New Sanctions Checking Regulations

New Sanctions Checking Regulations for Letting Agents in England (May 2025)

New AML Regulations will shortly apply, we detail the specific requirements on sanctions checking.

Introduction

From May 2025, UK letting agents will face stricter anti-money laundering (AML) regulations, including mandatory sanctions checks for all prospective landlords and tenants. Sanctions screening is no longer optional – letting agents must actively check whether individuals or entities appear on the UK Sanctions List and take immediate action if a match is found.

This guide explains what a sanctions check is, why it is essential, the penalties for non-compliance and the best practices for conducting sanctions checks effectively.

What is a Sanctions Check?

A sanctions check screens individuals, entities and countries against government-imposed sanctions lists. These lists identify parties banned from conducting business in the UK or with UK-based financial institutions due to their involvement in criminal activities, such as:

• Terrorism financing
• Money laundering
• Corruption and bribery
• Drug trafficking
• Human rights violations

Types of Sanctions

A person or entity subject to sanctions may face:

• Frozen financial assets – Preventing access to bank accounts or investments.
• Bans on real estate transactions – Restrictions on buying, selling or renting properties.
• Financial service restrictions – Blocking access to loans, insurance or financial products.
• Travel bans – Preventing sanctioned individuals from entering or leaving certain countries.
• Visa denials – Refusal of entry or residence permits.

For letting agents, this means checking if a prospective tenant or landlord appears on the UK Sanctions List and, if they do, immediately reporting them to the Office of Financial Sanctions Implementation (OFSI).

Why Are Sanctions Checks Important for Letting Agents?

Legal Obligation & Increased Liability

Under the new regulations effective May 2025, letting agents must report to OFSI if:

• A landlord or tenant is a designated individual under sanctions laws.
• There is reasonable suspicion of a sanctions breach.
• They are holding or managing frozen assets on behalf of a sanctioned person.

Failure to comply with these obligations is a criminal offence, and ignorance or negligence will not be a valid defence.

Hefty Financial Penalties

Non-compliance with sanctions regulations can result in significant fines. According to the UK Government, penalties can be whichever is greater: £1 million or 50% of the value of the breach.

Real-life Example:

A London-based money service provider, Xpress Money Services Ltd, was fined £1.4 million for failing to conduct adequate AML and due diligence checks. Additionally, in 2024, £1.6 million in fines was issued to estate agents for failing to register for AML supervision.

Reputational Damage & Business Risk

Letting agents who fail to comply risk:

• Regulatory scrutiny
• Loss of business license
• Negative press coverage
• Loss of client trust

Sanctions checks help letting agents avoid costly mistakes and protect their reputation by ensuring they do not facilitate illegal transactions.

How to Conduct a Sanctions Check

Step 1: Access the UK Sanctions List

The UK Government maintains a publicly available sanctions list, which is updated regularly.

Step 2: Search for Prospective Tenants or Landlords

• Input the name of the individual or business into the sanctions database.
• Check against international sanctions lists, including OFSI, UN, EU, and US OFAC sanctions lists, if necessary.

Step 3: Verify Matches

If you find a potential match, further verification is needed:

• Confirm personal details, including date of birth, address, nationality, and passport number.
• If there is any uncertainty, report the match to OFSI immediately.

Step 4: Report to OFSI

If you confirm a match, you must:

• Submit a report to OFSI via their reporting form.
• Immediately halt the transaction – renting property to a sanctioned individual is illegal.

Step 5: Keep Detailed Records

You must document all sanctions checks to prove compliance in case of an audit:

• Dates of checks performed
• Search results
• Verification steps taken
• Reports submitted to OFSI

Failure to keep records is itself a regulatory offence.

Manual vs. Automated Sanctions Checks

While manual checks can be performed, they are time-consuming, prone to errors, and require constant monitoring of sanctions lists. Many letting agents are now turning to automated solutions that streamline compliance.

Manual Sanctions Check Process

Pros: Free and accessible. Cons: Labour-intensive, risk of human error, difficult to verify identity.

Automated Sanctions Screening Tools

Pros:

• Instant cross-checking against multiple databases.
• Reduces risk of false positives.
• Provides real-time updates.

Cons: Requires a small investment in compliance software.

Automated solutions will soon be available as part of our comprehensive tenant referencing services, which include:

• Credit checks
• Residential history checks
• Income verification
• Right to rent checks
• Identity document validation

Automating sanctions checks ensures compliance while saving time and reducing risk.

Final Thoughts: Why Letting Agents Must Act Now

With the May 2025 deadline fast approaching, letting agents must prioritise sanctions screening as part of their AML compliance process. Ignoring these new regulations could lead to significant financial penalties, criminal liability, and business disruption.

Key Takeaways:

1. Sanctions checks will be mandatory from May 2025.
2. Non-compliance can result in fines of £1 million+ or business closure.
3. Sanctions checks should be performed for ALL landlords and tenants.
4. Automated screening solutions can simplify compliance.
5. OFSI must be notified immediately if a match is found.

Ensure your agency is prepared by integrating sanctions checks into your tenant referencing and AML compliance strategy today.

For more details you can visit:

• HMRC AML Guidance
• UK Sanctions List
• HMRC AML Supervision
• National Crime Agency (NCA) SAR Guidance
• Propertymark AML Guidance

Need Help With AML Compliance?

If you need support in implementing AML compliance systems, contact Smart lettings or seek professional advice to ensure your fully prepared by May 2025.