Starting Wednesday, letting agents in the UK will face huge compliance changes as the government moves to tighten anti-money laundering (AML) regulations and financial sanctions reporting obligations.
These regulations coming into place on 14th May 2025 will require letting agents to verify the identity of tenants and landlords, check that they donโt appear on the UKโs financial sanctions list, report any suspected money laundering or suspicious financial activity and, most significantly, monitor and report all tenancy agreements regardless of rental value.
The latter is the most significant change, as currently, reports are only required where the monthly rent paid exceeds 10,000 EUR per month (ยฃ8,300).
The most recent government figures show that estate and letting agency businesses were fined to the tune of ยฃ3m in a single year as a result of 468 AML breaches, with the average (median) fine coming in at just over ยฃ4,000.
Christopher Hutchings, Head of Risk & Compliance at Creditsafe, commented, โThese new anti-money laundering rules represent an important shift in protecting landlords and the wider rental market. Until now, only the most expensive tenancies were under scrutiny, but criminal activity can occur at every price point, so broadening these checks is a smart and necessary move.
Whilst changes to vet every rental agreement created should, in theory, provide greater protection across the board, the huge increase in resource required to remain AML compliance could see many agents struggle and actually lead to an increase in AML fines issued.
Chris added โItโs important to recognise that many letting agents will face real challenges as they adjust. The scale of the change means compliance can no longer be an afterthought, it has to be embedded into everyday operations.
โTo navigate this transition smoothly and avoid steep fines, agents should review their current processes and introduce robust systems for identity verification and reporting. Investing in modern technology and specialist compliance support isnโt just a box-ticking exercise; itโs the best way to ensure they meet the new obligations and protect their businesses in the long term.โ
To help letting agents stay compliant and avoid potential penalties, Creditsafe have put together a guide outlining the changes and offering these key tips:
Screen individuals and entities
Screen all parties involved in the tenancy agreement including tenants, guarantors and landlords against the UKโs financial sanctions list which is maintained by the OFSI.
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.
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.
Leave a Comment