New Legislation: Financial Sanctions Checks for Letting Agents from 14 May 2025

From 14 May 2025, the UK government will enforce new legislation requiring letting agents to carry out financial sanctions checks on both landlords and tenants. This regulatory change is designed to improve transparency in the private rental sector and reduce the risk of financial crime, including money laundering and terrorism financing.

What Are Financial Sanctions Checks?

Financial sanctions are government-imposed restrictions that prevent individuals, companies, or organisations from accessing financial services or conducting certain economic activities. In the property sector, this means checking that landlords and tenants are not listed on the UK’s Consolidated List of Financial Sanctions Targets, which is maintained by the Office of Financial Sanctions Implementation (OFSI).

Letting agents must verify that no party involved in a tenancy is subject to these sanctions before proceeding with any property transaction.

New Legal Responsibilities for Letting Agents

Under the Sanctions and Anti-Money Laundering Act 2018, letting agents will be classified as “relevant firms”, meaning they must now comply with a set of financial crime prevention duties. These include:

1. Screening Landlords and Tenants

• Agents must check the identity of landlords upon instruction and tenants when a rental offer is accepted.

• All parties must be screened against the UK’s consolidated sanctions list before any tenancy agreements are signed or funds are transferred.

2. Reporting Obligations

If a letting agent knows or has reasonable cause to suspect that a person is a designated individual or holds frozen assets, they must report this to OFSI immediately. Failure to report could lead to significant penalties.

Why These Checks Are Critical for Letting Agents

Complying with financial sanctions legislation is essential for several key reasons:

Preventing Financial Crime

These checks help identify individuals or entities attempting to use property transactions to launder money or fund illegal activities, including terrorism.

Avoiding Legal and Financial Penalties

Letting agents that fail to conduct sanctions checks or submit reports to OFSI risk severe fines, regulatory sanctions, and reputational damage.

Promoting Transparency and Trust

Compliance contributes to a more secure and reliable lettings market, benefiting landlords, tenants, and agents alike.

How Letting Agents Can Prepare for the 14 May 2025 Deadline

To meet the new legal requirements, letting agents should act now to implement the necessary procedures:

1. Update Internal Compliance Processes

Incorporate sanctions screening into your onboarding workflows for both landlords and tenants.

2. Train Your Team

Ensure all staff members are aware of the new requirements and understand how to conduct and report sanctions checks properly.

3. Use Trusted Screening Tools

Consider using automated compliance software or databases that allow for real-time checks against the UK sanctions list.

4. Stay Informed with OFSI Guidance

Regularly review updates and guidance from OFSI to ensure your agency remains compliant with the latest regulations.

With the introduction of mandatory financial sanctions checks, the government is placing greater responsibility on letting agents to support the fight against financial crime. By integrating these checks into daily operations and staying informed, agents can ensure full compliance while maintaining trust with landlords and tenants.