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Glossary Definitions: 

 

AML (Anti-Money Laundering) Obligation  

The legal and regulatory requirement for banks and other financial institutions to establish programs to detect, prevent, and report suspicious activities, such as money laundering or terrorist financing. 

 

Associated Transferee Legal Names  

Refers to the legal entity or trust that receives ownership of residential real property, rather than an individual owner, and requires detailed reporting of its beneficial ownership and identifying information. The rule requires that the legal name of the transferee entity (like an LLC, corporation, or partnership) or transferee trust be identified, along with the names, residential addresses, dates of birth, and taxpayer identification numbers of its beneficial owners. 

 

Beneficial Owner  

A natural person who, directly or indirectly:

 

  • Exercises substantial control over a transferee entity (e.g., serves as a senior officer; has authority to appoint/remove senior officers; or directs/has substantial influence over important decisions), or

 

  • Owns or controls ≥ 25% of the transferee entity’s ownership interests (equity, capital/profits interests, or through convertible instruments, options, or similar arrangements), or

 

  • In the case of a transferee trust, meets one of the trust-based categories listed below under Beneficial Owner Category.

 

Beneficial Owner Category  

The reason a person qualifies as a beneficial owner, selected from these categories:

  • For a Transferee Entity

     

    • Substantial Control (senior officer, appointment/removal authority, or key decision-making influence)

       

    • Ownership Interest ≥ 25% (direct or indirect)

       

  • For a Transferee Trust

     

    • Trustee

       

    • Person with authority over disposition/management of trust assets

       

    • Primary/sole beneficiary (or an individual with a right to demand substantially all trust assets)

       

    • Grantor/Settlor with a right to revoke the trust or withdraw assets

       

    • Look-through owner: an individual who is a beneficial owner of an entity or trust that itself holds one of the roles above 

 

Cascade of Responsibility  

A key rule in the Real Estate Rule established by the Financial Crimes Enforcement Network (FinCEN) to determine which professional involved in a non-financed transaction is responsible for filing a mandatory Real Estate Report.
 Order of the cascade:

  • Settlement agent: The person explicitly listed as the closing or settlement agent on the closing statement.

     

  • Settlement statement preparer: If no one is designated as the settlement agent, the person who prepared the closing or settlement statement.

     

  • Recordation filer: The person who files the deed or other instrument of ownership with the recordation office.

     

  • Title insurance underwriter: The person who underwrites the owner’s title insurance policy for the buyer.

     

  • Greatest disburser of funds: The person who disburses the greatest amount of funds in connection with the transfer, such as from an escrow or trust account.

     

  • Title evaluator: The person who provides an evaluation of the title status.

     

  • Deed preparer: The person who prepares the deed or other legal instrument that transfers ownership.

 

Country of Jurisdiction  

The nation where the property is physically located. The laws of this country govern all aspects of the property, including ownership, sales, taxation, and use, regardless of the nationality or residence of the buyer or seller. This is known as in rem jurisdiction, or “jurisdiction over the thing.” 

 

Designation Agreement  

A written contract that assigns the responsibility of filing a Real Estate Report for a specific residential property transfer to one of the professionals involved in the transaction, rather than the individual designated by FinCEN’s “reporting cascade.” The designation agreement, which must be executed at or before the closing and is unique to each transaction, allows parties to transfer compliance liability for the filing of the report.

 

Five-Year Document Retention Rule  

Stems from the Bank Secrecy Act and the TILA-RESPA Integrated Disclosure Rule (TRID), which requires creditors to keep a copy of the Closing Disclosure for five years after the closing date.
 Key requirements:

  • Retain written certification of beneficial ownership information.

     

  • Retain designation agreements if parties agree to designate a single reporting person.
  • Retain a copy of each reliance certificate on which the reporting person is relying for the truthfulness of information.

     

  • Retention applies to all parties, not just the reporting person.

     

  • No copy of the filed Real Estate Report must be kept.

     

  • Effective for reportable transfers occurring on or after March 1, 2026. 

 

Foreign Principal Place of Business  

An address associated with a reporting foreign legal entity. Specifically, if a foreign entity’s principal place of business is outside the United States, it must report the address from which it conducts business in the U.S.

Hard Money  

A short-term, asset-based loan from a private lender (not a traditional bank) that is secured by the property itself rather than the borrower’s creditworthiness. 

 

Payor  

The individual or entity responsible for making a payment. In the context of a sale, this most often refers to the home buyer, who provides the funds for the purchase, or the seller, who typically pays real estate commissions, taxes, and other closing costs.

 

Reliance Certificate  

A legal document that allows a reporting person to depend on the findings of a report or assessment that was not originally prepared for the reporting person. It extends the original professional’s liability to the new party, providing legal assurance that the information is valid for a specific, defined use. 

 

Reporting Person  

The individual who performs a specific function in a reportable non-financed residential property transfer to a legal entity or trust. This person is identified through a reporting cascade – a list of seven roles in order of priority, where the highest-ranking person who performed a function in the transaction is designated the reporting person. This obligation typically falls on closing/settlement agents, title insurance underwriters, or preparers of closing documents, but it can also be assigned via a written designation agreement among the involved parties. 

 

Residential Real Estate Rule (RRE Rule / RER / Reporting Rule)  

Requires certain non-financed residential property transfers into legal entities or trusts to be reported, increasing transparency and combating money laundering. Residential real estate includes property for one-to-four-family occupancy, such as houses, townhouses, condos, and associated land.
 Key facts:

  • Applies to non-financed transactions nationwide.

     

  • No price or geography threshold; replaces prior GTOs.

     

  • Reports must include the reporting person’s identity, property details, transferor, transferee entity/trust (including BOI).

     

  • Reports are due within 30–60 days.

     

  • Certain records (e.g., BOI certification, designation agreements) must be retained for five years. 

 

SAR (Suspicious Activity Report)  

A form filed by financial institutions and other obligated entities to report suspicious transactions or activities that might indicate money laundering, terrorist financing, fraud, or other illegal activities.

 

Signing Person  

Anyone with the legal authority to sign documents that transfer or encumber property, such as the buyer, seller, or an authorized agent. The specific signing rules depend on the individual’s role, the type of transaction, and state law.

 

Total Consideration  

The full value exchanged for the property, including any payments made for the transfer. This includes monetary payments, non-monetary value in the form of goods or services, gifts, and the full value of any exchange of assets.

 

Transferee  

The trust or entity receiving ownership of the residential real estate in a non-financed transaction, such as a limited liability company, partnership, or trust. 

 

Transferee Person Types  

Definitions of beneficial owners depending on whether the transferee is an entity or a trust:

  • Beneficial Owner of a Transferee Entity: any individual who either (1) exercises substantial control over the entity (e.g., senior officer, authority over appointments, decision-making) or (2) owns/controls at least 25% of ownership interests.

     

  • Beneficial Owner of a Transferee Trust: an individual who holds certain roles/rights, such as trustees, beneficiaries, grantors with revocation rights, or beneficial owners of an entity/trust holding those positions.

 

Transferee Type  

The legal entity or trust receiving ownership of a property, triggering a reporting requirement for certain non-financed transactions.

  • Reportable Transferee Types:

     

    • Transferee Entity: corporations, partnerships, estates, associations, LLCs.

       

    • Transferee Trust: domestic or foreign trusts where a trustee manages assets for beneficiaries or specific purposes.

       

  • Exempt Transferee Types:

     

    • Entities: banks, credit unions, depository institution holding companies, securities issuers, governmental authorities, insurance companies, registered investment companies, and other highly regulated entities.

       

    • Trusts: statutory trusts, securities reporting issuer trusts, and certain trusts wholly owned by exempt entities. 

 

Transferor  

The seller (or current owner) of the residential real property being transferred in a non-financed transaction to a legal entity or trust.

 

Trustee (Legal Entity)  

A legal person or institution that holds legal title and manages property for the benefit of a trust’s beneficiaries. The trustee has legal control but not personal ownership and must act in the beneficiaries’ best interests at all times.

 

Types of Unique Identifying Information Needed to File  

Specific personal or entity-level data required for reporting:

  • For Individuals: full legal name, residential street address, date of birth, and a unique identifying number (EIN, SSN/ITIN, foreign tax ID, passport, entity registration).

     

  • For Entities: entity name, trade name/DBA, unique identifying number (EIN, SSN/ITIN, foreign tax ID, etc.).

     

  • For Trusts: trust name, execution date of trust instrument, unique identifying number, trustee’s identifying details.

     

  • Other Required Information: citizenship, residential property address, total consideration, method of payment, and financial institutions/accounts used.