New AML Rules for Landlords and Letting Agents

From 14 May 2025, the UK government will enforce new Anti-Money Laundering (AML) regulations that significantly expand compliance obligations for landlords and letting agents. These changes aim to prevent criminals from exploiting the rental market to launder illicit funds or engage in other financial crimes.

Key Changes Under the New AML Regulations

Previously, AML checks were only mandatory for high-value rental properties, specifically those with monthly rents exceeding €10,000 (approximately £8,300). However, under the new regulations, AML compliance will be required for all rental properties, regardless of the rental amount. This means that every landlord and letting agent must conduct thorough identity verifications and financial sanctions checks on both tenants and landlords before entering into tenancy agreements.

The scope of responsibility has also broadened. While only letting agents were previously obliged to perform AML checks, the new rules extend these duties to private landlords as well. Both parties are now required to verify identities, check against government sanctions lists, and maintain comprehensive records of these checks. Records must be kept for at least 5 years after the tenancy ends to comply with the regulations and in case of an audit in a manner which is compliant with GDPR.

Non-compliance with these regulations carries significant penalties, including substantial fines, business restrictions, and potential imprisonment for up to seven years. Therefore, it is crucial for landlords and letting agents to understand and adhere to these new requirements.

Summary of Requirements

Under the new AML rules, landlords and letting agents must:

• Verify the identities of all adult tenants and landlords involved in rental agreements by collecting official photo identification and proof of address.
• Check the names of all landlords and tenants on the UK Sanctions List before letting a property.
• Keep records of the checks for at least 5 years.
• Report suspicious transactions to the authorities.
• Keep up to date on Anti-Money Laundering regulations, including providing regular training to employees (if operating as a business).

Additional steps, such as in-person ID checks, signature comparisons, and the use of digital verification tools, are recommended to ensure authenticity.

Red flags to watch for during the verification process include:

• Refusal to provide identification documents
• Documents that appear altered or inconsistent
• Mismatch between the address on ID and other documents
• Insistence on paying large amounts in cash
• Landlord cannot provide proof of ownership of the property
• Landlord requests rent to be paid to a third party or offshore account

If any of these issues arise, landlords and letting agents should refrain from proceeding with the rental until proper verification is completed.

Comparison of AML Rules Before and After 14 May 2025

These changes represent a significant shift in the UK’s approach to preventing financial crime in the rental sector. Landlords and letting agents must take proactive steps to understand and implement these new requirements to ensure compliance and avoid severe penalties.