New Anti-Money Laundering Regulations Challenge Letting Agents

New changes to anti-money laundering (AML) regulations for letting agents, set to take effect on 14 May, could result in more fines as businesses scramble to keep up with the updated requirements.

Under the new rules, letting agents will face stricter AML checks. They must verify the identities of tenants and landlords, ensure these individuals are not listed on the UK’s financial sanctions list, report any suspected money laundering or suspicious financial activity, and, most notably, monitor and report all tenancy agreements, irrespective of their rental value.

This is a significant shift from current practices, where reporting is only necessary for rental payments exceeding 10,000 EUR per month (£8,300).

An analysis by AML platform FCC Paragon indicates that only around 2.5% of rental listings in the UK currently have a monthly asking rent of 10,000 EUR (£8,300) or more. This highlights the considerable increase in regulatory workload these changes will bring.

Last year, estate and letting agencies were fined £3m due to 468 AML breaches, with the median fine being slightly over £4,000. With the new regulations, the increased resources needed to maintain AML compliance could see more agents facing difficulties, potentially leading to a rise in AML fines.

Bekki Leaves, Managing Director of FCC Paragon, stated, “These changes to AML protocols are largely beneficial, providing greater protection to landlords at all market levels. Illegal practices aren’t confined to properties with higher rents, so increased protections should help curb criminal activity.”

“However,” Leaves continued, “there’s a likelihood of a rise in AML fines initially, as letting agents struggle with the substantial increase in required resources. To avoid hefty fines, agents must adopt a proactive approach, starting with a thorough assessment of their onboarding and monitoring processes and establishing clear reporting channels.”