With less than a month to go until the UK Office of Financial Sanctions Implementation (OFSI) expands the list of relevant firms to include letting agents, what exactly does this mean?

Under the Sanctions and Anti-Money Laundering Act 2018, it is illegal to deal with sanctioned individuals or entities unless authorised by the government. While there is often confusion between anti-money laundering (AML) regulations and sanctions, it’s important to understand the distinction: AML regulations apply only to certain business activities, whereas sanctions obligations apply much more broadly—to businesses and individuals alike.

To address this ongoing confusion, the OFSI is extending its oversight to include letting agents, alongside existing relevant firms such as estate agents, financial institutions, currency exchanges, accountants, and casinos. Other sectors being added include high-value dealers, art market participants, and insolvency practitioners.

So, what does this mean for letting agents?

Being designated a “relevant firm” means letting agents are now subject to enhanced reporting obligations such as the duty to respond to OFSI Requests for Information. In a recent example, three charities were publicly criticised for failing to respond to such a request. While no financial penalties were issued, they were named and shamed, potentially damaging their reputations. One key lesson for letting firms is the importance of ensuring accurate and up-to-date contact information is available on official platforms such as Companies House and that these channels are actively monitored.

Failure to comply with sanctions can be very costly and we don’t need to look for a relevant case. Late last year, Integral Concierge Services Limited (ICSL), a small UK-registered property management company, was fined £15,000 for dealing with funds from a designated person without the appropriate licence. The offence related to 26 transactions made in 2022 and 2023 as part of its property management services. ICSL had continued to manage a property owned by a sanctioned individual and received £15,487.30 in fees. The company mistakenly believed that the obligation was only to avoid sending money to the sanctioned person, not receiving it. The OFSI disagreed.

What should letting agents do to comply?

Many agents are now asking: Do we need to monitor clients on an ongoing basis? Should we screen guarantors? Unfortunately, current guidance and extended FAQs offer little clarity. What is clear, however, is that letting agents are expected to take reasonable steps to understand their exposure to sanctions risks and to know who they are dealing with. Importantly, agents must not accept funds or, send to a sanctioned individuals regardless of their association with the firm.

To align with the new requirements, letting agents should act now:

Review and Update Client Screening Procedures
Ensure all clients are screened against the most up-to-date sanctions lists at appropriate stages of the letting process. Unlike AML rules, which apply only to high-value tenancies (over £10,000 monthly rent), sanctions rules have no minimum threshold. All lettings, regardless of value, are subject to these requirements.

Verify ownership and Identity
When letting or managing a property on behalf of another, ensure that you have fully verified all parties set to the benefit from such arrangement including their identity. For individuals you could check the land registry for such information or if you’re dealing with a corporation you will need to determine the UBO.

Enhance Record-Keeping
Maintain thorough records of all due diligence activities, including identification documents and evidence of sanctions screenings.

Train Your Staff
Provide comprehensive training to all staff involved in client onboarding and transaction processing. Everyone must understand the new obligations and the importance of timely reporting.

Report Promptly to OFSI
If you identify a potential breach or have suspicions, report it immediately using the OFSI’s reporting form. Be sure to include all relevant client and transaction details.

The changes coming into effect in May 2025 represent a significant regulatory shift for the letting industry. Proactive compliance will not only protect your firm but also support the UK’s broader effort to combat financial crime. Letting agents should act now to update policies, train teams, and be fully prepared for what’s ahead.

Our specialist letting solution can help you verify who you’re working with and whether they appear on any official sanctions. To learn more visit www.credas.com/lettings/