Starting 14 May 2025, letting agents must make a formal report if they have evidence or reasonable suspicion that a landlord or tenant has violated financial sanctions regulations. The rules apply to all letting agency work, regardless of the value of the rental agreement.  

 To help them prepare, the Office of Financial Sanctions Implementation (OFSI), a division of HM Treasury responsible for enforcing financial sanctions in the UK, has released new guidance for letting agents. 

What do letting agents need to know?

The UK uses financial sanctions to support its foreign policy and national security objectives. To help it do this, specific individuals, businesses, and organisations must follow strict rules, such as meeting reporting requirements, freezing assets, and avoiding prohibited dealings with sanctioned individuals or entities. 

Certain businesses, referred to as “relevant firms,” are subject to mandatory reporting obligations under the financial sanctions regulations. And, to encourage better compliance, from 14 May 2025, letting agents will be added to the list of relevant firms and subject to these reporting obligations. Non-compliance with the new rules could lead to fines and prosecution.  

What this means for letting agents

Under the new financial sanctions rules:  

• Any letting agent instructed by a landlord or tenant will need to conduct sanctions checks. 

• Agents must report to 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. 

• Agents must also provide the information or reason behind the knowledge or suspicion. 

• If the designated person is a customer, the letting agent/agency must also report: 

• The type and amount of funds or resources it holds for the customer at the time of the knowledge or suspicion. 

However, agents need only report the information to OFSI if the knowledge or suspicion arises during the course of their “letting agency work”. For example, if an employee learns something in a personal capacity, the reporting obligation does not apply. 

Information on how to make a report can be found here.  

There is a narrow exception. If you simply advertise properties and enable private sellers to communicate (e.g. via a newspaper or online property portal), the new rules may not apply to you. Likewise the rules only apply when letting a property for a month or more. However, if you are unsure of your status under the law, it is better to check. 

The new sanction rules and the anti-money laundering supervision rules  

Understanding the distinction between the new financial sanctions reporting rules and existing Anti-Money Laundering (AML) regulations is crucial for letting agents.  

• AML rules: Target money laundering risks, requiring checks and reporting for high-value transactions that could conceal illicit funds. 

• New financial sanctions rules: Focus on ensuring compliance with financial sanctions, including identifying and reporting designated individuals or entities and preventing prohibited transactions. 

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. However, this is about to change, as there will be no financial threshold for sanctions reporting. 

While most property professionals accept the new reporting requirements will help reduce the risk of rental properties being used by criminals to clean dirty money, the difference in rules/thresholds is causing some confusion. This inconsistency could lead to misunderstandings or unintended non-compliance. 

How Legal Eye can help  

Navigating the complexities of AML and financial sanctions regulations can be challenging. At Legal Eye, we offer expert guidance to help estate and letting agents stay on top of their obligations. Contact us today for:  

• Advice and practical solutions tailored to your business needs, ensuring you meet the latest reporting requirements. 

• Staff training to equip your team with the knowledge they need to understand and fulfil their obligations. 

• Tools and support to identify and manage risks related to financial sanctions and wider AML compliance. 

Contacts us to learn more about how we can help you stay compliant, avoid penalties, and protect your business reputation.