AML and sanctions for letting agents: a plain-English compliance guide

General information only, not legal advice. Verify your obligations with your own compliance adviser.

Most letting agents think about anti-money laundering (AML) compliance the same way they think about boiler servicing: necessary, mildly dull, and easy to put off until something goes wrong. Then May 2025 arrived, the sanctions rules widened, and putting it off became genuinely expensive.

This guide cuts through the jargon and explains what you need to do, why the stakes are higher than you might think, and — more usefully — how embedding these checks inside your referencing workflow lets you tick most of the boxes as a by-product of work you were already doing.

Two separate regimes — and agents often confuse them

AML supervision and financial sanctions are related but distinct, with different triggers and consequences.

AML supervision falls under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended). Letting agents are only caught where they handle a tenancy at a monthly rent of €10,000 or more (a sterling equivalent of roughly £8,600 at current exchange rates) for at least part of the term. If you operate in that bracket you must register with HMRC, carry out customer due diligence (CDD) on landlords and tenants, keep records, and maintain a written AML policy. The annual supervision fee rose to £400 per premises (from £300) on 1 December 2025, with a separate one-off £300 registration fee for new applicants.

Financial sanctions screening is different. Since 14 May 2025, letting agents have been “relevant firms” under financial sanctions law and must screen clients irrespective of the rental value — no threshold applies. Agents must report to the Office of Financial Sanctions Implementation (OFSI, part of HM Treasury) as soon as practicable if they know or have reasonable cause to suspect a person is a designated person or has breached financial sanctions.

In short: AML registration depends on rent thresholds. Sanctions screening applies to everyone, always.

What sanctions screening actually involves

A sanctions check searches your landlord’s or tenant’s name (and any relevant entity) against the UK’s consolidated list of designated persons — individuals and organisations subject to asset-freezing measures. The OFSI consolidated list runs to thousands of entries across many jurisdictions and is updated frequently.

If a potential match comes back:

1. Do not proceed with the transaction.
2. Do not tip off the individual.
3. Report to OFSI as soon as practicable using its compliance reporting form (online forms are now available, with email reports to ofsi@hmtreasury.gov.uk).
4. Await OFSI’s instruction before taking further action.

You should also keep records of every check — date performed, documents reviewed, result, and any reports made. Under the AML Regulations, CDD records must be retained for five years; keeping a clear sanctions-screening audit trail to the same standard is sensible practice.

A common misconception is that a quick Google search is enough. It isn’t. You need to screen against a current, structured list and document that you did so.

The penalties are not theoretical

HMRC’s AML enforcement against the property sector has accelerated. In its tranche covering 1 April to 30 September 2025 (published February 2026), HMRC issued 369 penalties across all supervised sectors, of which 170 were levied against estate and letting agency businesses — the worst-affected sector. Those 170 agent fines totalled £835,842, with individual penalties reported as ranging from around £1,250 to over £50,000 and averaging roughly £6,200. Most breaches were simply trading without being registered. HMRC names fined businesses publicly, so the reputational damage compounds the financial hit.

That is only the AML supervision side. Penalties for breaching financial sanctions are more severe. OFSI can impose a civil monetary penalty of the greater of £1 million or 50% of the value of the breach (note: the Government has announced plans to raise this to the greater of £2 million or 100%, subject to legislation). Separately, criminal liability is in play: breaching financial sanctions is a criminal offence carrying up to 7 years’ imprisonment under the Policing and Crime Act 2017, while a substantive money laundering offence under the Proceeds of Crime Act 2002 carries up to 14 years and an unlimited fine. These are distinct offences — confirm which applies to any specific situation with your adviser. OFSI also has power to publicly name non-compliant firms.

Where this fits inside your referencing process

The good news: the practical burden is lighter than it sounds, with the right workflow. Tenant referencing already requires you to collect verified identity documents and financial information from every applicant. The gap is simply adding a structured sanctions screen at the point you gather those documents — before any tenancy agreement is signed.

A compliant process looks roughly like this:

• Collect identity documents from both tenant(s) and landlord — passport, driving licence, proof of address. This happens at referencing stage.
• Run a sanctions screen against the OFSI consolidated list the same day. Automated tools do this in seconds and produce a timestamped audit record.
• Document the result — match, clear, or “pending further review.”
• Flag PEPs and adverse media if you have AML supervision obligations above the threshold.
• Store records for five years, accessible if HMRC or OFSI ever ask.

At PropertyGoose, our AML check is built directly into the referencing flow as a standard component — agents don’t need to run a separate screening tool, log into a different system, or add an extra step. The check happens alongside the identity verification and financial screening you’ve already authorised, and the record is retained automatically. See the referencing and compliance check detail for exactly what’s covered.

What if you’re below the AML threshold?

A lot of agents assume that because they only let ordinary residential properties — £1,000 to £2,000 a month — AML doesn’t apply to them. That was largely correct before May 2025. It’s no longer the full picture.

You may not need to register with HMRC for AML supervision. But you are required to carry out sanctions screening on every transaction. That obligation sits outside the AML Regulations entirely — it comes from financial sanctions law, which has no rent threshold. The NRLA and Propertymark are both clear on this point.

If you want to see how PropertyGoose compares on compliance features, or talk through the workflow, book a quick demo.

What’s changing in the rules

HM Treasury has now finalised its reform of the Money Laundering Regulations. The Money Laundering and Terrorist Financing (Amendment) Regulations 2026 were made in June 2026, with the main provisions coming into force at the end of June 2026. Among other changes, they convert the euro thresholds in the Regulations to sterling on a 1:1 basis — so the letting-agent CDD trigger of €10,000 becomes £10,000 — and align letting agents’ transaction-based CDD triggers with those for high value dealers. The direction of travel is clearly towards more, not less, scrutiny of the lettings market, so building incremental updates from HMRC’s guidance pages and bodies like Propertymark into your routine is worth doing.

The practical takeaway

AML and sanctions compliance isn’t going away, and enforcement is visibly increasing. The agents who find this easy are the ones who’ve built the checks into work they were already doing — referencing, identity verification, document collection — rather than treating it as a separate project.

If you’re not sure where you stand, start with two questions. First: are you handling any tenancies at the AML threshold or above, and if so, are you registered with HMRC? Second, regardless of rent level: are you running structured sanctions screens on every landlord and tenant before signing? If the answer to either is “not sure,” that’s the place to start.

Need a referencing process that handles both? Take a look at how PropertyGoose works or check our pricing — the AML check is included as standard.

Craig Ryder — PropertyGoose

General information only. This article does not constitute legal or compliance advice. Consult a qualified adviser for guidance specific to your business.