Federal Court Blocks FinCEN Rule Targeting Cash Real Estate Transactions

Imagine working hard, saving diligently, and purchasing a rental property outright with cash through an LLC to reduce financing costs and protect personal assets. You’re not engaged in money laundering or funneling funds for illicit purposes. You’re following a common practice used by millions of Americans for legitimate reasons.

Under a rule finalized by the Financial Crimes Enforcement Network (FinCEN) in 2024, such transactions would have been automatically flagged as "suspicious" and reported to the federal government. The rule targeted between 800,000 and 850,000 transactions per year, with an estimated compliance cost exceeding $500 million annually.

That plan has now been blocked by a federal court in Texas. In Flowers Title Companies v. Bessent, Judge Jeremy Kernodle ruled that FinCEN overstepped its authority. The court vacated the rule entirely, removing it from enforcement nationwide.

Why the Court Rejected FinCEN’s Rule

The Bank Secrecy Act empowers FinCEN to require reporting of "any suspicious transaction relevant to a possible violation of law." FinCEN argued that nonfinanced real estate transfers to entities and trusts are inherently suspicious because some bad actors have used them for money laundering. The agency cited a statistic claiming that 42% of covered transactions involved parties previously flagged for suspicious activity.

Judge Kernodle dismissed these claims. In his ruling, he stated that just because some individuals misuse nonfinanced real estate transactions does not make all such transactions categorically suspicious. He also questioned whether banks were overreporting suspicious activities in the first place. Additionally, the court found that the 42% figure was based on a limited sample, not a representative national dataset.

When the primary argument failed, FinCEN attempted to justify the rule under a broader provision of the Bank Secrecy Act. This provision allows the agency to require financial institutions to maintain "appropriate procedures, including the collection and reporting of certain information." However, the court rejected this fallback as well, warning that accepting it would allow FinCEN to bypass the limits set by Congress.

The Plaintiffs: A Family-Owned Title Company Fighting Back

The case was brought by Celia Flowers, who built her own title company before acquiring her first agency in 1993. Today, she and her daughter, Erica Hallmark, operate Flowers Title Companies, a licensed business serving thousands of property buyers across more than 80 counties in Texas. They represent the kind of small, family-owned enterprises that politicians from both parties often claim to support.

Under FinCEN’s now-blocked rule, Flowers Title Companies would have been required to collect and report extensive personal details on every client who paid cash for a property. Compliance would have imposed new procedures, additional staff time, legal expenses, and the constant risk of severe penalties for unintentional errors. Worse, the rule would have forced the company to act as an arm of federal surveillance on its own clients—a stark contrast to the entrepreneurship Celia Flowers had spent decades building.

In response, the company challenged the rule in federal court, arguing that it exceeded FinCEN’s statutory authority and imposed undue burdens on law-abiding businesses.