Banking and Finance Law Daily Wrap Up, BANK SECRECY ACT—E.D.Tex.: FinCEN real estate reporting rule vacated for lack of authorization under BSA, (Mar 20, 2026)

By Shashi Kant, BALLB, LLM.

The Texas district court’s order holds non-financed transfers to entities and trusts are not categorically “suspicious” transactions subject to FinCEN reporting mandate.

A federal district court in Texas granted summary judgment to Flowers Title Companies, LLC and vacated FinCEN’s 2024 final rule requiring reporting and recordkeeping for certain non-financed transfers of residential real property to legal entities and trusts, holding that the rule exceeded the agency’s statutory authority under the Bank Secrecy Act. The court concluded that neither of the two statutory provisions cited by FinCEN authorized the rule and therefore set it aside under the Administrative Procedure Act (Flowers Title Company v. Bessent, No. 6:25-cv-00127 (E.D. Tex. Mar. 19, 2026)).

Background. The challenged rule, finalized in August 2024, imposed a nationwide reporting requirement on certain persons involved in real estate closings and settlements for non-financed transfers of residential real property to specified legal entities and trusts. FinCEN said the rule was intended to combat and deter money laundering by increasing transparency in the residential real estate sector and took effect Dec. 1, 2025.

Flowers Title, a Texas title company, filed suit in April 2025 challenging the rule under the Administrative Procedure Act and arguing, among other things, that FinCEN lacked statutory authority to impose the reporting requirement. The company had alleged that the rule conscripted title companies into collecting extensive information about lawful real estate transactions, including sensitive personal information, even though there is “nothing inherently suspicious” about a buyer using his or her own money to purchase residential property. (Banking and Finance Law Daily, Apr. 15, 2025).

Court says rule exceeded statutory authority. The court began and ended with Flowers Title’s statutory argument, holding that the final rule exceeded FinCEN’s authority under the Bank Secrecy Act. FinCEN had relied on two provisions: 31 U.S.C. § 5318(g)(1), which authorizes reports of “any suspicious transaction relevant to a possible violation of law or regulation,” and 31 U.S.C. § 5318(a)(2), which allows the Secretary to require certain institutions to maintain procedures, including collection and reporting of information, to ensure compliance with the subchapter or guard against money laundering and related risks. The court held that neither provision authorized the final rule. With respect to Section 5318(g)(1), the court held that FinCEN failed to explain or show how non-financed residential real estate transactions are categorically “suspicious.” The opinion stated that the term “suspicious” limits FinCEN’s authority and does not permit the agency to regulate all transactions merely because some bad actors have used them or because the government might find the information useful. The court rejected FinCEN’s reliance on public law-enforcement actions and a statistic from geographic targeting order data, finding those rationales too vague and insufficient to justify declaring an entire category of transactions suspicious. The court said that if FinCEN’s reasoning were accepted, “nearly every type of transaction imaginable would be ‘suspicious.’”

The court also rejected FinCEN’s reliance on Section 5318(a)(2), concluding that the provision authorizes the agency to require covered institutions to maintain appropriate procedures to comply with the statute, not to impose the substantive reporting regime created by the final rule. Because the court found the rule unauthorized on statutory grounds, it did not reach Flowers Title’s alternative constitutional arguments under the nondelegation doctrine, the Commerce Clause, and the Fourth Amendment.

Nationwide rule contrasted with geographic targeting orders. In explaining the rule and the litigation, the court noted that FinCEN had previously used geographic targeting orders since 2016 to require certain title insurance companies to report non-financed purchases of residential real estate above specified price thresholds in selected metropolitan areas. Those orders were limited by geography and expired unless renewed. By contrast, the 2024 final rule required reporting of eligible non-financed transfers nationwide, with no minimum dollar threshold value. The August 2024 final rule required reporting persons to file what FinCEN described as a streamlined suspicious activity report for certain non-financed transfers of residential real property to legal entities and trusts, identifying the reporting person, the transferee entity or trust, its beneficial owners, the transferor, the property, and transaction details. FinCEN said the rule incorporated amendments intended to reduce burden, including a reasonable-reliance standard and a cascade system for determining primary filing responsibility. (Banking and Finance Law Daily, Aug. 28, 2024).

Remedy and related statements. Pacific Legal Foundation, which represents Flowers Title, said in a press release that the ruling vacates the rule nationwide. In the same release, PLF attorney Luke Wake said Congress limited FinCEN to regulating only objectively suspicious transactions and not to requiring reports simply because the government might find the data useful. The opinion also noted that another challenge to the rule had proceeded in the Middle District of Florida, where a magistrate judge recommended denying a plaintiff’s summary judgment motion and granting FinCEN’s cross-motion, and the district judge later adopted that recommendation.

Attorneys: Amy Peikoff (Pacific Legal Foundation) for Flowers Title Companies, LLC. Adrian Garcia, U.S. Attorney's Office, for Scott Bessent, U.S. Department of Treasury and The Financial Crimes Enforcement Network.

Companies: Flowers Title Companies, LLC; U.S. Department of Treasury; The Financial Crimes Enforcement Network

LitigationEnforcement: BankingOperations BankSecrecyAct CrimesOffenses GCNNews TexasNews