From 14 May, landlords and their tenants will be subject to financial sanctions checks by letting agents before a rental agreement can be concluded. This additional screening is a major regulatory change for letting agents and landlords and you must ensure that both you and your agent comply with the new rules or risk fines, prosecution and damaging your reputation as a landlord.
Financial sanctions are imposed by the Office of Financial Sanctions Implementation (OFSI) which is part of HM Treasury. They aim to restrict certain individuals, companies or organisations accessing financial services or the property market. This helps the UK to meet its foreign policy and national security aims, as well as to protect its financial system.
After the new changes take place, letting agents must check that landlords and tenants aren’t on the UK’s consolidated sanctions list. Previously only estate agents were required to screen and report suspicions. Letting agents will now fall under the ‘relevant firms’ definition of the Sanctions and Anti-Money Laundering Act and so now join estate agents in having sanction check responsibilities.
Compliance requirements
The mandatory screening will involve a number of checks at the point that you formally instruct a letting agent to work on your behalf. This will include identity verification to prove you are who you say you are. Your details will then be checked against the sanctions lists.
If you, or your tenant, are on the list then your letting agent will have to halt the letting. They will have to report it to the authorities if they are suspicious that you have breached sanctions or know that you have.
Similar screening will be applicable to your prospective tenants and will be in addition to the tenant referencing, ID checks and Right to Rent checks that are already carried out on new lettings in England. However, the sanctions checks on tenants will only be carried out once you, as a landlord, have accepted their rental offer and are looking to proceed with the tenancy.
Potential penalties
As well as risking your letting, there are also penalties for non-compliance by agents. These include unlimited fines and up to seven years in prison. The association with a breach of sanctions can also damage your reputation as a landlord. This means you must ensure that your agent is aware of and compliant with the new sanctions screening requirements to ensure that you and your business are not damaged.