Anti-Money Laundering Guide

Money laundering is defined in the Proceeds of Crime Act 2002 as '“the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin, so that they can be retained permanently or recycled into further criminal enterprises”.

Within the property sector this typically occurs through methods like:

• Buying up property using illegally obtained funds and then letting it out or selling it on;
• Setting up fake 'ghost' lettings where the property is left empty but rent is paid continuously.

Money laundering is a serious problem and across the world, Government's have been taking action to try and prevent it through various forms of anti-money laundering (AML) regulations. This includes the UK which introduced the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to try to combat money laundering. 

This legislation places duties on certain businesses which must be followed. Since 2020, some letting agents have been required to meet these duties - specifically those who also operate as estate agencies or let at least one property for the equivalent of of 10,000 euros per month. 

Until 2025, most letting agents have sat outside these regulations. However, as as of May 2025, all letting agencies are required to follow the rules around financial sanctions reporting regardless of the amount of rent paid per tenancy, or whether they engage in estate agency work. 

Financial sanctions are a crucial part of the fight against money laundering. This is where the Government financially sanctions people by restricting access to the assets they hold. At the time of writing over 19,000 people have assets frozen through these financial sanctions.

This guide sets out the responsibilities around financial sanctions that all letting agents have to be aware of, as well as the enhanced responsibilities that agents may need to follow. 

What is letting agency work?

You will be caught by one or two of AML requirements if your business engages in letting agency work.  

Lettings agency work is defined as work consisting of things done in response to instructions received from:

• A prospective landlord seeking to find another person to let their property to for longer than a month.
• A prospective tenant seeking to find a property to rent for a term of a month or more.

and is done:

• For a prospective landlord, from the point that they instruct the letting agent, or
• Otherwise in the process of concluding the agreement for the letting of the property for a month or more.

It does not include self-managing landlords who don't use third parties. However, if you are a landlord who contracts with an agent, you should expect to be checked to ensure you are not engaging in money laundering.

Anti-money laundering requirements for some agents

These regulations will only apply where your letting agency business:

• Also performs estate agency work
• Is contracted to perform 'letting agency work' for a tenancy where the rent will be at least 10,000 euros a month.

How to comply?

If either of these criteria are met then, senior management are required to:

• Register with HMRC at this link and complete any required training
• Appoint a nominated officer to report suspicious activity to the NCA
• Conduct a written risk assessment identifying how and where the business is vulnerable to money laundering, terrorist financing and proliferation financing. 
• Prepare a written policy on how the business will manage the risks of money laundering, terrorist financing and proliferation financing identified in the risk assessments
• Make sure that all staff are appropriately trained and equipped to implement the policies
• Have systems in place to perform proper due diligence checks on potential clients
• Devote enough resources to deal with money laundering, terrorist financing and proliferation financing.

The Government provides detailed guidance on how to comply with these various requirements. If you are senior management you should familiarise yourself with the requirements in detail. It is available here.

Due diligence on new clients

One of the key requirements you will have to follow as a letting agent is ensuring that you have performed your due diligence on any new clients, tenant or landlord, to ensure they are not engaging in money laundering. 

When checking tenants or guarantors, the check should be made at the referencing stage as it must be done prior to entering into a tenancy agreement. 

For landlords it's best to perform this during the onboarding process.

What are the potential penalties for non-compliance?

Penalties for this are severe and senior management are personally responsible for ensuring the business does not fall foul of these rules. 

You may face unlimited fines or a prison term of up to 2 years for failing to comply with these requirements. You may also face money laundering charges under the Proceeds of Crime Act.

As of 14 May 2025, Letting Agents are to be added to the list of "relevant firms" for the financial sanctions regulations.

This means that they are now a type of business that must report to the Office of Financial Sanctions Implementation (OFSI). 

A relevant firm is required to report to the OFSI as soon as practicable if it knows or has reasonable cause to suspect that:

• A person they are dealing with is a designated person; or
• A person they are dealing with has committed a breach of financial sanctions regulations.

Where a designated person is a customer of the firm, then you must also report to the OFSI the nature, amount or quantity of any funds or other economic resources you hold for the customer. This should be done at the point you first had any knowledge or suspicion of them being a designated person.

The OFSI has produced guidance for letting agents which may be worth reading in addition to the following advice.

How to carry out financial sanctions checks

For all prospective tenants and landlords, you should check them on the UK Financial Sanctions List:

• If you use a tenant referencing provider, you should confirm with them that this is being included in their tenant checks. The NRLA tenant referencing provides this service. 
• You should check landlords separately as part of your onboarding process. 
• Alternatively, you can manually search via the OFSI tool. There is a separate OFSI search tool which also includes a "fuzzy search" option if you are not sure on an exact spelling for an individual. It appears that both these searches do cover the same data and either should be usable.

However you carry out the check, make sure you have a record of doing it, even if there is no cause for concern.

When do I have to report to OFSI?

The reporting obligation kicks in at different points depending on which part of the process you are in with your prospective landlords and tenants.

It will apply:

• From the moment you do any letting agency work in response to instructions received from a prospective landlord. It is a good idea to include a declaration inside your terms of business that addresses this point or questions the landlord to volunteer any relevant information at this point.
• For tenants, you should check their identity early on as part of other checks like right to rent and so on. The obligation to report them to OFSI only kicks in when the landlord has begun the process of concluding an agreement, in other words at the point an offer has been accepted.

If you find that someone you are checking appears on the list you must:

• Immediately report this to the OFSI.
• Suspend business activity with them until you have permission from the OFSI to continue).

What type of work is not caught by the financial sanctions regulations?

Within the rules there are some types of work that are close to lettings agency work, but would not bring you within the scope of the sanctions rules.

These include things like tenant find services, local noticeboards or online platforms that allow for contact between landlords and tenants.

For instance, a newsagent who puts up a notice in their window at the request of a landlord to find a tenant would not be counted as doing letting agency work. There have been no 'instructions' from the prospective landlord to find them a tenant, they are simply putting up an advert.

Is there a monetary threshold for the financial sanctions regulations?

No. Unlike the money laundering regulations, these reporting obligations apply in relation to any letting agency work you do, regardless of the rental value.

Agents should continue to carry out these anti-money laundering checks under the MLRs where appropriate as they are not the exact same as the new financial sanctions reporting obligations.

Do I need to check my existing tenants and landlord clients?

You must continue to monitor a business relationship after it is established and for its duration. This would include performing customer due diligence on renewals.

What penalties are there for non-compliance?

Not following these rules can lead to serious penalties from OFSI or from HM Treasury.

Prison sentences have been handed out for the most serious breaches in the past.

The OFSI has a page showing some of its recent enforcement actions that have been taken.