Financial Sanctions Guidance

From 14 May 2025, letting agents will be subject to reporting obligations as part of the UK Goverments financial sanctions regime.

These are new rules in addition to existing anti-money laundering rules that agents may be familiar with which have been in place for a number of years.

Financial sanctions are a measure used by the Government to meet its foreign policy and national security aims.

They can include restrictions on designated persons and can involve freezing their financial assets, or wider restrictions on the person's ability to use financial services or make investments.

They might be imposed to:

• Convince another country, or individuals within it, to change their behaviour.
• Constrain resources on someone committing offences such as financing of terrorism or nuclear proliferation.
• To signal disapproval of a regime or individual or as a way to send a political message.
• To protect assets that have been misappropriated from a country in order to return them later.

Importantly, these sanctions apply to a designated person at any time they are in the territory of the UK, or for UK persons, wherever they are in the world.

As of 14 May 2025, Letting Agents are to be added to the list of "relevant firms" for the financial sanctions regulations.

This means that they are now a type of business that must report to the Office of Financial Sanctions Implementation (OFSI). 

A relevant firm is required to report to the OFSI as soon as practicable if it knows or has reasonable cause to suspect that:

• A person they are dealing with is a designated person; or
• A person they are dealing with has committed a breach of financial sanctions regulations.

Where a designated person is a customer of the firm, then you must also report to the OFSI the nature, amount or quantity of any funds or other economic resources you hold for the customer. This should be done at the point you first had any knowledge or suspicion of them being a designated person.

The OFSI has produced guidance for letting agents which may be worth reading in addition to the following advice.

Whilst you are likely familiar with what counts as letting agency work, it is worth taking a look at what the financial sanctions regulations define it as.

Lettings agency work is work consisting of things done in response to instructions received from:

• A prospective landlord seeking to find another person to let their property to for longer than a month.
• A prospective tenant seeking to find a property to rent for a term of a month or more.

and is done:

• For a prospective landlord, from the point that they instruct the letting agent, or
• Otherwise in the process of concluding the agreement for the letting of the property for a month or more.

Part of the definition is that the work is done in response to "instructions" from a prospective landlord or tenant. These are defined as the prospective landlord or tenant formally engaging or authorising you as a letting agent to act on their behalf to go and find a property to rent out, or someone to rent your property to. They are not treated in an everyday sense of the word, like simply asking someone to do something.

You are only required to report the information to the OFSI if it came to you in the course of carrying on your business, as the rules define that letting agency work can only be carried out by a firm or sole practicioner. If you found out that someone might be a designated person in your personal capacity rather than in your role as a letting agent, you wouldn't need to report it.

For all prospective tenants and landlords, you should check them on the UK Financial Sanctions List:

• You can use the OFSI search tool for doing this. There is a separate OFSI search tool which also includes a "fuzzy search" option if you are not sure on an exact spelling for an individual. It appears that both these searches do cover the same data and either should be usable.
• If you use a tenant referencing provider, you should confirm with them that this is being included in their tenant checks.
• You should check landlords separately as part of your onboarding process

However you carry out the check, make sure you have a record of doing it, even if there is no cause for concern.

The reporting obligation kicks in at different points depending on which part of the process you are in with your prospective landlords and tenants.

It will apply:

• From the moment you do any letting agency work in response to instructions received from a prospective landlord. It is a good idea to include a declaration inside your terms of business that addresses this point or questions the landlord to volunteer any relevant information at this point.
• For tenants, you should check their identity early on as part of other checks like right to rent and so on. The obligation to report them to OFSI only kicks in when the landlord has begun the process of concluding an agreement, in other words at the point an offer has been accepted.

If you find that someone you are checking appears on the list you must:

• Immediately report this to the OFSI.
• Suspend business activity with them until you have permission from the OFSI to continue).

Within the rules there are some types of work that are close to lettings agency work, but would not bring you within the scope of the sanctions rules.

These include things like tenant find services, local noticeboards or online platforms that allow for contact between landlords and tenants.

For instance, a newsagent who puts up a notice in their window at the request of a landlord to find a tenant would not be counted as doing letting agency work. There have been no 'instructions' from the prospective landlord to find them a tenant, they are simply putting up an advert.

No. These reporting obligaitons will apply in relation to any letting agency work you do, regardless of the rental value.

There are existing rules that have existing under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, more concisely known as the MLRs, where letting agency work only relates to rental values of 10,000 euros or more.

Agents should continue to carry out these anti-money laundering checks under the MLRs where appropriate as they are not the exact same as the new financial sanctions reporting obligations.

AML checks may flag some potential tenants or landlords as a politically exposed person (PEP). It is not illegal to deal with PEPs and you can continue to let to them without reporting them, but you do require further due dilligence.

The guidance indicates that you absolutely must carry out the relevant checks for prospective landlords and tenants when you have received instructions from them and are at certain points throughout the lettings process.

Whilst existing landlords and tenants would not fit into this definition, as they are already your clients, it may be sensible to eventually check them over time to ensure your compliance. One suitable time may be at the end of tenancy where a new agreement is concluded.

Not following these rules can lead to serious penalties from OFSI or from HM Treasury.

Prison sentences have been handed out for the most serious breaches in the past.

The OFSI has a page showing some of its recent enforcement actions that have been taken.