Anti-money laundering (AML) regulation changes. A guide for letting agents.

4 Mins
  1. Home
  2. Content Hub
  3. Compliance
  4. AML Regulatory Changes for Letting Agents
Chapter 1

Introduction

Letting agents, alongside high-value dealers, art market participants, insolvency practitioners and crypto-asset service providers (CASPs) will soon face new reporting regulations as the government is set to add them to the list of ‘relevant firms’, under the Anti-Money Laundering (AML) laws and financial sanctions reporting obligations.

Chapter 1

Overview of legislative changes

New regulations will be mandatory from 14th May 2025 and extend to all letting agency work, regardless of the rental value. This marks a significant step forward in the approach to combating financial crime in the UK property sector.

With an estimated £100bn or more being laundered annually through the UK or UK corporate structures, these latest changes are intended to close existing regulatory loopholes by compelling the industry to adopt a more proactive approach to identifying and preventing money laundering activities.

With that in mind, the upcoming legislative changes show a more inclusive effort to raise security standards to protect the sector from illegal financial activities. Alongside a recent flurry of new bills from the new government aimed at improving the standards and security for renters, the new regulations place greater responsibility on letting agents to implement and uphold measures.

Chapter 1

Core obligations

Although AML rules already exist within the letting market, they have predominantly focused on landlords. Letting agents, unlike estate agents, handle and distribute money, which heightens the risk of money laundering. From May 2025, letting agents are required to comply with financial sanctions regulations, with key requirements including: 

 

  1. Reporting to the Office of Financial Sanctions Implementation (OFSI):

    You must report any knowledge or suspicion that a person or entity is subject to current financial sanctions.

  1. Timely reporting:

    Ensuring all reports are made “as soon as possible” after identifying a potential breach.

  1. Records:

    Maintain a detailed record of all compliance-related activities for a minimum of five years

  1. Risk assessment:

    Letting agents must perform adequate risk assessments to identify high-risk transactions, individuals or entities.

  1. Identity verification:

    The identification of individuals or entities mentioned in the tenancy agreement must be verified using official documentation or digital solutions.

  1. Financial sanctions checks:

    Perform financial sanctions checks on all prospective tenants mentioned in the tenancy agreement.

Chapter 1

Who must comply?

Unlike previous AML regulations which were capped to high-value rental properties which exceeded £120,000 annually, the new rules remove this threshold. This means that all letting agency work is covered, irrespective of the property value will be subject to reporting on AML and financial sanctions obligations including:

  • All letting agents managing residential property lettings, regardless of the rental value.
  • New regulations encompass tenants, guarantors and landlords, both residential and commercial.

With the previous high-end let threshold, many letting agents will not have been performing customer due diligence (CDD) as now required under money laundering regulations. With new regulations approaching, letting agents now need to prepare and ensure they are up to speed and best placed to meet the requirements. 

 

Chapter 1

What are financial sanctions?

Financial sanctions are restrictions imposed by the UK or UN (United Nations) to achieve a specific foreign policy objective or national security objective. By restricting access to funds and resources by individuals or entities involved in illegal activities, such as terrorism, money laundering or other financial-related crimes, sanctions restrict the ability of parties to operate illegal activities within the financial system of the state.

  • Freezing assets: Governments may freeze the assets held by a person or entity in a state’s jurisdiction to prevent them from accessing or transferring their funds.
  • Restrictions on financial services: Measures imposed to limit the ability of sanctioned individuals or entities to engage in financial services such as investments, loans and transactions within, or across borders.

Today, as a result of countries around the world experiencing high levels of sophisticated financial-related crime, most countries have adopted a more or less standardised approach to KYC, leaving no room for regional specifics. This globalised approach is key in preventing illegal financial activities and ensuring that those involved are denied access to the global financial system. 

 

Chapter 1

Penalties for non-compliance

With the latest regulatory changes requiring all letting agents to meet money laundering and financial sanctions reporting, failure to comply can result in significant penalties, including unlimited fines and other enforcement measures.

Penalties for non-compliance include:

 

  1. Substantial fines:

    Failure to comply with money laundering and financial sanctions regulations can result in unlimited fines being issued.

  1. Reputational damage:

    Letting agents that fail to comply with regulations can see their reputation severely damaged, potentially leading to a loss of trust and even custom from clients or stakeholders.

  1. Criminal charges:

    Letting agents that intentionally or wilfully breach regulations face criminal charges of up to 5 years in prison or even liquidation of the business.

Chapter 1

Steps to comply

To ensure compliance with the new regulations, letting agents must implement several key processes and procedures, including:

Screen individuals and entities

Screen all parties involved in the tenancy agreement including tenants, guarantors and landlords against the UK’s financial sanctions list which is maintained by the OFSI.

Freezing transactions

Any transactions that are suspicious or linked to a sanctioned individual should be immediately frozen and reported to the OFSI.

Rescreening

Continue to re-screen individuals and entities throughout the tenancy agreement to monitor for any changes in their sanction’s status. 

Implement financial sanctions checks

Letting agents are required to perform financial sanctions checks on all parties involved in tenancy agreements, including tenants, guarantors, and landlords. To ensure these checks are thorough and accurate, it's essential to use up-to-date databases or digital platforms to identify any restrictions or sanctions.

Verify the identity of all arties

Verify the identity of tenants, landlords and any other relevant parties using official documents such as passports, driving licenses or utility bills through digital identity verification tools.

Perform risk assessments

Perform comprehensive risk assessments to identify any high-risk transactions, individuals or entities. These risk assessments should include establishing the purpose of the tenancy, the financial background of the parties on the tenancy and exploring any potential links to money laundering activities or financial crime.

Reporting to the OFSI

If you or any staff member come across any positive matches or suspicions arise during checks, they should be reported to the OFSI immediately.  

Maintain detailed records

A record of all compliance activities should be kept for a minimum of five years for auditing purposes. This includes any documentation related to identity verification, financial sanctions checks and any risk assessments.

Regular staff training

Provide regular training to all staff members to help them identify money laundering risks, perform robust financial sanctions checks and fully understand their legal obligations under the latest regulations.

Chapter 1

How AMLCERT supports letting agents & property firms

Navigating AML and financial sanctions can be challenging, especially for businesses relying on manual processes. AMLCERT simplifies tenant and landlord checks with a fast, secure online solution, allowing instant remote verification while ensuring the highest data security standards.

 

  1. Right to Rent Checks

    Check a tenant's Right To Rent status in just a few clicks with our certified solution.

  2. AML Checks

    Verify your client's identity and check the latest PEPs/ Sanctions lists.

  3. Identity Verification

    Verify identity documents like passports and driving licences with biometric matching, ensuring authenticity and reducing fraud risk.

  4. KYC Checks

    Run extensive background checks on clients including sanctions and adverse media.

Ready to streamline your client onboarding and compliance?

Speak to us today to get started with free access to the AMLCERT platform.

You may also like...

Right to Rent checks

Reduce the risk of compromised tenancy agreements with automated ID.

Find out more

ID Verification

Verify identities with enhanced KYC compliance checks.

Find out more

AML Checks

Ensure regulatory compliance with comprehensive AML Checks.

Find out more