An industry supplier is advising letting agents to adopt proactive measures ahead of new rules on sanctions reporting. 

From May 14 this year letting agents must conduct sanctions checks on clients, following the UK government’s extension of sanctions reporting obligations under the Sanctions and Anti-Money Laundering Act 2018.

Letting agencies will now be classified as ‘Relevant Firms’, meaning they must notify the Office for Sanctions Implementation (OFSI) if they know or suspect a breach of sanctions has occurred, if a person is a designated person, if it holds frozen assets, and if that knowledge or suspicion arose during the business.

Ahead of the new regulations, Propertymark is warning that letting agents must understand the regulations and adapt their working practices and systems accordingly. Failure to comply may result in substantial fines or even criminal prosecution. 

The trade body says letting agents must undertake sanctions checking on all landlords and tenants. If a guarantor is to pay rent directly or engage with the agent or landlord during the tenancy, they must also be checked.

The OFSI publishes a consolidated list of sanctions targets. A separate list of persons subject to specific financial and investment restrictions under the Russian sanction regime is also available, so letting agents can use it to check everyone they are undertaking sanctions checks on.

An agent must formally report to OFSI if they have proof or reasonable suspicions that a client is a designated person; or a designated person has breached their sanctions; or a designated person intends to breach their sanctions.

Now due diligence service Thirdfort advises agents to bear the new sanctions rules in mind and refine onboarding and monitoring processes, establish clear internal reporting procedures, and provide staff with comprehensive training on sanctions compliance. Implementing strong screening processes for tenants and landlords, staying up to date with sanctions lists, and keeping detailed records will help ensure compliance.

It says red flags to consider include clients exhibiting aggressive behaviour, unexplained name changes, the involvement of third parties, or individuals whose details match those on the OFSI consolidated list.