The changes are designed to improve transparency and reduce financial crime in the lettings sector. The new rules will add extra steps to agents’ compliance processes; taking proactive measures now can help avoid the risk of increased fines and ensure full compliance.
What is changing for letting agents?
A firm or sole practitioner that carries out, or whose employees carry out, letting agency work will be known as ‘Relevant Firms’, which means they will have specific duties under the Sanctions and Anti-Money Laundering Act 2018.
Previously, only estate agents were required to complete sanctions checks and report to the Office for Sanctions Implementation (OFSI). This legal duty will now extend to all letting agents.
What are financial sanctions?
Sanctions such as freezing financial assets or limiting access to investment and financial services are applied by the UK and the United Nations to individuals or a legal entity, such as a business. These restrictions will prevent the spread of financial crime, terrorism, and other undesirable behaviour.
If an individual or entity is subject to sanctions, they are known as a designated person.
The Office of Financial Sanctions Implementation (OFSI) is part of HM Treasury and handles enforcing financial sanctions in the UK.
Read the OFSI general guidance on financial sanctions →
What must letting agents do?
Letting agents must undertake sanctions checking on all landlords and tenants. If a guarantor is to pay rent directly or engage with the agent or landlord during the tenancy, they must also be checked.
The OFSI publishes a consolidated list of sanctions targets. A separate list of persons subject to specific financial and investment restrictions under the Russian sanction regime is also available, so letting agents can use it to check everyone they are undertaking sanctions checks on.
An agent must formally report to OFSI if they have proof or reasonable suspicions that
- A client is a designated person
- A designated person has breached their sanctions
- A designated person intends to breach their sanctions
Read the OFSI financial sanctions guidance for letting agents →
While all letting agents are expected to report to OFSI if a property transaction involves a designated person, they are not required to register with HMRC for money laundering supervision if they do not rent any property with a monthly rent that is the equivalent of 10,000 Euros.
As best practice, Propertymark recommends that agents who do not fall under HMRC supervision submit a Suspicious Activity Report to the National Crime Agency if their customer due diligence uncovers that there could be a money laundering risk involved with the property transaction.
How to prepare for the regulations
Letting agents should review their due diligence procedures and update their processes to align with the new sanctions reporting requirements. In practice, this means:
- Reviewing client screening procedures. Ensure that you are checking against up-to-date sanctions lists.
- Enhancing record-keeping. Verify that systems capture all necessary information and that records are easily accessible.
- Train staff. Ensure everyone involved in client onboarding is fully aware of the new obligations and the importance of prompt reporting.
How to report to OFSI
Agents must make a report as soon as possible once they know or suspect a client is a designated person or that a designated person has breached, or is trying to breach, their sanctions.
Reports should be sent to OFSI using the Compliance Reporting Form.
For reporting Russian assets, agents should fill in the Immobilised Assets Reporting Document.
Completed forms must be emailed to [email protected] with a subject line stating if it is about a suspected designated person or frozen assets.
In the body of the email, agents should include the information or evidence for their knowledge or suspicion about the designated person and any information they hold which could be used to check the identity of the designated person.
If the designated person is a client, a summary of the funds or economic resources the agent holds for that customer must be provided.
Read the OFSI guidance on reporting information to them →
Propertymark support
To help members understand and stay fully compliant with the new regulations, we have created a fact sheet that provides a concise overview of the sanctions reporting obligations and what agents must do.
Members can get unlimited help and advice from the Propertymark helpline. Our trained specialists support agents with legal questions, general business practice and new legislation.
The Propertymark Members Facebook group provides a forum for discussion and collaboration across processes, training and anything that members need to help resolve day-to-day issues and share best practices.
Fact sheet: UK sanctions reporting obligations
Under the Sanctions and Anti-Money Laundering Act 2018, the UK Government introduced a new regime of issuing financial sanctions following the UK’s departure from the European Union. Under the Act, businesses specified in the Act have to report to the OFSI if they suspect they are engaging with a client who is under financial sanctions.
