Treasury rule changes could impact high-value home purchases 

The U.S. Treasury Department is crafting rules that could close a long-standing loophole criminals have used to launder money through luxury real estate, according to the agency's regulatory agenda.

While it is unclear when the rules could be introduced, experts say they are likely to expand the use of Geographic Targeting Orders (GTOs) nationwide. GTOs require title companies to report specific requirements about a homebuyer's identity but are only being used in a handful of cities like New York and Miami.

Currently, U.S. law does not require the beneficial owners of a company purchasing real estate to be disclosed during a transaction. Robert Siciliano, cybersecurity expert and co-founder of Protect Now, told Real Estate News that the U.S. regulates money laundering through an "inconsistent patchwork of state laws."

Siciliano added that GTOs are one of the best ways for the U.S. to address money laundering, although there is some disagreement about the impact of the technology on transaction costs. In February 2022, the National Association of Realtors argued that GTOs can increase real estate costs and that proposed anti-money laundering rules could prove "overly burdensome" for real estate professionals.

For brokers and agents, Siciliano said the rules could increase the amount of due diligence they will have to perform in high-dollar transactions. It could also result in Realtor associations requiring their members to add continuing education classes on money laundering, he said.

"The additional data requirements and reporting would extend the time needed to complete transactions," Siciliano said. "All parties may incur extra costs associated with the new requirements including new technologies and training to ensure compliance."

In March, Treasury Secretary Janet Yellen said at least $2.3 billion was laundered through U.S. real estate between 2015 and 2020, and admitted that the real number is likely "much higher." She added that Treasury is also working to build "a level playing field" going forward through a series of domestic and international initiatives.

Treasury officials told Reuters that they have been planning to implement the rule since 2021. Siciliano said the initiative could have been delayed by legal implications and debates over balancing consumer privacy and transparency.

Advocates like Erica Hanichak, government affairs director for the Financial Accountability and Corporate Transparency (FACT) Coalition, told Reuters that the proposed rules are an "important step to put something officially on the books that would root out money laundering through the sector once and for all."