Warning as letting agents face ‘financial sanctions’ rules next year
The move will be confusing for agents some of whom will be covered by AML rules but all must comply with new financial sanction rules, says Nathan Emerson.
New rules mean financial sanctions reporting obligations for the rental sector will apply to all letting agency work regardless of any rental agreement’s value.
Financial sanctions include restrictions on named people including freezing their financial assets and wider restrictions on investment and financial services. Financial sanctions apply to all persons of anyt nationality within the UK but also UK citizens, wherever they are in the world.
These new financial sanctions rules will kick off on 14 May 2025, after which letting agents will be subject to new reporting obligations as they will be added to the list of “relevant firms” under the financial sanctions regulations – which are seperate to the existing Anti Money Laundering rules. These are restricted to tenancies featuring rents of €10,000 or more a month.
The new financial sanctions rules mean letting agents will be required to inform the Office of Financial Sanctions Implementation as soon as practicable if they know or reasonably suspect a person is a designated person or has failed to comply with sanctions regulations.
This includes the amount or quantity of any funds or economic resources held or managed by the agent for that customer.
This is a missed opportunity to level the playing the field for letting agents.”
OFSI has published new guidance in relation to letting agents to provide further information on reporting obligations for letting agents and additional industry engagement is expected in the New Year.
Commenting on the changes, Nathan Emerson (main image), CEO at Propertymark, said: “Propertymark has long argued that the existing threshold for AML supervision for letting agents should be removed to reduce the risk of cash payments being used to ‘clean’ dirty money.
“Whilst we recognise that the UK Government wants to tackle financial sanctions breaches that are occurring below the threshold, this is a missed opportunity to level the playing [between AML rules and financial sanctions ones] the field for letting agents in terms of AML supervision, Customer Due Diligence and financial sanctions reporting obligations.
Misinformation
“HM Treasury must continue to engage widely with the sector to avoid misinformation and confusion among agents and financial institutions.
“Furthermore, we will continue to urge HM Treasury to reflect on the impact of the proposals and work to remove the threshold within the Anti Money Laundering Regulations to bring greater clarity to the sector and ensure it is less vulnerable to criminal activity.”
Well, when the renters reform becomes law that will put an end to fixed term tenancies in favour of monthly periodic tenancies and therefore not being able to take rent in advance of more than 1 month; our bank has long threatened to close our pool clients account if we pay any cash into it so cash is no longer an option. I don’t see how the majority of letting agents can be affected by money laundering unless they do so knowingly and wouldn’t therefore report it. As far as who is renting the property and whether they are on any sanctions list i would have thought the reference companies will include a PEP sanctions and adverse media check which has to be done on every buyer and seller of a property.