The UK’s financial sanctions framework for the property sector is transforming. From 14 May 2025, letting agents will be required to monitor and report financial sanctions breaches for all rental and commercial property transactions, removing any ambiguity around reporting obligations.
This marks a major shift in compliance responsibilities, putting the sector under increased scrutiny from regulators. Although ambiguous before, agents can no longer claim ignorance, and sanctions compliance will be strictly enforced.
Letting agents must now ensure that they have the right processes to identify and report sanctions breaches related to landlords, tenants, and any parties involved in a transaction. Failure to comply could lead to severe financial and reputational risks. However, many agencies still rely on outdated verification methods that may struggle to meet these new requirements.
So, how can letting agents prepare for this regulatory change and ensure they remain compliant without disrupting operations?
Reporting just got more crucial
Previously, only estate agents were designated as relevant firms and had enhanced requirements to conduct sanctions checks and report to the Office for Financial Sanctions Implementation (OFSI). However, this legal duty will extend to all letting agents.
To conduct these checks, agents can use the OFSI's consolidated list of sanctioned individuals and entities. This includes a separate list of individuals subject to specific financial and investment restrictions under the Russian sanctions regime. Identifying a sanctioned individual, known as a 'designated person', triggers further responsibilities.
This increased responsibility puts greater emphasis on agents to maintain clear processes for identifying and reporting sanctioned individuals, ensuring they meet their legal obligations. Those who fail to comply risk fines, regulatory action, or other penalties.
How to implement robust processes to stay compliant
To meet the upcoming compliance requirements, letting agents must strengthen their onboarding and monitoring procedures. Effective processes should combine clear identity verification, thorough sanctions screening, and reliable record-keeping.
Verifying the identity of landlords, tenants, and guarantors is the first critical step. Agents should request official documents such as passports, driving licences, or utility bills to confirm identities and addresses. For corporate landlords or tenants, verifying the company’s structure and identifying key individuals, such as beneficial owners or persons with significant control, is equally important.
Once verified, all parties involved in the transaction must be screened against the OFSI consolidated list. Since this list is regularly updated, agents must ensure they are always working from the latest version. Screening should include not only landlords and tenants but also any guarantors involved in payments or communication.
Record-keeping is another essential element. Agents should securely document each stage of the process, including identification checks, screening results, and any concerns raised. Clear audit trails demonstrate compliance and provide vital evidence in the event of an inspection.
Just as important is staff training. Teams must understand their responsibilities under the new regulations, including how to conduct effective checks and escalate concerns if necessary. But onboarding alone isn’t enough – ongoing monitoring is crucial. If a tenant’s circumstances change, such as a new guarantor stepping in or a tenant switching to direct rent payments, agents must conduct fresh checks to remain compliant.
By combining these steps, letting agents can establish a robust framework that ensures compliance without disrupting day-to-day operations.
The role of technology in streamlining compliance
Technology can play a vital role in helping letting agents manage these new compliance duties efficiently. Automated screening tools can instantly cross-reference client information against sanctions lists, reducing the risk of human error. These tools also simplify ongoing monitoring by automatically flagging changes in an individual's status throughout a tenancy.
Digital identity verification tools can further enhance compliance by enabling fast and secure ID checks using biometric scanning, facial recognition, and document authentication. This not only improves accuracy but also helps agents identify fraudulent documents more effectively.
Integrating these tools with identity verification technology can streamline workflows by combining client data, screening results, and audit trails in one place. This integration improves accuracy and makes it easier for agents to demonstrate compliance if inspected.
With the May 2025 deadline fast approaching, taking proactive steps today will help agencies avoid disruption, safeguard their reputation, and meet their legal obligations with confidence.
