Federal District Court Decision Halts the Financial Crimes Enforcement Network’s (“FinCEN”) Expansion Into Residential Real Estate Oversight
By Zoe Tsicalos and Adam Leitman Bailey
On March 19, 2026, Judge Jeremy D. Kernodle of the U.S. District Court of the Eastern District of Texas held that FinCEN’s implementation of the Residential Real Estate Rule (“Rule”) exceeded FinCEN’s statutory authority under the Bank Secrecy Act. As a result, the Court vacated the Rule. See Flower Title Companies, LLC v. Bessent, 6:25-CV-127-JDK, 2026 WL 782283 (E.D. Tex. 2026) (challenging the Rule as unlawful under the Administrative Procedure Act because the Rule exceeds FinCEN’s statutory authority provided by the Bank Secrecy Act).
The Rule, which only became effective on March 1, 2026, was implemented to increase transparency in residential real estate transactions. Specifically, the Rule implemented reporting requirements for non-financed residential real estate transactions where ownership is transferred to entities or trusts, subject to a few exceptions.
In Flower Title Companies, LLC v. Bessent, the Court noted that the Bank Secrecy Act does permit FinCEN to require reports of “any suspicious transaction,” however, FinCEN failed to explain or prove that non-financed residential real estate transactions are generally deemed as suspicious. The Court determined FinCEN’s explanations for the Rule to be “vague, conclusory, and unpersuasive,” stating that the fact that some bad actors have engaged in non-financed real estate transactions does not render such transactions inherently suspicious. FinCEN relied on a statistic showing that about 42% of non-financed real estate transfers identified through geographic targeting orders involved individuals or entities subject to a suspicious activity report. The Court, however, found this statistic unpersuasive because it was drawn from a narrow subset of transactions—limited by price thresholds and confined to selected geographic areas under monitoring. Furthermore, the Court indicated that while the Bank Secrecy Act gives FinCEN authority to require financial institutions to maintain procedures to comply with the Bank Secrecy Act, it does not give FinCEN the authority to require the reports under the Rule.
FinCEN’s Response
As a result of the District Court’s decision vacating the Rule, FinCEN issued the following statement on its website: “In light of a federal court decision, reporting persons are not currently required to file real estate reports with FinCEN and are not subject to liability if they fail to do so while the order remains in force.”
Adam Leitman Bailey, P.C.’s Recommendation
Despite the recent District Court decision and the resulting uncertainty surrounding the Rule, Adam Leitman Bailey, P.C. strongly advises all real estate professionals who qualify as “Reporting Persons” to proceed with the compliance measures. Specifically, such professionals should continue to collect all information required for a Real Estate Report, and should prepare and retain these reports in their files.
Taking these proactive steps will ensure that, if the Rule is reinstated, reporting obligations can be met immediately and without disruption or delay.
Adam Leitman Bailey, P.C. will continue to closely monitor developments and will promptly notify clients of any material updates or changes.