A leading title insurer is suing two federal U.S. offices over a new "arbitrary and capricious" reporting rule aimed at preventing money laundering activity that it claims exceeds their authority.
Fidelity National Financial and its similarly named title insurance subsidiary filed the lawsuit in a Florida federal district court in May. Named as defendants were the Department of the Treasury and its Financial Crimes Enforcement Network, commonly referred to as FinCEN, housed within the unit. Treasury Secretary Scott Bessent and FinCEN Director Andrea Gacki were also listed as defendants.
Approved in mid 2024 and scheduled to go into effect in December this year, the new law
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The rule seeks to reduce the risk of money laundering activity from scammers operating anonymously through purchases with no outside loan financing. Historically, fraudsters have eluded regulators by taking advantage of situations when property titles were transferred to a legal entity or trust, allowing them to illicitly commit financial crimes.
Jacksonville, Florida-based Fidelity National said that compliance with the rule would cause irreparable harm to business privacy and increase its volume of required disclosure reports by 4,000% annually. The rule goes beyond
"By demanding wide-ranging and intrusive disclosures, the new rule will impose severe burdens on title insurance companies like plaintiffs and ride roughshod over the privacy interests of parties involved in routine residential real estate transactions," the filing stated.
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In 2023, Fidelity National Title, as well as several
Among the burdens title companies will be subjected to are "significant compliance costs" on each transaction that will add "massive red tape," the suit said.
Plaintiffs argued that the new rule was arbitrary and capricious and "suffers from a host of legal defects," as FinCEN failed to administer a proper cost-benefit analysis. The additional costs to produce the expected number of new reports required total between $427 and $829 per covered transaction. FinCEN estimated the law would increase the volume of disclosures to between 800,000 to 850,000.
"Millions of perfectly lawful transactions are swept into FinCEN's dragnet," they also claimed.
"The mere fact that a type of transaction 'can be' used by 'illicit actors' does not render the entire category of transactions suspicious," the plaintiffs argued, adding that FinCEN did not cite any data before introducing the rule.
The other actions taken against FinCEN
The lawsuit is at least the second filing this year targeting the new reporting mandate. In April, Texas-based Flowers Title Cos. sued the Treasury Department in an attempt to prevent the rule from taking effect.
In February, Sen. Mike Lee, R-Utah, also introduced legislation to nullify FinCEN's regulation through an act of Congress. Later that same month, Rep. Andrew Clyde, R-Ga., put forth a similar bill in the House of Representatives. Legislation, if passed through both chambers and signed by the president, would effectively eliminate the need for the lawsuits to go forward.
All-cash purchase transactions surged in the first half of the current decade, leading to a nine-percentage-point increase in sales share between early 2020 and 2023 in the largest metropolitan areas, according to data from Redfin. The size of the market grew to a record-high of 35.1% from 26.1% over the period, as housing trends skewed to favor cash-rich buyers with capital readily available to compete for offers.
Although the cash-sales share of the market pulled back last year to 32.6% after its 2023 high, the percentage is still above levels in the years preceding the Covid-19 pandemic.
However, even with elevated market share, the total number of transactions in 2024 finished at a decade low of approximately 700,000, corresponding to stagnating
