How does FinCEN justify treating all those buyers as suspicious?
The agency argues that dragnet real-estate surveillance will help identify bad actors.
I magine you’ve spent years saving, and you finally buy a modest rental property. You pay cash to avoid taking out unnecessary loans, and you put the property in an LLC because your accountant told you to. Congratulations, the federal government now considers you a suspect!
That’s the logic behind a Treasury Department rule that a federal court struck down this spring, which the government is now trying to revive. The case, Flowers Title Companies v. Bessent, is before the U.S. Court of Appeals for the Fifth Circuit. Its outcome will decide whether nearly every all-cash home purchase by a trust or business in America is reported to federal law enforcement.
The Bank Secrecy Act of 1970 lets the Treasury require banks and other “financial institutions” to report suspicious transactions that could point to money-laundering. You might have already run into it without knowing: If you deposit more than $10,000 in cash, your bank files a report. In fiscal 2025, about 28.7 million of these reports were filed.
For about a decade, Treasury’s Financial Crimes Enforcement Network (FinCEN) has also used temporary “geographic targeting orders” aimed at real estate. They began a decade ago with luxury all-cash purchases in Manhattan and Miami-Dade in the $1 million to $3 million price ranges. The theory was that high-end cash deals in those specific markets were especially attractive to money-launderers, which is reasonable enough.
But the number of orders kept growing. FinCEN renewed and expanded the requirements at least four times to add more cities, more payment types, and lower price thresholds. The latest version covered parts of 13 states and D.C. with only a $300,000 threshold. In Baltimore, the threshold was lowered to just $50,000.
Then, in August 2024, FinCEN decided to require dragnet reporting of almost all non-financed residential transfers across the nation. FinCEN churned out a “Residential Real Estate Rule” with no price threshold. Now, any time someone buys residential real estate without taking out a mortgage and transfers it to an LLC, someone involved in the closing must file a real-estate “suspicious activity report” that requires collecting documents and filling out a cumbersome form with over 100 fields.
So how does FinCEN justify treating all those buyers as suspicious? The agency argues that it can deem any consumer transaction suspicious and require dragnet surveillance if bad actors might launder money or cheat on their taxes. But by that logic, FinCEN would have unlimited power to monitor ordinary financial activity. After all, any time that anyone deals in cash, something shady could be happening.
FinCEN relies heavily on its finding that, in 42 percent of the real estate deals reported under its prior orders, someone involved had been flagged for another “suspicious transaction” in the past. But even accepting that figure at face value, it confirms that there is no reason to suspect impropriety for the majority (58 percent) of these transactions. That’s a problem for FinCEN because Congress gave it authority to require reporting only when there is reason to suspect illegal activity.
FinCEN’s 42 percent statistic is incredibly self-serving and misleading because it comes from earlier reports focused on high-dollar transactions in select geographic regions that FinCEN chose precisely because it knew bad actors were active there. Financial institutions may flag anyone for a suspicious transaction at any time — even for something as innocuous as repeatedly withdrawing cash from an ATM to pay a babysitter. After all, FinCEN receives 12,870 suspicious activity reports each day.
So FinCEN’s claim that it can deem ordinary transactions suspicious because someone involved has been flagged for something in the past is akin to noticing that many hardware-store customers have had parking tickets and therefore requiring everyone who buys a hammer to be frisked.
Remarkably, FinCEN’s supposed evidence confirms only that a vanishingly small segment of non-financed residential transfers have any connection to illicit activity. FinCEN points to just 21 enforcement actions over 19 years as proof of supposedly rampant illicit activity. But FinCEN estimates that there are at least 800,000 such transactions each year (or 15 million over a 19-year period). But at that rate, FinCEN’s supposed evidence translates to only 0.00014 percent of these transactions having any connection to illicit activity.
By contrast, the costs are high. FinCEN’s own estimates put the rule’s cost at $690 million in its first year and up to $663 million each year after. As a result, the rule will cost $5.34 billion in its first decade, along with nearly 5 million hours of paperwork landing on about 173,000 businesses each year.
When the rule briefly took effect this March, title companies got a preview. In a survey by the American Land Title Association, more than half said the rule delayed closings, more than 80 percent said buyers and sellers raised privacy concerns, and nearly two-thirds called the data collection especially burdensome.
That’s where the Flowers Title Companies case comes in. Pacific Legal Foundation represents the family-run Texas title company challenging the rule. On March 19, just 18 days after reporting began, a federal judge in the Eastern District of Texas vacated the rule. The court found that FinCEN had failed to explain or show how these transactions are categorically suspicious. The Bank Secrecy Act lets Treasury require reports of suspicious transactions; it doesn’t let the agency declare a whole category of ordinary, lawful purchases suspicious by fiat.
People buy homes through LLCs and trusts for plenty of good reasons, including estate planning, liability protection, privacy, and keeping a family’s affairs simple. Paying cash isn’t a red flag, either. It’s often just what careful savers do.
The Fifth Circuit should affirm. Fighting money-laundering is a worthy goal, but it doesn’t require treating every cash homebuyer in America like a suspect.
Luke Wake is a senior attorney at Pacific Legal Foundation and represents Flowers Title. Mitchell Scacchi is the strategic research manager for the separation of powers at PLF.