What’s Happening? And when?

Starting 14th May 2025, new regulations will require all letting agents to conduct financial sanctions checks on every tenant and landlord. This means you must verify that neither your tenants nor landlords are on the UK’s financial sanctions list before entering into any tenancy agreements or rental transactions. The UK government has introduced these changes to improve national security and prevent financial crime, including money laundering and terrorism financing.

This change will affect how you operate your business, and failure to comply can result in serious penalties.

What Are Sanctions?

Sanctions are legal measures imposed by governments to target individuals, organisations, or countries involved in activities that pose risks to national or international security. These can include actions like terrorism, money laundering, or the proliferation of weapons of mass destruction. Sanctions can involve prohibiting or restricting financial transactions, and in the context of lettings, they can prevent you from entering into rental agreements or providing services to those on the sanctions list.

For letting agents, it's crucial to ensure that neither tenants nor landlords are subject to these sanctions, as failure to comply can lead to severe consequences, both financially and legally.

What Do I Need to Do as a Letting Agent?

As a letting agent, you have a legal responsibility to ensure you’re not conducting transactions with individuals or entities subject to financial sanctions. Here’s what you need to do to stay compliant:

Conduct Sanctions Checks: From May 2025, you’ll be legally required to conduct PEPs (Politically Exposed Persons) and sanctions checks for all tenants and landlords before proceeding with tenancy agreements.

Due Diligence: Perform due diligence on all parties involved in the rental process. This includes verifying the identity of tenants, landlords, and any other relevant parties and checking them against the financial sanctions lists.

Cross-Reference Sanctions Lists: You must check all tenants and landlords against the UK government’s Consolidated List of Financial Sanctions Targets and other relevant sanctions watchlists. These lists are regularly updated, so staying informed is crucial.

Document Everything: Record the results of your sanctions checks, so you have a clear audit trail in case you need to demonstrate compliance.

Report Matches: If you find that a tenant or landlord is on the sanctions list, you must stop the transaction immediately and report it to the relevant authorities, such as the Office of Financial Sanctions Implementation (OFSI).

Steps You Can Take Now to Be Ahead of the Game

It’s important to start preparing now to ensure that you’re fully compliant with the upcoming changes. Here are steps you can take today:

Implement a Compliance System: Begin establishing a compliance system that includes regular sanctions checks for all tenants and landlords. This can be integrated into your existing referencing process, using Canopy’s automated services for ease.

Train Your Team: Make sure your staff is trained on the new regulations and how to conduct sanctions checks properly. Knowledge and awareness across your team will help ensure compliance across all transactions.

Start Using Sanctions Screening: Begin incorporating sanctions and PEPs checks into your referencing process now. If you’re not already doing so, start using tools and services that automatically cross-check sanctions watchlists and PEPs.

How Canopy Can Help

At Canopy, we’re already ahead of the curve in helping you stay compliant with financial sanctions regulations. Here’s how we can make compliance easier for you:

PEPs and Sanctions Checks: Canopy already includes PEPs and sanctions checks as part of our referencing services for all renters and guarantors. Alongside a standard credit check, we automatically cross-reference sanctions watchlists to identify any matches. These are flagged immediately, so you’re informed in real time.

Independent Checks for Limited Credit Footprints: If a credit check is not found due to a limited credit footprint, we partner with trusted providers to conduct independent checks. This ensures that we are still performing the necessary PEPs and sanctions checks on every applicant, regardless of their credit history. Learn more about our credit and referencing services.

Landlord KYC Service:  In preparation for the May 2025 changes, solutions to support Landlord KYC (Know Your Customer) compliance, including PEPs and sanctions checks, are expected to become available. These will help ensure compliance when onboarding new landlords, with additional options potentially offered to further support compliance efforts.

Consequences of Non-Compliance

Failure to comply with financial sanctions regulations can result in serious consequences for letting agents, including:

Fines: Non-compliance can result in significant financial penalties imposed by the government.

Reputational Damage: Non-compliance can severely damage your agency’s reputation, making it more difficult to attract new clients and retain existing ones.‍

Legal Consequences: Failure to adhere to sanctions regulations can lead to criminal charges, particularly if it’s found that you knowingly facilitated a prohibited transaction.

The new financial sanctions regulations coming into effect 14th May 2025 will require all letting agents to conduct thorough sanctions checks on every tenant and landlord. By understanding your responsibilities and leveraging Canopy’s automated services, you can ensure your business remains fully compliant. With our integrated PEPs and sanctions checks, as well as our upcoming Landlord KYC service, Canopy is here to make compliance simple and efficient for you.

Stay ahead of the changes and protect your business. For more guidance, refer to the UK government’s Financial Sanctions Guidance for Letting Agents.

Stay informed, be proactive, and ensure that your lettings agency remains compliant, secure, and trusted in the industry.