics.
Beyond addressing money laundering, these rules could also impact housing costs. According to a study by Canadian academics, home purchases facilitated by laundered money could drive up prices by 3.7% to 7.5%.
Ian Gary, the executive director of the FACT Coalition, a non-profit organization aimed at promoting transparency, called the new rules "much-needed safeguards."
"After years of advocacy by lawmakers, anti-money laundering experts, and civil society, the era of unmitigated financial secrecy and impunity for financial criminals in the U.S. seems to finally be over," he said.
