Significant changes are in the way for the UK rental sector. From May 2025, the government will expand Anti-Money Laundering (AML) regulations to cover rental agreements. As a result, letting agents will be required to implement new procedures to verify tenants and landlords, ensuring they are not engaged in unlawful activities.
What are AML checks?
AML checks help detect and prevent money laundering and financial crime. Under the Money Laundering Regulations 2017, property managers must verify client identities, assess transaction risks, and monitor for suspicious activity. These checks enforce transparency in property transactions and reduce the risk of illegal activity.
Key AML updates for 2025
The UK government has introduced significant changes to AML regulations, particularly affecting property managers handling lettings and sales. These regulations aim to prevent criminal funds from circulating in the rental market.
Here’s what is changing from the 14th of May 2025:
- Expanded AML rules for lettings: Property managers involved in lettings in England and Wales will now fall under the Financial Sanctions Regulations (FSR), increasing their compliance responsibilities.
- Removal of the rent threshold: Previously, AML checks were only required for rental agreements above €10,000 per month. From May 2025, all lettings work will need AML compliance, regardless of rental value
- Financial sanctions reporting: Property managers handling lettings must report to the Office of Financial Sanctions Implementation (OFSI) if they suspect a person or entity is under financial sanctions
- Stronger penalties: AML fines have increased significantly, with a 49% rise in average penalties during the 2022/23 financial year, now averaging £5,350 per breach
- HMRC supervision: Estate agents and property managers involved in sales must register for AML supervision with HMRC to ensure full compliance
- Updated Government guidance: New official guidance will help property professionals understand their AML responsibilities, focusing on risk assessments and customer due diligence
- Economic crime act: The Economic Crime and Corporate Transparency Act 2023 has introduced legal protections around sharing client data for AML purposes, making obligations clearer for property managers
What do these changes mean for property managers?
From May 2025, property managers involved in lettings will be classified as “relevant firms” under financial sanctions regulations, meaning they must:
- Report any suspicions related to designated individuals under financial sanctions
- Declare any funds or resources held on behalf of sanctioned persons
- Submit reports as soon as they are instructed by a prospective landlord or tenant, without the previous rent-based threshold
These updates are designed to enhance transparency and reduce financial crime risks in the property sector.
What do these changes mean for landlords?
With tighter AML regulations, landlords must also be aware of their responsibilities when working with property managers. Key points to consider include:
- More scrutiny: All rental agreements will now require AML checks, meaning landlords must provide more financial information when engaging with property managers
- Source of funds checks: Property managers may ask landlords to verify their income sources, particularly for large transactions or those involving international payments
- Financial sanctions compliance: Landlords dealing with overseas tenants must ensure compliance with financial sanctions reporting requirements
- Record keeping: Maintaining clear financial records and having documentation readily available will help avoid delays in lettings and sales
Understanding these updates will help landlords navigate the property market smoothly while staying compliant.
How to conduct AML checks as a property manager
To meet AML requirements, property managers should implement the following checks:
- Customer due diligence: Verify the identities of buyers, sellers, landlords, and tenants using official documents such as passports or driving licences
- Enhanced due diligence: Conduct deeper investigations in high-risk cases, such as transactions involving politically exposed persons or offshore entities
- Source of funds verification: Ensure funds used in property transactions are legitimate
Transaction monitoring: Detect and report any unusual or suspicious activity - Record-keeping: Maintain detailed AML-related records for regulatory review
Identifying suspicious activity
Property managers must stay alert to potential red flags, including:
- Buying or selling real estate at prices significantly above or below market value
- Unusual or repeated property purchases inconsistent with the buyer’s financial situation
- Registering a property under a client-owned company without a clear reason
- Large cash deposits followed by a withdrawal request before completing a transaction
- Payments made via third parties with no clear connection to the client
- Reluctance to provide financial documentation or an unusual lack of interest in inspecting a property
- Rapid acquisition of multiple properties without considering location or condition
- Financing transactions through foreign or high-risk sources
- Frequent name changes or last-minute substitutions of buyers
Compliance in 2025
With the removal of the rent threshold and stricter financial sanctions requirements, AML compliance is now a priority for property managers handling lettings and sales.
For landlords, these changes highlight the importance of working with fully compliant, professional property managers to ensure smooth and legal property transactions.
If you need expert guidance on AML compliance or updating your processes, get in touch with us and we can outline the next steps.
