New Reporting Obligations
Additional financial reporting obligations come into force for letting agents on 14 May 2025. These changes, form part of what will be extended anti-money laundering rules (AML), have been introduced by HM Treasury Office of Financial Sanctions Implementation (OFSI). The changes mean that, as “relevant firms”, letting agents (who carry out “letting agency work” per the financial sanctions regulations) will have to report known or suspected breaches of financial sanctions law and unlike with the current AML rules, there is no minimum rent threshold. The OFSI’s guidance can be found here
What are the reporting obligations?
As a relevant firm, letting agents will be required to report to the OFSI as soon as practicable if it knows or has reasonable cause to suspect that a person:
- Is a “designated person”; or
- Has committed a breach of financial sanctions regulations.
What are financial sanctions?
They are designed to meet the UK’s foreign policy and national security aims and to protect the integrity of the UK’s financial system. It includes restrictions on “designated persons”, for example by way of “freezing” assets and imposing restrictions on investment and financial services.
What about “designated persons”?
Names of “designated persons” and to whom such sanctions apply can be found on the consolidated list here
When do the obligations apply?
The reporting obligations will apply at different stages:
- When a letting agent is first instructed to do work.
- During the course of carrying out work for a landlord, but the duty to report in relation to the landlord will not apply until a tenant is found and accepted by the landlord.
- However, if the knowledge of suspicion applies to a prospective tenant (whether they are the letting agent’s client or not), the duty to report will apply from when an offer to let by a tenant has been accepted.
What should go in any report?
Any report must include:
- Information on which knowledge or suspicion is based.
- Any information held by which the subject of the report can be identified.
- Where a letting agent knows or has reasonable cause to suspect that their customer is a “designated person”, the report must also include details of nature and amount or quantity of any funds or electronic resources held by the letting agent for that customer at the time when the knowledge or suspicion arose.
What work is covered?
If the letting agent does “letting agency work” as defined by the financial sanction regulations. This is a different definition to “letting agency work” in terms of the Letting Agent Code of Practice. The rules therefore apply to things done in response to instructions to either:
- Find property or land for a prospective landlord or tenant to rent for a term of a month or more; or
- Conclude an agreement for a prospective landlord to let property or land for a term of a month or more.
It does not apply to those who only:
- Publish advertisements or disseminate information (the example given is adverts in newsagent windows);
- Provide a means by which prospective landlords and tenants, in response to adverts, can make direct contact with each other.
- Provide a means by which prospective landlords and tenants can contact each other.
- Provide legal services.
Looking at the definition, it would also not apply to any short-term lets (for example holiday lets) where the term is for a period of less than one month.
What should letting agents do?
Clearly the new rules will have a broader impact that the current AML rules due to the lack of an income threshold and it will mean letting agents will have to look at their processes and procedures (including for screening of landlords and tenants) to ensure they are compliant going forward. This will mean ensuring staff are aware of and receive training about the new requirements and keeping sufficient records to allow transactions to be monitored properly and reports to be made where necessary. As is always the case, failures to report suspected breaches could result in fines and other penalties, so it is important to get it right.
If you require any further information or advice, please contact us or watch our blogs for further updates.
