US judge strikes down rule targeting money laundering in real estate
By Luc Cohen
NEW YORK, March 20 (Reuters) - A U.S. judge has struck down a Treasury Department rule aimed at curbing money laundering in real estate by requiring that the beneficial owners of companies buying real estate in cash be disclosed.
The Treasury Department's Financial Crimes Enforcement Network (FinCEN) implemented the rule in 2024 to prevent criminals from anonymously stashing ill-gotten gains in U.S. property.
Lawyers at the libertarian Pacific Legal Foundation challenged the rule, arguing it exceeded FinCEN's statutory authority.
Tyler, Texas-based U.S. District Judge Jeremy Kernodle sided with the Pacific Legal Foundation in a ruling late on Thursday.
While banks have long been required to understand the source of customer funds and report suspicious transactions, no such rules exist nationwide for the real estate industry.
Instead, FinCEN since 2016 has operated real estate purchase disclosure rules, known as geographic targeting orders, in a handful of cities including New York and Miami. The new rule effectively expanded those orders nationwide.
"The agency fails to explain or show how non-financed residential real estate transactions are categorically 'suspicious,'" Kernodle, an appointee of U.S. President Donald Trump, wrote in striking down the rule.
FinCEN did not immediately respond to a request for comment.
As much as $2.3 billion was laundered through U.S. real estate between 2015 and 2020, former Treasury Secretary Janet Yellen has said.
The FACT Coalition, an advocacy group that supports the rule, said it expected the government to prevail on appeal. FACT Executive Director Ian Gary said in a statement, "The district court in Texas has just sided with cartels, money launderers, and U.S. adversaries."
