Changes to anti-money laundering regulations for letting agents could see more fines as firms struggle to keep up with the changes, it has been warned. 

As of 14 May, new financial sanctions reporting obligations will come into force requiring letting agents to conduct far stricter AML checks.

 Agents will need to verify the identity of tenants and landlords, check that they don’t appear on the UK’s financial sanctions list, report any suspected money laundering or suspicious financial activity and, most significantly, monitor and report all tenancy agreements regardless of rental value.

The latter is the most significant change, as currently, reports are only required where the monthly rent paid exceeds 10,000 EUR per month (£8,300).

Analysis of current rental market listings by AML platform FCC Paragon shows that, across the UK, just an estimated 2.5% of all rental listings currently boast a monthly asking rent of 10,000 EUR (£8,300) or more, demonstrating the huge increase in red tape that could come as a result of the latest changes to AML reporting requirements.

It comes as estate and letting agency businesses were fined £3m last year as a result of 468 AML breaches, with the average (median) fine coming in at just over £4,000.

The huge increase in resource required to remain AML compliance could see many agents struggle and actually lead to an increase in AML fines issued, FCC Paragon warns.

 Its managing director Bekki Leaves, said: “The changes to anti-money laundering protocols are, for the large part, a positive that should provide a far greater degree of protection to landlords at all levels of the market.

“There’s no doubt that illegal practices aren’t refined to properties with asking rents of 10,000 EUR or more and so greater protections at all levels of the market should help to crack down on criminal activity.

“However, there’s a good chance that AML fines could climb, at least initially, as letting agents struggle to get to grips with the huge increase in the resources required to stay AML compliant.

“It’s vital that they take a proactive approach if they want to avoid what can be hefty fines and the best place to start is to assess their onboarding and monitoring processes, whilst establishing clear reporting channels.”