How to comply with new sanctions checks regulations

Sanctions and anti-money laundering (AML) compliance are important parts of tenant referencing. But despite being two distinct entities, they’re often conflated.

While AML laws aim to prevent money laundering in general, sanctions checks specifically focus on identifying individuals or entities subject to government-imposed restrictions, including financial penalties, asset freezes, and travel bans. The latter is the concept we’ll be discussing in this blog. 

At the moment, letting agents only need to conduct sanctions checks where monthly rents exceed €10,000 per month (approximately £8,300). However, from May 14 2025, this threshold will be removed, and agents will be subject to reporting obligations as “relevant firms” under financial sanctions laws. 

As a result, sanctions checks are mandatory for all prospective:

• Landlords - at the point of instruction
• Tenants - before concluding a letting agreement

Failure to comply can result in seven-figure fines or even criminal prosecution. Below, we’ll explore the implications of this change for letting agents, the process of conducting sanctions checks, and how you can comply without drowning in paperwork👇

• What is a sanctions check?
• Sanctions check changes: Implications for letting agents 
• How to manually conduct a sanctions check
• How to automate tenant sanctions checks with Goodlord
• Conclusion: Preparing for the changes

What is a sanctions check?

A sanctions check screens individuals, entities, and countries against Government-imposed sanctions lists. These lists include parties banned from doing business with or through certain jurisdictions, often due to involvement in criminal activities like terrorism, corruption and financial crime, drug trafficking, and human rights violations.

Sanctions can include but aren’t limited to:

• Freezing financial assets
• Banning real estate transactions
• Imposing restrictions on financial services and investments
• Introducing travel bans
• Removing or denying visas

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

Why are the changes to sanctions regulation happening?

Criminals often look to evade sanctions or create complex financial trails that are hard to trace. By removing the €10,000 per month threshold, the Government is closing a loophole and making sure that no sanctioned individuals can enter into rental agreements unnoticed. 

While this adds an extra compliance step for letting agents, it helps to protect your business from unknowingly getting involved in financial crime.

Sanctions check changes: Implications for letting agents

The expansion of sanctions check regulations will affect you in several ways:

More legal responsibility

Under the new regulations, you must report to OFSI if: 

• A client is a designated individual under sanctions laws
• There is evidence or reasonable suspicion of a sanctions breach
• You hold frozen assets
• Knowledge or suspicion came to you in the course of business

You also need to take prevent the rental agreement from being completed as OFSI doesn’t consider ignorance or negligence a defence. 

Hefty financial penalties

Failing to comply with the obligations can result in fines "which will be the greater of £1M or 50% of the value of breach", according to the Government.

For example, a London-based company was fined £1.4M for failing to conduct proper risk assessments, implement adequate anti-money laundering controls, and perform due diligence checks.

In 2024 alone, HMRC issued over £1.6M in fines to 254 estate agents for failing to register for AML supervision.

Administrative burden

Letting agents are already juggling a growing list of compliance requirements, from changes introduced by Renter’s Rights Bill (RRB) to shifting Energy Performance Certificate (EPC) regulations. The removal of the sanctions check threshold means you need to jump through another hoop to stay on the right side of the law.

How to manually conduct a sanctions check

Technically, you can conduct sanctions checks yourself. However, that process is manual, time-consuming, and prone to errors. The step-by-step process to conducting a sanctions check is as follows:

1. Access the UK sanctions list - the publicly available sanctions list includes individuals and entities subject to sanctions.
2. Manually search tenant names - input tenant details into the database to check for potential matches.
3. Verify matches - should a potential match be found, you need to investigate further. But, with no unique identifiers like date of birth, address, or unique ID, confirming matches can be challenging.
4. Contact OFSI - report to OFSI, even if you're sure about the match, and wait for their response.
5. Document the checks - keep detailed records of all the checklists to prove compliance in case of audits.

This approach to conducting sanctions checks has several major challenges — especially as new names are added to the list every day. Common names can also appear multiple times, making it nearly impossible to confirm the correct individual.

This risk of human error, combined with the fact that it takes weeks for OFSI to respond to requests, makes automation preferable, allowing you to avoid delays and extended void periods.

How to automate tenant sanctions checks with Goodlord

In response to the changing regulations, Goodlord will launch functionality that automates tenant sanction checks. Here’s how we can support you:

Comprehensive tenant referencing

Goodlord’s PRO referencing solution already performs a range of tenant and guarantor checks, including:

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

In the near future, tenant sanctions and AML checks will also be available to add to your referencing package.

Reliable identification of potential matches

Our system will cross-reference multiple data points, such as unique ID, date of birth, credit checks, and address, to ensure accurate identification. This reduces the risk of mistakenly flagging the wrong individual and the need to contact the OFSI for clarification.

Simplified compliance reporting

Goodlord will provide detailed and easy-to-understand compliance reports. These reports will help you stay on top of your obligations and provide the necessary documentation to demonstrate due diligence in case of an audit.

Reduced administrative burden

By automating tenant sanction checks, we’ll significantly reduce reduce the amount of admin on your team's plate. This will allow your teams to focus more on revenue-generating activities.

Timely and accurate updates

Sanctions lists are updated regularly, and staying current is crucial. Goodlord’s system will automatically update to reflect the latest changes, making sure that your checks are always up-to-date and compliant.

Hit the banner below to learn more👇

Conclusion: Preparing for the changes

Aside from investing in technology, you should follow these steps to ensure that you’re prepared for the new regulations:

Evaluate current practices

Identifying blindspots in your existing compliance processes is essential. This includes assessing how you currently conduct sanction checks, ensuring that your AML policies and procedures are up to date, and implementing any necessary improvements before May 14. 

Train staff

Regular staff training sessions will help your team:

• Identify potential risks and red flags in tenant applications
• Understand their legal obligations under financial sanctions laws
• Implement best practices for compliance, such as proper documentation and reporting procedures

Keep landlords informed

29% of landlords cited compliance as the main benefit of using an agent in Goodlord’s State of the Lettings Industry report, up by 12% from 2023. That’s why you need to notify them about the new regulations and explain the steps you’re taking to keep your agency's processes up to date. 

This article is intended as a guide only and does not constitute legal advice. For more information, visit gov.uk.