Who actually files the FinCEN report on a cash close to an LLC?

Question

My coordination business touches maybe 14 non-financed entity purchases a year, and since the residential reporting rule came in every party at the table has decided it's someone else's job. The closing attorney on my last two files says the reporting person is determined by a cascade and that she'll take it on for $750 per transfer, plus $250 if there are more than two beneficial owners to collect. The title agent says her underwriter told her she's the reporting person by default and she'd rather designate it away. Nobody will put anything in writing until someone else does.

What I need to understand before I quote clients: is the cascade something the parties can reassign by agreement, and if it can be reassigned, does the party who signs the designation take on the record retention too? I'd rather build the fee into my file than eat $750 out of a $1,200 coordination fee, but I'm not willing to be the one holding the obligation if I'm the cheapest body in the room.

Rena Expert · Accepted Answer

The mechanism is a cascade of persons involved in the closing, and the rule contemplates that parties in the cascade can shift the obligation to another person in the cascade by written designation agreement. So both people at your table are describing real features of the same rule. The one who signs the designation is the one who owes the report and the associated recordkeeping, which runs for years after the transfer, not just through closing. That's the part your title agent is trying to get out from under, and she's right to think about it as an ongoing file obligation rather than a one-time form.

Two things about your economics. $750 per transfer against a $1,200 coordination fee only looks bad if you assume you're absorbing it. Entity buyers paying cash for residential property are not usually fee-sensitive at that level, and 14 files a year is a line item you can quote separately with the attorney's engagement letter attached. What you cannot do is take the designation yourself as a non-attorney and then perform the analysis of whether a given transfer is even reportable, because deciding whether an exemption applies to a particular trust or financed structure is legal judgment, and in several states doing that for a fee lands you in unauthorized practice territory. That's for your state bar to answer, and FinCEN has nothing to say about it.

The other cost worth pricing here is data handling. Collecting beneficial ownership identifiers means you're holding government ID numbers on a shared drive with retention obligations attached. Ask your E&O carrier in writing whether compliance work and that data are inside your policy, because general transaction coordination endorsements often aren't written for it. And confirm the current cascade language and effective dates with the attorney rather than a summary, including mine.

nataliehsu · Answer

The designation-holder-owes-the-retention point is the part I'd never have guessed. So the cheap way to look helpful is also the expensive way to sign up for five years of file custody.

derekj19 · Answer

I sat in on a closing where the attorney handled this and it added about 20 minutes of front-end work, mostly chasing the ID copies for two members who live overseas. The report itself wasn't the hard part. Getting documents out of a buyer who has already wired the money and considers himself finished was the hard part. If you're quoting a fee, thatch, price the chasing.

mikeoconnell7 · Answer

I've been trying to build a compliance add-on into my service menu and this thread is why I stopped. The moment my deliverable is "we determined this transfer was exempt" I'm doing something I'm not licensed to do in my state. What I can sell is document collection and delivery into the attorney's system, which is a $150 task, not a $750 one.

ryanmck27 · Answer

Does the reporting obligation land differently if the buyer is a trust rather than an LLC? My pre-license course spent about four sentences on FinCEN and none of them mentioned trusts.

tonyv88 · Answer

halyard, certain trust transfers are inside the scope, which is exactly the determination lantern is saying he can't make. That's a call for the attorney on the file.

thatch, unrelated but relevant to your fee: two of my owners bought through single member LLCs and their insurance carrier reissued the landlord policy at a higher premium once the named insured changed. Not your obligation, still ends up as your phone call.

tylerbrooks9 · Answer

Simplest version I can construct from this thread: let the attorney hold the obligation, bill it through at cost plus something for the chasing, keep no ID numbers on your own drive. Anything more clever than that seems to buy you liability instead of margin.

Who actually files the FinCEN report on a cash close to an LLC?

7 replies