The Biden administration wants to make residential real estate transactions more transparent by unmasking the owners of certain all-cash purchases. It’s part of an ongoing effort to combat money laundering and the movement of dirty money through the American financial system.

The Treasury Department’s Financial Crimes Enforcement Network proposed a regulation on Wednesday that would require real estate professionals to report information to the agency about non-financed sales of residential real estate to legal entities, trusts and shell companies.

All-cash purchases of residential real estate are considered at high risk for money laundering. The rule would not require the reporting of sales to individuals.

“Illicit actors are exploiting the U.S. residential real estate market to launder and hide the proceeds of serious crimes with anonymity, while law-abiding Americans bear the cost of inflated housing prices,” FinCEN Director Andrea Gacki said in a statement.

She said the proposal is an “important step toward not only curbing abuse of the U.S. residential real estate sector, but safeguarding our economic and national security.”

The White House in December 2021 laid out plans to launch real estate recordkeeping requirements to increase transparency in real estate transactions, “diminishing the ability of corrupt actors to launder ill-gotten proceeds through real estate purchases.”

Real estate is a commonly used vehicle for money laundering, due to opaque reporting rules on purchases. The degree to which criminal activity affects housing affordability is being studied.

One study on the impact of money laundering on home values in Canada, conducted by a group of Canadian academics, found that money laundering investment in real estate pushed up housing prices in the range of 3.7% to 7.5%.

Ian Gary, executive director of the transparency advocacy group FACT Coalition said the proposed regulation “sends a clear message that the U.S. plans to close off options for criminals looking to hide their ill-gotten gains in our real estate markets.”

Treasury has also been responsible for carrying out other transparency-related initiatives, including the rollout of a new database on small business ownership. The so-called beneficial ownership registry is expected to contain personal information on the owners of at least 32 million U.S. businesses.

Treasury Secretary Janet Yellen said last month that 100,000 businesses have registered for the new database.

The National Small Business Association filed a lawsuit in November 2022 to stop the U.S. database from being created, arguing that it is unduly burdensome on small firms and infringes on states’ rights to regulate businesses.

(AP)