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:
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👇
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:
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).
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.
The expansion of sanctions check regulations will affect you in several ways:
Under the new regulations, you must report to OFSI if:
You also need to take prevent the rental agreement from being completed as OFSI doesn’t consider ignorance or negligence a defence.
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.
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.
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:
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.
In response to the changing regulations, Goodlord will launch functionality that automates tenant sanction checks. Here’s how we can support you:
Goodlord’s PRO referencing solution already performs a range of tenant and guarantor checks, including:
In the near future, tenant sanctions and AML checks will also be available to add to your referencing package.
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.
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.
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.
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.
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Aside from investing in technology, you should follow these steps to ensure that you’re prepared for the new regulations:
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.
Regular staff training sessions will help your team:
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.