Advalis CEO speaks on expanded FinCEN compliance platform

Compliance software provider Advalis has launched a new version of its platform designed specifically for title companies, escrow officers and settlement agents facing the upcoming Financial Crimes Enforcement Network (FinCEN) Residential Real Estate Reporting Rule.

The rule, which takes effect Dec. 1, will require reports on certain all-cash real estate transactions — essentially expanding what used to be the localized geographic targeting order (GTO) filings into a nationwide mandate.

“We hired somebody who worked on the GTO reports on behalf of an underwriter, so they put this on our radar last year,” Advalis CEO Charles Wismer told HousingWire. “The more we looked at it, the more we realized it was a very similar filing process.

“So, we decided to take the same solution that we had in the law and accounting space and port it over here for the FinCEN filings for real estate.”

The new platform — called FincenRealEstateReport — builds on Advalis’ experience supporting attorneys and accountants with Beneficial Ownership Information (BOI) and Corporate Transparency Act (CTA) filings.

Wismer said the real estate rollout is the first expansion into the title sector.

Time savings explained

For settlement agents and title professionals, the new filings represent a major time burden.

Wismer explained that completing a report manually is an eight-step process that can take two and a half hours.

“You have to explain these reporting requirements, distribute and collect forms with 111 fields, answer questions, track deadlines before and after closing, follow up with all parties, then finally submit the report and store the record for five years,” Wismer said. “Submitting the form itself can take 20 to 25 minutes alone.

“Essentially, our mission is simple. We figured out how to automate this process, and we take it down to about five minutes.”

Wismer said the platform allows firms to scale quickly.

“If they don’t have a lot of closings, if they’re only doing one or two of these reports a month, it’s not the worst thing in the world,” he said. “But as it expands, it’s a very quick curve up in the amount of labor and staff time it consumes. Once they get to five to 10 reports, they need to look toward heavier automation.”

Client concerns, exemptions

With the rule’s effective date three months away, Wismer said clients are still adjusting.

“Most people, of course, don’t want to do it. Nobody’s a fan of more regulation,” he said. “As [we are] 90 days out, people are still hoping that things will go away and it’ll get rolled back or suspended. But it seems unlikely that’s going to happen.”

Reporting responsibility typically falls to the settlement agent, but Wismer said the platform helps clarify roles.

“Whoever’s in that top spot has to file the report, unless there’s a designation agreement that will bump it down to somebody else,” he said. “The big ones are the individuals or businesses listed as closing or settlement agent.

“If they are not there, then the professional who prepared the settlement statement, or the one who filed the deed [is designated]. Underwriters really don’t get in the spot much.”

Exemptions for the new rule are limited, Wismer added.

“Essentially, is it a residential property or land related to it? If it is, and any buyer is a legal entity or trust, and it’s completely non-financed, they have to report unless they have an exemption,” he said. “[Exemptions may include some] things [that are] super low-risk for money laundering like divorce, death transfers, bankruptcies — they are exempt because it would be unnecessary to report.”

Ready to go

In addition to the new real estate reporting requirement, Advalis’ platform already supports BOI filings and has capacity for foreign entity reporting, though Wismer described that space as “an unprecedented gray area” still under interim rules.

“FinCEN will publish the (Residential Real Estate Rule) PDFs as soon as they’re out of testing,” he said. “Last we heard, they’re in testing as of a few days ago. [Once they do that,] we’re ready to go.”

Advalis recently joined the American Land Title Association (ALTA) and will showcase the platform this fall at ALTA ONE in New York City.

“People like to know what it takes to do one of these reports,” Wismer said. “Our goal is to make sure the industry is ready — and to give them back the hours that this reporting would otherwise consume.”