Letting agents and sanctions compliance: new legal duties from May 2025

From 14th May 2025, letting agents operating in both the commercial and residential sectors will be required to comply with new legal duties under the UK’s financial sanctions regime. These obligations apply in addition to existing responsibilities under the Money Laundering Regulations and significantly broaden the regulatory framework in which letting agents operate.

Application of the New Obligations

These changes apply to all letting agents involved in letting agency work, regardless of the value or term of the letting arrangement. From the date the changes come into force, letting agents will be considered “relevant firms” under the UK sanctions regime and will be subject to mandatory reporting obligationsR

Existing Anti-Money Laundering Requirements

Letting agents are currently required to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 where the letting of land is for a term of one month or more and the rent is at least €10,000 per month (approximately £8,600). These regulations require letting agents to carry out a written risk assessment, implement policies and controls, appoint a nominated officer, conduct customer due diligence and register with HMRC. These duties apply only where the letting arrangement meets or exceeds the specified threshold.

Changes Introduced from 14 May 2025

From 14 May 2025, letting agents will also be required to report to the Office of Financial Sanctions Implementation (OFSI) where they know, or have reasonable cause to suspect, that a person is a designated person or has breached financial sanctions legislation. This duty applies to all letting agency work, not only high-value arrangements.

The reporting obligation arises only where the information giving rise to the suspicion is obtained in the course of acting as a letting agent. Unlike the Money Laundering Regulations, the duty is not limited by rent value or duration of the letting.

Points at Which the Duty Arises

For letting agents acting on behalf of a prospective landlord, the obligation applies from the point of instruction. If the agent knows or suspects that the landlord is a designated person or has breached financial sanctions, a report must be made. The duty also arises where, during the course of acting for the landlord, the agent becomes aware of relevant concerns in relation to a prospective tenant, either once an offer is accepted or when an agreement is being concluded.

For agents acting on behalf of a prospective tenant, the obligation applies once the landlord has accepted the tenant’s offer, and the parties are in the process of finalising the letting agreement. At this stage, the agent must report if they know or suspect that either party is a designated person or has committed a breach of sanctions legislation.

Contents of a Sanctions Report

Where a report is required, the letting agent must include:

• The basis of the knowledge or suspicion
• Any identifying details about the designated person that the agent holds
• If applicable, the nature and amount of any funds or economic resources held for that person

Steps Required to Prepare for Compliance

Letting agents are not required to amend their existing approach to anti-money laundering compliance, but they must now update internal processes to reflect the additional reporting duties under the Sanctions Regime. Appropriate steps include:

• Ensuring that sanctions checks are conducted for all prospective landlords and tenants
• Implementing a clear internal process for identifying risks and submitting reports to OFSI
• Training relevant staff on their obligations and the process for escalation and reporting

Letting agents who also carry out estate agency work may already have some of these systems in place. However, it is essential that procedures are reviewed to confirm that they fully address the specific responsibilities associated with letting agency work.