NEW REGULATIONS - UK SANCTIONS CHECKS
On 14 May 2025, a new regulation came into effect. It obliges all lettings agents – regardless of size – to carry out a ‘sanctions check’ before taking an instruction from a landlord or before signing a letting agreement with a prospective tenant.
The Government’s Office for Financial Sanctions Implementation (OFSI) writes that:
“Certain types of business are subject to reporting obligations as “relevant firms” under financial sanctions regulations. … From 14 May 2025, letting agents will be subject to these reporting obligations as they will be added to the list of “relevant firms” under financial sanctions regulations.”
The new rule is intended to tighten controls over individuals, businesses and even nations that the UK deems to be a risk. It provides an extra safeguard against money-laundering, but it is also designed to curtail the actions of those who may be linked to organised crime, the financing of terrorism, misappropriation of assets, human rights abuses, national security threats and state-level corruption.
The official UK Sanctions List can be seen here on the Gov.UK website. However, lettings agents should also carry out checks against international sanctions lists.
Prior to 14 May, such checks had been a requirement only where a property’s rental value exceeded €10,000 per month. However, the Government has recognised that criminals have employed increasingly complex financial schemes to avoid detection and to evade sanctions. By removing the €10,000 monthly income threshold, it has sought to shut down such efforts and ensure that fraudsters are subject to due scrutiny.
Reporting
The new regulations dictate that letting agents must inform OFSI immediately if any of the following apply:
· The landlord/tenant is named on the UK Sanctions List
· There is evidence – or a reasonable suspicion – of a breach of sanctions
· The agent has taken control of a frozen asset
Detection and Actions
If a letting agent finds that a prospective tenant or landlord is named on the Sanctions List, the agent must take immediate steps, as follows:
· Freeze any assets or property held on behalf of the named individual/entity;
· Report the discovery immediately to OFSI;
· Maintain a written record of the checks, their results, and any actions taken.
Technically, these regulations only apply to “prospective” tenants and landlords, so those who are subject to existing contracts need not be checked. However, OFSI recommends making such checks, not least as a means of demonstrating proper risk assessment and mitigation.
Legal Penalties
There are stiff penalties for lettings agents that fail to comply with the new law. Government states that failure can result in fines of £1 million or 50% of the value of breach, whichever is the greater. Ignorance of the law will not be accepted as a defence.
Implications for Investors
Although the new legal obligations relate to lettings agents, the change in the law does have some implications for landlords and investors. First, it means that they can now expect to come under more scrutiny by agents before a contract can be signed. This will primarily be to confirm the investor’s identity and their formal ownership of the property. That, of course, could precipitate some small delay.
Second, landlords must accept that their lettings agent will now be obliged to perform an extra check on prospective tenants before a rental agreement can be signed. This should ideally be conducted at the same time as a conventional reference-check but, again, it could lead to a small delay.
Most landlords and investors should otherwise remain unaffected.
For further information, please refer to the “UK financial sanctions general guidance” section of the Gov.UK website, which was last updated in March 2025. Specific governmental advice for lettings agents can be found here.
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