Are your AML compliance obligations watertight?

The property sector has long been a key target for financial crime, and in 2025, both estate and letting agents are under increasing pressure to strengthen their compliance measures – with regulatory changes set to make breaches more costly than ever.

What’s changing?

New regulations mean more agents will need to adopt stricter controls, particularly in relation to sanction risk assessments and due diligence procedures. And with a renewed focus on enforcement, regulators are expected to take a more aggressive approach to non-compliance, conducting more frequent audits and issuing higher fines.

Some of the key areas of change include:

New sanction requirements for letting agents 

Estate agents have long been required to conduct due diligence on buyers and sellers. However, as of 14 May this year, new reporting obligations will come into force, requiring letting agents to conduct far stricter checks. The rules apply to all letting agency work, regardless of the value of the rental agreement.

Under the new requirements, any letting agent instructed by a landlord or tenant will need to conduct sanctions checks, and must report to the Office of Financial

Sanctions Implementation (OFSI) as soon as possible if they know or reasonably suspect that:

• A person is a designated individual under financial sanctions.
• A person has breached financial sanctions regulations.

You can find out more about the new sanction requirements here.

Potential changes to AML threshold for letting agents  

Currently, the UK’s AML rules only apply to letting agents dealing with properties rented for €10,000 or more per month. This has allowed some agents to largely ignore AML if they don’t handle high-value tenancies.

The new financial sanctions reporting rules – which focus on identifying and reporting designated individuals or entities – are separate from the UK’s existing Anti-Money Laundering (AML) regulations. So, letting agents currently under the €10,000 threshold are still not required to register for AML supervision. However, there are rumours about potentially revising the current threshold1, and if this happens, letting agents could face far more stringent obligations and procedures.

Increased regulatory scrutiny on estate agents, and more significant penalties for non-compliance   

HMRC – the property sector’s AML supervisor – is expected to take a stricter stance on estate agents who fail to implement effective AML measures, with increased inspections and penalties.

The most recent figures published reveal that, in just three months, 144 sanctions were issued for AML breaches, with fines ranging from £1,250 to £52,000. In total, estate and letting agency businesses were fined £3 million last year due to 468 AML breaches.

Some industry experts predict estate agent fines for failing to meet AML obligations will increase, with HMRC making examples of firms that fail to meet their responsibilities.

Data shows that AML fines are rising. In a statement on its website, trade body Propertymark warned agents that “The penalties for non-compliance are significant and can have a lasting impact. Agents could face a prison sentence of up to two years or an unlimited fine.”

What do the changes mean for estate and letting agents?

For both estate and letting agents, these changes mean that AML compliance cannot be ignored. Firms must be proactive in assessing and mitigating their risks, ensuring their policies and procedures are fit for purpose. Key areas of focus should include:

• Ensuring your compliance framework is fully aligned with the latest regulatory expectations.

• Making sure all employees, whether in estate or letting agencies, are up to date with the relevant and latest AML and sanction reporting requirements.

• Regularly assessing exposure to financial crime risks.

• Maintaining proper documentation to demonstrate compliance with AML procedures and checks if audited.

The cost of getting it wrong

The increase in resources needed to ensure compliance with the sanction regulations could see some letting agents struggle and lead to an increase in AML fines for those not adequately prepared.

When it comes to wider AML compliance across the property sector, HMRC is shifting towards a ‘zero-tolerance’ approach. Agents that fail to meet their obligations could face significant fines, legal consequences, and potential reputational harm.

With stricter rules and higher fines on the horizon, the message is clear: compliance must be a priority. Failing to act now could result in costly consequences later.

If your firm needs support in strengthening its AML compliance, contact Legal Eye for expert advice to ensure you are fully prepared for the changes ahead.