A district judge in Texas has ruled in favor of title company owners who argued that the new rules violated their Fourth Amendment rights.
A district judge in Texas has blocked the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) from implementing new real estate anti-money laundering rules.
Pacific Law Foundation (PLF), a public interest law firm based in Sacramento, California, filed the lawsuit in April 2025 on behalf of Texas title company owner Celia Flowers. Flowers said FinCEN’s rules, which require closing and settlement agents to report financings and corporate and trust purchases made through unregulated lenders, impose unwarranted “costly new compliance obligations” and “draconian penalties” for reporting errors.
PLF argued that this rule oversteps FinCEN’s authority under the Currency and Foreign Transaction Reporting Act, also known as the Bank Secrecy Act. The 1970 Act requires record-keeping and reporting of high-value cash transactions over $10,000. PLF said the law also “gives the Secretary of the Treasury complete discretion to determine whether and when to require systematic information collection and reporting on consumer transactions.”
However, PLF said the thorough record-keeping required by FinCEN’s new rules is time-consuming and violates the Fourth Amendment by requiring closing and settlement personnel to “enforce government oversight of their customers by reporting personal information from legitimate transactions.”
A previous Inman article detailed the rules that require agents to document the corporation or trust involved, the corporation’s owners, the individuals signing documents on behalf of the corporation, the seller, the property being transferred, social security numbers, payment information, and more. Reports must be submitted by the last day of the month following the month in which the transaction occurred, or 30 days after the transaction closes, whichever is later.
The Treasury Department first proposed new reporting rules in early 2024. It was originally scheduled to come into force in December 2025, but was delayed to “give industry time to comply”.
U.S. District Judge Jeremy Kernodle sided with PLF, saying the U.S. Treasury “failed to explain or demonstrate how unfinanced residential real estate transactions were conclusively ‘suspicious.'” President Donald Trump, who appointed Kernodle in 2018, has steadily weakened FinCEN’s regulatory authority by watering down some of the Biden administration-era money laundering regulations.
FinCEN has never included real estate agents in its reporting process. But with about 28% of sales in 2025 being all-cash, the National Association of Realtors has begun educating real estate agents about the new rules. Additionally, approximately 22% of transactions involved legal entities such as trusts.
The Financial Accountability and Corporate Transparency (FACT) Coalition deplored Kernodle’s ruling but said three other lawsuits in Florida, Texas and Puerto Rico could restore FinCEN’s ability to enforce rules.
“In striking down this rule, the Texas district court has sided with cartels, money launderers, and America’s adversaries, giving them free license to continue moving dirty cash through American real estate,” Ian Gailey, executive director of the FACT Coalition, said in a press release. “Two other federal courts recently upheld this rule as legal and constitutional. Therefore, we expect the government to quickly appeal this extraordinary decision and for the Court of Appeals to overturn it.”
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