The U.S. District Court for the Eastern District of Texas agreed with a Texas title agency that the Financial Crimes Enforcement Network’s (FinCEN) new residential reporting rule is unlawful and ordered the rule be vacated.
In its March 19 decision in Flowers Title Company v. Bessent, the court granted the plaintiff’s motion for summary judgment, denied FinCEN’s motion of summary judgment and ordered that the rule be vacated.
FinCEN’s “Anti-Money Laundering Regulations for Residential Real Estate Transfers” final rule went into effect March 1. It requires individuals to report non-financed transfers of residential real estate to legal entities and trusts.
Flowers and Davis PLLC Senior Partner Celia Flowers filed suit in April 2025 challenging the legality of rule, claiming it is unlawful under the Administrative Procedure Act and that it exceeds FinCEN’s statutory authority under the Bank Secrecy Act.
The court agreed.
“Neither provision of the [Bank Secrecy] Act cited by FinCEN authorizes the final rule,” U.S. District Judge Jeremy Kernodle said in the opinion and order. “The first provision, 31 U.S.C. § 5319(g)(1), permits FinCEN to require reports of ‘any suspicious transaction.’ But the agency fails to explain or show how non-financed residential real estate transactions are categorically ‘suspicious.’ The second provision, 31 U.S.C. § 5318(a)(2), gives FinCEN the authority to require financial institutions to maintain ‘procedures’ to comply with the act, not the authority to require the reports covered by the final rule.”
The judge called FinCEN’s explanations “vague, conclusory and unpersuasive.”
“The fact that some bad actors have conducted non-financed real estate transactions does not make such transactions categorically ‘suspicious.’ If it did, then nearly every type of transaction imaginable would be ‘suspicious,’ and § 5318(g)(1) would grant FinCEN far-reaching powers no one has contemplated,” Kernodle wrote.
He said under § 5318(g)(1), FinCEN must limit the reporting rule to “any suspicious transaction.”
“Instead, FinCEN has declared an entire category of residential real estate transactions to be ‘suspicious’ with no proof or sufficient explanation why,” the judge wrote in the opinion. “… The court holds that the final rule conflicts with the unambiguous terms of the Bank Secrecy Act and vacatur and remand is the proper remedy.”
Check back with The Legal Description for more on this decision.
For more about this case, watch Flowers’ conversation with October Research Chief Knowledge Officer Mary Schuster on the Keys to Real Estate podcast.