New Legal Requirements for Letting Agents: What Landlords Need to Know About PEP & Financial Sanctions Checks

As of 14 May 2025, new legislation means letting agents in the UK are now officially included in the Government’s financial sanctions regime. While you may already be familiar with anti-money laundering (AML) checks, these financial sanctions checks are a new legal obligation and its crucial landlords understand what this means.

At Xenia Lettings, we’re committed to keeping our clients informed and compliant, so here’s everything you need to know about the changes.

What are Financial Sanctions?

Financial sanctions are a tool used by the UK Government to support foreign policy and national security. They are designed to restrict the financial movements of designated individuals or entities who may pose a risk to the UK or international peace and security.

These sanctions can include:

· Freezing assets or bank accounts

· Blocking access to financial services

· Restricting the ability to make or receive investments

Sanctions may be applied to:

· Individuals involved in terrorism or organised crime

· People who are funding nuclear proliferation

· Politically Exposed Persons (PEPs)

· Anyone the UK wishes to apply pressure to, or send a clear message of disapproval to

These rules apply whether the individual is in the UK or not, and UK businesses must comply regardless of where their client is located.

 

How Does This Affect Letting Agents?

From 14 May 2025, letting agents are now officially defined as "relevant firms" under financial sanctions regulations. This means we're now required by law to report to the Office of Financial Sanctions Implementation (OFSI) if we know or have reason to suspect that:

· A person we’re dealing with is a designated person; or

· Someone has breached financial sanctions rules

If that person is a landlord or tenant, we must also report the nature and amount of any funds or resources we hold for them, and we must do this as soon as we have any reason to suspect something might be wrong.

 

When Do We Need to Carry Out Sanctions Checks?

As lettings agents we should screen all new landlords and tenants during the onboarding process. This can be done through the UK Sanctions List, using tools available on the OFSI website.

As a landlord if you use a referencing company to conduct your own referencing, it’s a good idea to confirm that these checks are included in their standard service – at Xenia Lettings we have this covered for you!

We also have to check landlords separately as part of our usual compliance process.

And remember you must keep a record of every check you carry out, even if there’s no cause for concern, just like we do!

 

When Should We Report to the OFSI?

Our reporting obligations kick in as soon as we begin formal letting work – that means:

· For landlords: from the moment they give us instructions to find a tenant

· For tenants: once the landlord has accepted an offer and the agreement is in progress

If we believe a person appears on the sanctions list, we must:

1. Report to OFSI immediately

2. Suspend all business activity with that person until we receive permission to continue

 

Do We Need to Check Our Existing Landlords or Tenants?

Currently, the obligation only applies to new instructions from landlords or prospective tenants. However, as good practice we will start reviewing existing clients over time – perhaps at the end of a tenancy or when signing a new agreement – to make sure we are always compliant. Landlords, this would be good to do too.

 

Is There a Minimum Rent Value for These Checks?

No. This is different from the Money Laundering Regulations (MLRs), which only apply to rental income over €10,000 per month. The financial sanctions regulations apply to all lettings, regardless of rental amount.

That means even our smallest portfolio clients or low-rent tenancies must be checked under these new rules.

And don’t forget – AML checks are still required in addition to sanctions checks where the MLRs apply. These two processes are separate and serve different purposes.

 

What About Politically Exposed Persons (PEPs)?

AML checks may flag someone as a PEP. That in itself doesn’t mean we have to report them or avoid dealing with them – but it does require enhanced due diligence.

You only need to report someone to the OFSI if they appear on the UK Sanctions List – not just if they are politically exposed.

 

What Are the Penalties for Non-Compliance?

Penalties for failing to comply with sanctions regulations can be severe, including:

· Heavy fines

· Enforcement actions

· Even prison sentences in the most serious cases

OFSI has already taken enforcement action against firms who failed to carry out proper checks, and they publish details of these actions on their website.

 

Final Thoughts from Xenia Lettings

We know that new compliance rules can feel overwhelming, especially when it feels like the goalposts keep moving, however, these changes are a vital part of keeping the UK’s property industry safe and transparent.

At Xenia Lettings, we’re on top of it and we are here to support our landlords every step of the way.

If you want to double-check our process, ask about our referencing provider, or get advice on the above just reach out. We’re happy to help.

This blog is for informational purposes and should not be considered legal advice. For full guidance, visit the OFSI website or consult with a legal advisor.