Anti-Money Laundering Compliance

1. Overview of AML in Real Estate

Money laundering in real estate involves the use of property transactions to disguise the origins of criminally derived funds. Real estate has long been considered an attractive vehicle for money laundering because of its high transaction values, the ability to use shell companies and trusts to obscure beneficial ownership, the perception of stable asset appreciation, and the historically limited regulatory oversight compared to the banking sector.

Common money laundering techniques in real estate include purchasing properties with cash or cash equivalents through legal entities that conceal the true beneficial owner, artificially inflating or deflating property values to move money between parties, rapidly buying and selling properties ("flipping") to layer illicit funds, using complex ownership structures involving multiple LLCs, trusts, and offshore entities to obscure the source of funds, and commingling legitimate rental income with illicit proceeds.

The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, has been expanding its regulatory framework to address these risks. FinCEN's efforts include Geographic Targeting Orders (GTOs), the Anti-Money Laundering Act of 2020, the Corporate Transparency Act, and the Residential Real Estate Rule finalized in 2024. Together, these measures represent the most significant expansion of AML obligations in the real estate sector in decades.

2. FinCEN's Residential Real Estate Rule

On August 28, 2024, FinCEN published its final rule titled "Anti-Money Laundering Regulations for Residential Real Estate Transfers" (31 CFR Part 1031), which became effective on March 1, 2026. This rule represents a landmark expansion of AML requirements in the residential real estate sector.

2.1 Scope and Applicability

The Residential Real Estate Rule requires certain persons involved in real estate closings and settlements — referred to as "reporting persons" — to report information about non-financed transfers of residential real property to legal entities or trusts. Specifically, the rule applies to:

• Covered transfers: Any transfer of residential real property to a legal entity (such as an LLC, corporation, partnership, or similar structure) or a trust, where no bank loan or similar financing from a financial institution secures the transfer. This includes all-cash purchases, seller-financed transactions, and transfers funded by cryptocurrency or other non-traditional means.
• Reporting persons: The person who is designated as the "reporting person" under the rule is generally the settlement agent, closing attorney, title company, or other person responsible for conducting the closing or settlement of the real estate transaction. The rule establishes a "cascade" to determine who bears the reporting obligation when multiple parties are involved in the closing process.
• Reportable information: The reporting person must file a report with FinCEN that includes the identity of the transferee entity or trust, the beneficial owners of that entity or trust, the property address and description, the consideration paid, and other transaction details.

2.2 Reporting Requirements

Under the rule, reporting persons must file reports with FinCEN within 30 days of the closing or settlement date. The reports must include:

• Full legal name and taxpayer identification number (TIN) of the transferee entity or trust
• Names, dates of birth, addresses, and identification numbers of all beneficial owners (individuals owning 25% or more, or exercising substantial control)
• The property address, legal description, and type of residential property
• The total consideration paid or to be paid for the transfer
• The date of the transfer and the nature of the consideration (cash, cryptocurrency, seller financing, etc.)
• Information about the reporting person filing the report

2.3 Purpose and Rationale

FinCEN has stated that non-financed transfers to legal entities and trusts represent the highest risk for money laundering in the residential real estate sector, because these transactions bypass the existing AML checks performed by mortgage lenders and other financial institutions. By requiring reporting on these transfers, FinCEN aims to close a significant gap in the U.S. AML framework and provide law enforcement with critical information to detect and investigate money laundering, sanctions evasion, tax fraud, and other financial crimes involving real estate.

2.4 Penalties for Non-Compliance

Reporting persons who fail to comply with the Residential Real Estate Rule may face significant civil and criminal penalties under the Bank Secrecy Act, including fines of up to $50,000 per violation and imprisonment for willful violations. FinCEN may also pursue injunctive relief and other remedies.

3. Geographic Targeting Orders (GTOs)

Since 2016, FinCEN has issued and periodically renewed Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used to purchase residential real estate in all-cash transactions above certain thresholds. These GTOs have been instrumental in revealing the scope of money laundering through real estate and served as a precursor to the permanent Residential Real Estate Rule.

3.1 Current GTO Coverage

As of the most recent renewal, the GTOs cover metropolitan areas in the following jurisdictions:

• California: Los Angeles, San Diego, San Francisco, San Mateo, and Santa Clara counties
• Connecticut: Fairfield County
• Florida: Miami-Dade, Broward, and Palm Beach counties
• Hawaii: Honolulu County
• Illinois: Cook County
• Maryland: Montgomery County
• Massachusetts: Suffolk and Middlesex counties
• Nevada: Clark County
• New Jersey: Hudson, Monmouth, and Ocean counties
• New York: All five boroughs of New York City, plus Westchester County
• Pennsylvania: Philadelphia County
• Texas: Bexar, Dallas, Harris, and Tarrant counties
• Virginia: Arlington and Fairfax counties, Alexandria and Falls Church cities
• Washington: King County

3.2 GTO Thresholds and Requirements

The current GTOs require title insurance companies to report all-cash purchases of residential real estate by legal entities when the purchase price meets or exceeds $300,000. The GTO reports must identify the beneficial owners of the purchasing entity, the property details, and the source of funds. Title insurance companies that fail to comply with GTO requirements face penalties under the Bank Secrecy Act.

3.3 Relationship to the Residential Real Estate Rule

With the Residential Real Estate Rule now effective, the GTOs and the new rule operate in parallel. The Residential Real Estate Rule is broader in geographic scope (nationwide) and applies to transfers to trusts in addition to legal entities. FinCEN has indicated that it will evaluate the continued necessity of the GTOs as the new rule is implemented, but for now both regimes remain in effect.

4. Varden's Role and Regulatory Position

While Varden is not a reporting person under the Residential Real Estate Rule, we recognize our responsibility as a participant in the real estate ecosystem. Accordingly, Varden has adopted the following posture:

• Full cooperation with law enforcement: Varden cooperates fully with FinCEN, the FBI, the IRS Criminal Investigation Division, and all other federal, state, and local law enforcement agencies investigating money laundering, terrorist financing, sanctions evasion, or other financial crimes involving real estate transactions conducted or facilitated through our platform.
• Voluntary suspicious activity monitoring: Although we are not required to file Suspicious Activity Reports (SARs), we voluntarily monitor for patterns of activity on our platform that may indicate money laundering, structuring, or other illicit financial activity, and we report such patterns to the appropriate authorities.
• User education: We provide information and resources to help our users understand their own AML obligations, including their obligations under the Residential Real Estate Rule, the GTOs, and state-level AML requirements.
• Record keeping: We maintain comprehensive records of user activity, property listings, communications, and transactions conducted through our platform, and we make these records available to law enforcement upon valid legal process (subpoena, court order, or search warrant).
• Platform integrity: We prohibit the use of our platform for any purpose that violates anti-money laundering laws, and we reserve the right to suspend or terminate accounts that we believe are being used for illicit purposes.

5. Prohibited Activities

Users may not use the Varden platform to:

• Launder money: Conduct or attempt to conduct real estate transactions for the purpose of concealing, disguising, or integrating the proceeds of criminal activity, in violation of 18 U.S.C. § 1956 (Money Laundering) or 18 U.S.C. § 1957 (Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity).
• Structure transactions: Break up transactions or use multiple accounts, entities, or trusts to avoid triggering reporting thresholds under the Bank Secrecy Act, the Residential Real Estate Rule, or the GTOs.
• Finance terrorism: Use real estate transactions to raise, move, store, or distribute funds intended to support terrorist organizations, terrorist activities, or individuals designated by the Office of Foreign Assets Control (OFAC), in violation of 18 U.S.C. § 2339A, § 2339B, or § 2339C.
• Evade sanctions: Conduct transactions involving persons, entities, or countries subject to U.S. economic sanctions administered by OFAC, including Specially Designated Nationals (SDNs) and persons on the Sectoral Sanctions Identifications (SSI) List.
• Commit tax evasion: Use real estate transactions, inflated or deflated valuations, or complex ownership structures to evade federal, state, or local tax obligations.
• Engage in fraud: Use the platform to conduct fraudulent transactions, including mortgage fraud, appraisal fraud, straw buyer schemes, property flipping schemes designed to artificially inflate values, or any other scheme to defraud buyers, sellers, lenders, or the government.
• Conceal beneficial ownership: Use shell companies, nominee arrangements, layered entity structures, or other mechanisms to conceal the true beneficial owner of a property in order to circumvent AML laws, sanctions, or other legal requirements.

6. Know Your Customer (KYC) Measures

Varden implements the following KYC measures to verify the identity of our users and mitigate the risk of our platform being used for illicit purposes:

6.1 Identity Verification

• Government-issued ID verification: Users who list properties for sale or rent, or who engage in financial transactions through our platform, are required to verify their identity by submitting a valid government-issued photo identification document (driver's license, passport, or state ID card). We use Stripe Identity to verify the authenticity of submitted documents and match the photo to a live selfie.
• Selfie verification: In conjunction with document verification, users must complete a live selfie check to confirm that the person submitting the identification document is the same person creating the account.
• Address verification: We verify user addresses through document verification, utility bill confirmation, or other means appropriate to the user's role on the platform.
• Name matching: For landlords and property sellers, we perform name matching between the identity verification documents and property ownership records to confirm that the person listing a property has a legitimate ownership interest.

6.2 Account Verification

• Email verification: All users must verify their email address before accessing platform features.
• Phone verification: Users engaging in transactions or communications are required to verify a valid phone number.
• Financial account verification: Users receiving payments through the platform (landlords, property sellers) must complete Stripe Connect onboarding, which includes additional identity verification, bank account verification, and tax identification number validation.

6.3 Enhanced Due Diligence

For transactions or accounts that present elevated risk indicators, Varden may conduct enhanced due diligence, including:

• Requesting additional documentation to verify the source of funds
• Verifying the beneficial ownership of legal entities listing or purchasing properties
• Conducting OFAC sanctions screening against the SDN List and other sanctions lists
• Reviewing public records for adverse media, regulatory actions, or criminal history
• Requiring in-person or video verification for high-value transactions

6.4 Ongoing Monitoring

KYC is not a one-time process. We conduct ongoing monitoring of user accounts and platform activity, including:

• Periodic re-verification of user identity documents (at least annually for active accounts)
• Monitoring for unusual transaction patterns or listing activity
• Screening against updated sanctions lists and law enforcement databases
• Reviewing accounts flagged by our automated risk detection systems

7. Reporting Suspicious Activity

Varden takes all reports of suspicious activity seriously. If you encounter or suspect any of the following on our platform, you should report it immediately:

• A user who appears to be using shell companies or trusts to conceal their identity
• Transactions that appear to involve proceeds of criminal activity
• Unusually rapid buying and selling of properties at prices that do not reflect market value
• Users who are reluctant to provide identification or who provide false or inconsistent information
• Transactions structured to avoid reporting thresholds
• Users who appear on sanctions lists or who are associated with sanctioned countries or entities
• Listings that appear designed to facilitate money laundering or fraud
• Any other activity that appears inconsistent with the legitimate use of a real estate platform

7.1 How to Report

7.2 Whistleblower Protections

Varden will not retaliate against any user, employee, or contractor who reports suspected money laundering, terrorist financing, sanctions violations, or other illicit financial activity in good faith. Federal law provides additional protections for whistleblowers under the AML Act of 2020 (31 U.S.C. § 5323), which establishes a formal whistleblower program administered by FinCEN with monetary awards of up to 30% of sanctions collected in successful enforcement actions exceeding $1,000,000.

8. User Obligations

By using the Varden platform, you acknowledge and agree to the following obligations:

• Compliance with AML laws: You must comply with all applicable federal, state, and local anti-money laundering laws and regulations, including but not limited to the Bank Secrecy Act (31 U.S.C. § 5311 et seq.), the USA PATRIOT Act, the Anti-Money Laundering Act of 2020, and FinCEN's implementing regulations.
• No illicit use: You must not use the Varden platform to conduct, facilitate, or attempt to conduct any transaction involving the proceeds of criminal activity, or to launder money, structure transactions, finance terrorism, or evade economic sanctions.
• Accurate information: You must provide accurate and complete information in connection with your account registration, identity verification, property listings, and all transactions conducted through the platform. Providing false, misleading, or incomplete information is a violation of this policy and may constitute a federal crime.
• Cooperation with verification: You must cooperate with Varden's identity verification, KYC, and enhanced due diligence processes. Failure or refusal to provide requested documentation may result in account suspension or termination.
• Reporting obligations: If you become aware of suspicious activity involving another user on the platform, you are encouraged to report it to Varden and, where appropriate, to law enforcement or FinCEN.
• Sanctions compliance: You represent and warrant that you are not a Specially Designated National (SDN), that you are not acting on behalf of any SDN or sanctioned entity, and that you are not located in or ordinarily resident in any country or territory subject to comprehensive U.S. economic sanctions (currently Cuba, Iran, North Korea, Syria, and the Crimea, Donetsk, and Luhansk regions of Ukraine).
• Beneficial ownership disclosure: If you are listing, purchasing, or renting property through a legal entity (LLC, corporation, partnership, trust, or similar structure), you must disclose the beneficial owners of that entity upon request by Varden.

9. Transactions Involving Legal Entities or Trusts

9.1 Additional Requirements for Entity Transactions

Users who list, purchase, or rent property on Varden through a legal entity or trust may be subject to the following additional requirements:

• Entity verification: Varden may require documentation establishing the legal existence of the entity (articles of organization, certificate of incorporation, trust agreement, etc.) and identifying its beneficial owners.
• Beneficial ownership disclosure: Users acting on behalf of a legal entity or trust must identify all individuals who own 25% or more of the entity, or who exercise substantial control over the entity, consistent with FinCEN's beneficial ownership requirements under the Corporate Transparency Act (31 U.S.C. § 5336).
• Corporate Transparency Act (CTA) compliance: As of January 1, 2025, most legal entities created in or registered to do business in the United States are required to file beneficial ownership information (BOI) reports with FinCEN. Users transacting through legal entities on our platform should ensure that their entities are in compliance with CTA filing requirements.
• OFAC screening: Varden screens the names and identifying information of legal entities and their disclosed beneficial owners against OFAC's SDN List and other applicable sanctions lists.

9.2 Trust Transactions

Transactions involving trusts present unique AML considerations because trusts may not have the same public registration requirements as corporations and LLCs. For trust-based transactions on our platform, Varden may request:

• The name and type of the trust (revocable, irrevocable, land trust, etc.)
• The identity of the trustee(s) and successor trustee(s)
• The identity of the settlor/grantor
• The identity of all beneficiaries with a vested interest in the trust
• A certification of trust or relevant excerpts of the trust agreement

10. Bank Secrecy Act (BSA) Compliance

The Bank Secrecy Act (BSA), as amended by the USA PATRIOT Act, the Anti-Money Laundering Act of 2020, and other legislation, is the primary federal anti-money laundering statute in the United States. The BSA requires financial institutions and, increasingly, participants in the real estate sector to assist government agencies in detecting and preventing money laundering, terrorist financing, and other financial crimes.

10.1 BSA Framework

Key components of the BSA framework relevant to real estate include:

• Currency Transaction Reports (CTRs): Financial institutions must file CTRs for cash transactions exceeding $10,000. While Varden does not process cash transactions, users should be aware that banks, credit unions, and other financial institutions involved in funding real estate transactions are required to file CTRs and may inquire about the source and purpose of large cash deposits.
• Suspicious Activity Reports (SARs): Financial institutions must file SARs when they detect transactions that appear suspicious, unusual, or potentially indicative of money laundering, terrorist financing, or other criminal activity. SARs are filed confidentially with FinCEN and are a critical tool for law enforcement.
• Customer Due Diligence (CDD): Financial institutions are required to implement CDD programs that include identifying and verifying the identity of customers, identifying beneficial owners of legal entity customers, understanding the nature and purpose of customer relationships, and conducting ongoing monitoring for suspicious activity.
• Recordkeeping requirements: The BSA imposes extensive recordkeeping requirements on financial institutions, including maintaining records of transactions, customer identification information, and compliance program documentation.

10.2 Varden's BSA-Aligned Practices

Although Varden is not currently classified as a "financial institution" under the BSA, we voluntarily align our compliance practices with BSA principles. This includes maintaining a risk-based compliance program, conducting customer identification and verification, monitoring for suspicious activity, maintaining comprehensive records, and cooperating with law enforcement and regulatory agencies. We recognize that the regulatory landscape is evolving and that additional obligations may be imposed on real estate platforms in the future.

11. Currency Transaction Reporting Awareness

Users of the Varden platform should be aware of federal currency transaction reporting requirements that may apply to their real estate activities, even though these reporting obligations fall on financial institutions rather than on Varden or its users directly.

11.1 Cash Transaction Thresholds

Under the BSA, financial institutions (banks, credit unions, money services businesses) must file a Currency Transaction Report (CTR) with FinCEN for any cash transaction or series of related cash transactions exceeding $10,000 in a single business day. "Cash" includes currency (paper money and coins), cashier's checks, money orders, bank drafts, and traveler's checks when used as a medium of exchange.

11.2 Anti-Structuring Rules

It is a federal crime (31 U.S.C. § 5324) to "structure" transactions — that is, to break up a transaction into smaller amounts, or to conduct transactions in a specific pattern, for the purpose of evading CTR filing requirements. Structuring is illegal regardless of whether the underlying funds are legitimate. For example, depositing $9,500 on two consecutive days to avoid a $10,000 CTR filing constitutes structuring and is punishable by fines and imprisonment.

Users of the Varden platform must not structure transactions, deposits, or payments related to real estate transactions for the purpose of evading any reporting requirement. Varden will report any evidence of structuring to the appropriate authorities.

11.3 IRS Form 8300

In addition to CTRs filed by financial institutions, any person (including real estate professionals and property sellers) who receives more than $10,000 in cash in a single transaction or in related transactions must file IRS Form 8300 (Report of Cash Payments Over $10,000 Received in a Trade or Business) within 15 days. Users who receive large cash payments in connection with real estate transactions should consult with a tax professional or attorney to determine their Form 8300 filing obligations.

12. Cooperation with Law Enforcement

Varden maintains a strong commitment to cooperating with law enforcement agencies at all levels in the investigation and prosecution of money laundering, terrorist financing, sanctions evasion, fraud, and other financial crimes.

12.1 Legal Process Response

Varden will respond to valid legal process, including:

• Subpoenas: Grand jury subpoenas, administrative subpoenas, and civil subpoenas for records
• Court orders: Court orders directing the production of records or testimony
• Search warrants: Warrants issued by a court upon a showing of probable cause
• National Security Letters (NSLs): NSLs issued by the FBI for counter-terrorism and counter-intelligence investigations
• FISA orders: Orders issued under the Foreign Intelligence Surveillance Act

12.2 Voluntary Disclosures

In addition to responding to legal process, Varden may voluntarily disclose information to law enforcement when we have a good-faith belief that such disclosure is necessary to prevent or mitigate imminent harm, to report suspected criminal activity, or to protect the safety of our users and the public. Voluntary disclosures are made in compliance with applicable privacy laws and our Privacy Policy.

12.3 FinCEN Coordination

Varden maintains open channels of communication with FinCEN and participates in information-sharing initiatives, including FinCEN's public-private partnership programs, to stay informed about emerging money laundering trends and typologies in the real estate sector.

12.4 International Cooperation

Where real estate transactions on our platform have an international dimension, Varden cooperates with international law enforcement agencies and regulatory bodies through appropriate legal channels, including mutual legal assistance treaties (MLATs) and other intergovernmental agreements.

13. Record Retention

Varden maintains comprehensive records related to user accounts, identity verification, property listings, transactions, and communications conducted through our platform. These records are retained in accordance with the following schedule:

• Identity verification records: Retained for a minimum of seven (7) years after the closure of the user's account, consistent with BSA recordkeeping requirements for customer identification programs (31 CFR § 1010.312).
• Transaction records: Retained for a minimum of seven (7) yearsfrom the date of the transaction, consistent with BSA recordkeeping requirements (31 CFR § 1010.310).
• Property listing records: Retained for a minimum of seven (7) years from the date the listing is removed or expires.
• Communication records: Messages, inquiries, and other communications between users conducted through the platform are retained for a minimum of seven (7) years.
• Suspicious activity records: Records related to suspicious activity reports, investigations, and law enforcement inquiries are retained for a minimum of seven (7) years, or longer if required by law or the circumstances of the investigation.
• Compliance program records: Policies, procedures, training records, and audit reports related to our AML compliance program are retained for a minimum of seven (7) years.

Records are stored securely using encryption at rest and in transit, with access controls limiting access to authorized personnel. Records may be retained in electronic form. Varden will preserve records beyond the standard retention period when required to do so by law, regulation, legal hold, or in connection with pending or anticipated litigation or government investigation.

14. Policy Updates and Training

This AML Compliance Policy is reviewed and updated at least annually, or more frequently as needed in response to changes in law, regulation, FinCEN guidance, or emerging risks in the real estate sector. Material changes will be communicated to users through our platform and by updating the "Last updated" date at the top of this page.

Varden employees and contractors who interact with users, review listings, or handle compliance functions receive regular AML training covering applicable laws and regulations, red flags and indicators of money laundering in real estate, our internal policies and procedures, suspicious activity identification and escalation procedures, and sanctions screening and OFAC compliance.

15. Contact Us

For questions about this AML Compliance Policy, to report suspicious activity, or to request additional information about our compliance program: