The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has finalized new rules targeting certain all-cash and non-traditional real estate transactions. These regulations are designed to combat money laundering and illicit financial activity in residential real estate. “The Residential Real Estate Rule requires certain professionals involved in real estate closings and settlements to submit reports to FinCEN regarding certain non-financed transfers of residential real estate to legal entities or trusts”
For buyers, sellers, and professionals involved in New Jersey real estate closings, these rules matter — and noncompliance can carry significant penalties.
At Riley and Gutman, we focus exclusively on real estate closings in New Jersey. Here’s what you need to know.
What Is FinCEN and Why Is It Involved in Real Estate?
Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury. Its mission is to safeguard the financial system from illicit use, including money laundering, fraud, and sanctions evasion.
Historically, residential real estate has been vulnerable to anonymous purchases through shell companies and trusts. In response, FinCEN has moved from temporary Geographic Targeting Orders (GTOs) to a broader nationwide reporting rule aimed at increasing transparency.
What Transactions Are Covered?
The new rule generally applies to Residential real estate purchases that have the following criteria:
- Non-individual buyers (such as LLCs, corporations, partnerships, or trusts)
- Transactions made without traditional institutional financing
- All-cash purchases
- Purchases involving private or non-institutional lenders
If a legal entity — rather than a natural person — purchases residential property in New Jersey using cash or certain non-traditional financing, the transaction may trigger a reporting obligation to FinCEN.
Who Must Report?
The rule places reporting responsibility on the “reporting person.” In many cases, this may include:
- The settlement agent
- The title company
- The real estate attorney
- Other professionals involved in closing, depending on the structure of the transaction
Importantly, liability is not limited to one party. Failure to properly report a covered transaction can expose multiple participants to civil and potentially criminal penalties.
What Must Be Disclosed?
For covered transactions, the reporting party must submit detailed information to FinCEN, including:
- Information about the legal entity buyer
- Information about the beneficial owners behind that entity
- Payment details
- Property information
This reporting is separate from — and in addition to — any other required disclosures, including state-level documentation.
Are There Exceptions?
Yes. Certain transactions are excluded, including:
- Purchases financed by a traditional institutional lender
- Transfers resulting from death, divorce, or bankruptcy
- Certain low-risk transfers
- Transactions involving individual buyers purchasing in their own name
However, determining whether an exception applies requires careful legal review. Misinterpreting an exception could result in a failure to report.
Why This Matters in New Jersey
New Jersey has a high volume of LLC purchases — especially in:
- Investment properties
- Shore properties
- Multi-family residential properties
- Asset-protection planning transactions
It is common for buyers to take title to an LLC for liability or tax-planning purposes. Under the new FinCEN rules, that structure may now trigger federal reporting obligations if the purchase is made in cash or without institutional financing.
Even sophisticated investors may be unaware of the new requirements.
The Risk of Non-Compliance
Failure to report a covered transaction can lead to:
- Substantial civil fines
- Potential criminal exposure
- Federal enforcement investigations
- Professional liability concerns
Given that multiple parties may share responsibility, it is critical that the closing team clearly determine who is designated as the reporting person and ensure compliance before funds are disbursed.
How Riley and Gutman Helps Protect Your Transaction
At Riley and Gutman, we do more than facilitate closings. We:
- Analyze whether your transaction triggers FinCEN reporting
- Coordinate with title companies and settlement agents
- Confirm whether an exception applies
- Protect clients from avoidable federal liability
- Ensure smooth and compliant closings
Federal oversight of residential real estate transactions is increasing. Buyers and sellers — particularly those using LLCs or purchasing with cash — should not assume that “the title company will handle it.”
Compliance must be intentional and documented.
If you are purchasing or selling residential property in New Jersey through an entity or with cash, contact Riley and Gutman before closing. Proper planning ensures your transaction is not only successful — but compliant.