Treasury’s Real Estate Reporting Rule Struck Down in Court (1)

The Treasury Department’s reporting requirements for certain real estate transactions are illegal, a federal judge in Texas ruled, vacating the 2024 rule.

The rule, issued by Treasury’s Financial Crimes Enforcement Network in an effort to crack down on money laundering in the residential real estate sector, runs afoul of the Bank Secrecy Act, Judge Jeremy D. Kernodle of the US District Court for the Eastern District of Texas said Thursday.

The 2024 rule requires reporting on any nonfinanced residential real estate transaction occurring within the US or its territories where ownership is transferred to an entity or trust, with limited exceptions. Flowers Title Cos. challenged the rule in a suit filed last year, alleging it exceeded FinCEN’s statutory authority.

Although the Bank Secrecy Act allows FinCEN to mandate reports of suspicious transactions, the agency failed to show how the regulated transactions are categorically suspicious, Kernodle found.

The agency argued that roughly 42% of nonfinanced real estate transfers identified by geographic targeting orders between 2017 and 2024 were made by individuals or entities on which a suspicious activity report was filed.

But that statistic doesn’t justify the final rule, Kernodle said. That number “focused on a limited subset of non-financed real estate transactions—those covered by the GTOs, which were limited by price and to geographic areas selected by FinCEN for monitoring.” And just because some bad actors conducted nonfinanced real estate transactions doesn’t mean all of those transactions are categorically suspicious, Kernodle said.

Holding otherwise “would grant FinCEN far-reaching powers no one has contemplated,” the judge said.

The law also doesn’t give FinCEN the authority to require the reports at issue, Kernodle said.

Although FinCEN interprets the statute as granting it authority to require reports from financial institutions, that interpretation “would allow the agency to circumvent the express congressional limit on its authority” in the suspicious transactions provision, Kernodle said.

Pacific Legal Foundation represents Flowers.

The case is Flowers Title Cos. LLC v. Bessent, E.D. Tex., No. 6:25-cv-00127, 3/19/26.