U.S. District Court Vacates FinCEN Residential Real Estate Rule
A federal court has vacated the Financial Crimes Enforcement Network’s (FinCEN) Anti-Money Laundering Rule for residential real estate transfers, and reporting is not currently required for covered parties.
On March 19, 2026, the U.S. District Court for the Eastern District of Texas in Flowers Title Companies, LLC v. Bessent vacated the Rule nationwide, effective immediately, after concluding that FinCEN exceeded its statutory authority under the Bank Secrecy Act (BSA).
Background: FinCEN Real Estate Reporting Requirements
Since March 1, 2026, FinCEN required certain “Reporting Persons,” including:
- Title insurance agents
- Escrow agents
- Settlement agents
- Attorneys
to report information about non-financed residential real estate transfers where ownership was transferred to legal entities or trusts, subject to specified exemptions.
Court Decision: Flowers Title Companies, LLC v. Bessent
In Flowers Title Companies, LLC v. Bessent, No. 6:25-cv-00127 (E.D. Tex. Mar. 19, 2026), the court vacated the Rule in its entirety and enjoined its enforcement nationwide.
In granting summary judgment for the plaintiffs, the court concluded that the Rule conflicted with the unambiguous terms of the Bank Secrecy Act on two independent grounds:
1. Scope of “Suspicious Transactions”
The court held that the BSA provision authorizing FinCEN to require reports of “suspicious transactions” does not support a categorical determination that all non-financed residential real estate transactions within the Rule’s scope are inherently suspicious.
2. Limits on FinCEN’s Authority
The court further concluded that, although the BSA permits FinCEN to require financial institutions and certain non-financial businesses to implement procedures designed to assure compliance with the statute, it does not authorize FinCEN to adopt the substantive reporting regime reflected in the Rule.
Because the Rule imposed direct reporting obligations rather than procedural requirements, the court held that FinCEN exceeded its statutory mandate.
Current Compliance Status
As a result of the Flowers decision:
- The Rule has been vacated nationwide
- Reporting Persons are not currently required to file reports
- Reporting Persons are not subject to liability for failing to file while the order remains in effect
As of March 20, 2026, FinCEN’s website states that reporting is not required while the Flowers order remains in effect.
The Flowers decision is the operative authority for compliance unless and until modified by an appellate court.
Conflicting Court Decisions
The regulatory landscape is further complicated by a prior decision in Fidelity National Financial, Inc. v. Bessent, No. 3:25-cv-00554 (M.D. Fla. Feb. 20, 2026), in which the U.S. District Court for the Middle District of Florida upheld the Rule and rejected challenges to FinCEN’s authority and rulemaking process.
These conflicting rulings increase the likelihood that appellate courts will address the scope of FinCEN’s authority under the Bank Secrecy Act.
Potential Next Steps
FinCEN is expected to consider appealing the Flowers decision to the U.S. Court of Appeals for the Fifth Circuit and may seek a stay of the district court’s vacatur pending appeal.
If a stay is granted, the Rule could be revived while appellate proceedings are underway.
Practical Considerations for Reporting Persons
For now, parties that would have been covered by the Rule are not required to comply with its reporting requirements.
However, a cautious approach is advisable. Reporting Persons should consider:
- Maintaining existing systems and procedures developed to comply with the Rule
- Pausing reporting filings rather than dismantling compliance processes
This approach may help mitigate disruption if the Rule is revived or replaced.
Frequently Asked Questions (FAQ)
Is the FinCEN real estate reporting rule still in effect?
No. The Rule has been vacated nationwide and is not currently in effect.
Are reporting persons required to file reports?
No. FinCEN has stated that reporting persons are not currently required to file reports while the Flowers order remains in effect.
Is there liability for not reporting?
No. Reporting persons are not subject to liability for failing to file reports while the order remains in effect.
Could the Rule return?
Yes. FinCEN may appeal the decision and could seek a stay, which may result in the Rule being reinstated during appellate proceedings.
Why did the court vacate the Rule?
The court held that the Rule conflicted with the Bank Secrecy Act and exceeded FinCEN’s statutory authority.
Strategic Outlook
The vacatur of the Rule creates a pause in current reporting obligations. However, given the likelihood of appellate review and conflicting court decisions, further developments are expected.
Contact Our Real Estate Team
MacDonald Illig is closely monitoring developments related to FinCEN’s Anti-Money Laundering Rule for residential real estate transfers.
For questions about how these developments affect your specific transaction, please contact a member of our Real Estate team at 814-870-7600.
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