The American Land Title Association has filed an amicus brief in support of Fidelity National Financial, which is suing the Treasury Department and the Financial Crimes Enforcement Network, looking to stop an anti-money laundering regulation reporting requirement.
The Biden Administration promulgated the rule, which is set to go into effect on Dec. 1.
FNF sued the department, the network, Treasury Secretary Scott Bessent and FinCEN Director Andrea Gacki in the U.S. District Court for the Middle District of Florida in Jacksonville.
What the new rule requires for real estate reporting
This rule requires filing reports with FinCEN on transactions involving cash transactions and legal entity buyers. These reports include beneficial ownership information of a legal entity property purchaser.
Holland & Knight, which prepared the brief for the association, cited FinCEN’s expectations that between 800,000 and 850,000 of these reports would be filed annually. ALTA estimates its members, which include title agencies as well as underwriters with direct operations like FNF, will have to file more than half of those reports.
FNF is the largest direct producer of title insurance through its various underwriting units. Its second quarter volume of open orders was more than double No. 2 First American’s at 366,000 versus 179,500, respectively.
What ALTA argues in its amicus brief filing
The brief, written by Holland & Knight partners Laura Renstrom and Peter Hardy, is in support of a motion for summary judgement for the title company.
It argues that “almost all title companies are considered ‘small businesses,'” and the rule places “substantial burdens” on its members.
ALTA cited FinCEN’s own estimated total additional costs of $45.3 million in the filing declaring that amount was understated compared with reality.
“Even accepting FinCEN’s estimates, these significant costs are overly burdensome, particularly when weighed against the Rule’s speculative benefits,” the filing declared. “Small businesses — the bulk of ALTA’s membership — are ill-equipped to absorb these additional costs and regulatory burdens, which will erode already thin profit margins.”
Other problems ALTA has with the rule
Furthermore, title companies do not verify the identity of the parties in the deal, except when documents are notarized to ensure the authenticity of signatures as required by state law.
They do not collect beneficial ownership information because these firms don’t need it to in order to underwrite a title insurance policy.
“Thus, ALTA’s members lack both experience with the Rule’s new processes and the power to obtain some of the information it requires,” the brief argued.
The filing later calls the part of the rule requiring beneficial-ownership interests reporting arbitrary because this data only gives the government marginal benefits even though “law-abiding, small businesses” like ALTA’s membership have to take on those costs.
In an update on the case docket, the court on Sept. 4 issued an order setting oral arguments for a preliminary injunction to take place on Sept. 30.
