New Anti-Money Laundering (AML) Regulations For Letting Agents Explained

In light of recent regulatory updates, all UK letting agents are now subject to enhanced anti-money laundering (AML) compliance requirements. Benjamin Davies, Director in the Property Litigation team at JCP Solicitors, explains letting agents’ new responsibilities and how to implement best practices to stay compliant.

Mandatory AML and Sanctions Checks

Letting agents must now conduct thorough due diligence on all individuals and entities involved in a tenancy, including landlords, tenants, and any guarantors. This includes:

• Verifying the identity of each party involved.
• Screening all parties against the UK Government's Consolidated List of Financial Sanctions Targets.

If a party is found or suspected to be on this list, letting agents must immediately report it to the Office of Financial Sanctions Implementation (OFSI) and suspend all related transactions.

Scope of Application: No More £10,000 Threshold

Previously, anti-money laundering checks only applied to high-value lettings, typically where the monthly rent exceeded £10,000. This threshold has now been removed.

This means that AML and sanctions checks are mandatory for all rental transactions, regardless of rent amount. Every letting agent must now treat even modest rentals as subject to full compliance.

Understanding the Verification Process

Letting agents must follow a thorough verification procedure for each party involved in a tenancy agreement:

1. Identity Verification

• Collect official photo ID, such as a valid passport or UK driving licence.
• Confirm that the document is current and legitimate, with a visible photo and no signs of tampering.

2. Proof of Address

• Obtain recent utility bills, bank statements, or council tax bills.
• Ensure the address matches that on the ID and is consistent with tenancy documents.

3. Ownership Confirmation

For landlords, verify ownership of the property through official documentation such as Land Registry records, mortgage statements, or title deeds.

Sanctions Screening

Use up-to-date databases to screen each individual against the UK’s sanctions list. If a match is found or suspected, letting agents should not proceed with the transaction and should report it to OFSI without delay.

Record-Keeping Obligations

All anti-money laundering and sanctions checks, including copies of documents and details of any decisions or actions taken, must be kept securely for at least five years. This serves both as an audit trail and evidence of compliance in the event of an investigation or inspection by HMRC or other regulatory bodies.

Specific Responsibilities by Role

Landlords:

• Must complete AML checks before their property can be marketed.
• Are required to provide valid ID, proof of address, and property ownership documentation.

Tenants (Contract-Holders):

• Must undergo ID and address verification during the application process.

Guarantors:

• If a guarantor is involved, they must be subject to the same verification and sanctions screening as the tenant.

Consequences of Non-Compliance

Failing to comply with these regulations can have serious ramifications, including financial penalties ranging from £1,500 - £50,000 as well as risk of criminal prosecution. There is also an operational risk, as letting agents could be barred from legally operating if they fail to comply.

How to Ensure Compliance

Integrate checks into onboarding for both landlords and tenants, as this avoids delays and reduced compliance risk later in the tenancy cycle. You should also use trusted AML tools to automate checks and flag high-risk individuals.

Training your staff fully can help them to recognise potential red flags – such as reluctance to provide information – and understand correct procedures.

Finally, regular policy reviews will keep your team compliant. Regulations evolve, and you should always update your internal policies to reflect current laws and best practices.

If you are dealing with a tenancy issue, get in touch with the team at JCP Solicitors for practical advice and assistance. Whatever the circumstances, our Property Dispute Solicitors will be able to guide you through the process and take the necessary action to protect your position. Please call our team on 03333 208644 or email hello@jcpsolicitors.co.uk.