[00:00:04] Speaker A: Good afternoon everybody. Welcome to today's webinar. Thank you all for joining us. With us today we have Matt Curtis from the Lettings Hub who's going to be talking to you about mandatory sanctions regulations and what letting agents need to know.
So without further ado, I'll pass over to Matt.
[00:00:22] Speaker B: Thanks Rachel.
Hi everyone. Thank you for joining us today. So my name is Matt Curtis. I am the referencing operations director for the Lettings Hub. Now in today's session we really want to ensure that when we get to the end we have a clear understanding of what the upcoming sanction changes are and how they're going to impact your day to day activities in agency. These changes are going to be happening very soon, that deadline being May 14, and we appreciate that compliance legislative changes can feel really challenging indeed. The changes that we're going to talk about today do mean new legal responsibilities for letting agents and non compliance has its penalties but we're hoping to break it down and make it simpler to understand for you guys today.
So just to kind of start us off of what we're going to be covering today, the reality is we're going to be kind of going through what the sanction regulations are and what are the upcoming changes, how and when these regulations do change and what letting agents and landlords need to do differently in their day to day proven approaches to stay ahead in the changing market, prevent fines and ensure the compliance. And at the end, if we have enough time left at the end, we've got a little bit of area for some from Open Q and A.
So first and foremost what are sanctions? You know, sanctions are official penalties or restrictions that are imposed by one country or group of countries on another country, individual or organization to hopefully influence the behavior, enforce international laws or maintain national security.
They're used as a tool of foreign policy and economic pressure.
There are several different types of sanctions and while they can vary slightly depending on the country or international body that's issuing them, so for example the UN, UK, US, EU, etc. They generally do fall into the same few categories.
Obviously today's topic which we're talking about is the financial sanctions. So that's the general restriction of financial assets, financial access or assets. We have things like trade sanctions which restrict import and export goods and services, arm embargoes which is to ban the sale of supply and transfer of weapons and other related materials as well things like transport sanctions that restricts movement of people and different goods, individual sanctions so to apply to specific people or entities as well as immigration and travel Sanctions and also diplomatic sanctions as well. And sanctions are often used to respond to things like human rights violations, terrorism and breaches of international law, things like that.
In the uk, it's the Office of Financial Sanction Implementation, the ofsi, part of His Majesty's treasury, who maintains an official list of financial sanction targets and provides guidance on enforcement and reporting.
So financial firms are required to make sure they don't knowingly deal with sanctioned individuals or businesses. The OFSI sanction list include individuals and entities that are sanctioned by the un, the EU and the UK itself.
Breaching these sanctions can lead to fines or criminal charges.
The fines are really significant at the greater end of a million pounds or 50% of the value of the breach permitted, maximum around about a million pounds. So while many believe that the risk of actually identifying sanctioned individuals or companies through this lettings process is actually quite low, it is really important to bear in mind that the OFSI do take a dim view on non compliance. In 2020, outside of the letting sector, a record £20.47 million, which is the largest in the UK history, were the amount of fines that were issued by the OFSI for breaches of financial sanctions.
£3 million was issued in fine to just under 500 estate agents in the 12 months leading up to February of 2025. And in 2024 the average fine issued to agencies was nearly £4,000, which was up 6% from 2023 and is predicted to be higher in 2025.
In terms of the sanction list, there are currently around about 4,500 entries on the consolidated list. And with 80% of those being individuals and around about 20% are businesses. In 2023, 800 new people were added to the list and in 2024, 564 were also added. So it's roughly around one and a half people, if you can count half a person being added over that two year period per day.
That's quite a lot.
So what's changing? You know, the key changes for letting agents is letting agents now must verify all parties involved in tenancy agreements. So things like tenants and landlords to make sure that they don't appear on UK sanction lists. And it applies to all rentals, regardless of the value.
So letting agents are now what we call relevant firms.
So there's actually a few industries that are changing on the 14th of May, it's not just letting agencies. So things like IVA, solicitors, people, people that deal with fine art, etcetera, they're all being kind of widened into this Already existing legislation. So letting agents just become part of those relevant firms.
The 10,000 monthly threshold that used to apply for the euros, obviously that still is in place, but obviously it's now much wider.
All transactions now must comply with the regulations, not just anything over €10,000 per month.
And the other thing is all evidence. You know, the idea being that no record of a check means no check happened. So a letting agent needs to check all parties, tenants, landlords, etc. Against these financial sanctions before the tenancy is granted.
Use reliable up to date sources, you know, the OFSI database or integrated software tools, that kind of thing.
And they must retain a record of the search outcome. So even if there was no match and you weren't able to find anything on any of these individuals, you must record that there was no match. Things like the date of check, the name of the person checked, what the result was and the method or tool that was used.
And as we've kind of touched on already, there are severe penalties for non compliance and failure to adhere to these regulations can result in substantial fines and in worst case is actually criminal conviction.
Now I thought we'd quickly jump to some of our frequently asked questions. You know, before we kind of go into how we can meet these new obligations as a letting agent or a landlord, we're going to cover some of the common questions that we've actually had here at TLH on these changes. There are a lot of these and although we can't necessarily go through all of them in the webinar, I've picked some of the top questions and we've also got the QR code on screen as well. You're able to scan that. It will take you through to our sanctions FAQ page where you'll find all of the answers you need and actually submit some more questions to us as well. So we're just going to kind of run through a couple of these. So first and foremost, do the changes apply to all agents, even single branches? And the answer to that question is very simple. It's a yes. These are mandatory sanction checks and they must happen for all letting agents, any letting agent, whether you're a one man band or whether or not you are a multi branch across the across the country, we've all got to apply to all of those agents if for example there are two landlords, so if the property is under joint ownership, do we need to check both of those? And again the regulations do not distinguish it individually. So both landlords should definitely be checked.
Do I need to check A company if they're taking on the tenancy. The answer to that question is also yes, companies can be sanctioned.
Obviously some companies are very, very large and checking all of the directors could be seen as a little bit excessive. So recommendation would be that if you are going to rent a property to a, especially like a limited company, you would check the people that have significant control or, you know, more than a 50% shareholding, that kind of thing. And you should pick up any, any of those sanctions in there.
When do you have to do the sanction check? That's a really important one. You know, a sanction search should be conducted as part of the application process. You are obliged to report the financial sanctions breached only when the tenant's offer has been been accepted.
Do you have to check students. The regulations, again, they do not distinguish between different tenant types. So if someone's going to go through as a tenant, you should be checking them. There's a very common theme you'll find with a lot of these questions and the answers are going to be yes to a lot of them.
Do I need to check all my existing landlords and tenants?
Now the answer to this one is you do not have to do this. The OFSI guidance talks about prospective landlords and prospective tenants.
However, some agents may prefer to take that belt and breeches approach and that's something that we would recommend to not only complete the checks on their current landlords and tenants, but also the one, you know, do annual rechecks and maybe a 12 month point just to make sure.
Do you have to check guarantors?
Again, the answer to that question is no. So specifically the legislation does state prospective tenants and prospective landlords. So it insinuates that anyone that's going to be a tenant or anybody that's going to be a landlord, post the formula 14th of May are the people that need to be checked. However, you know, knowing that the whole point of the financial regulations is to make sure that you are exchanging funds with people where you know where the funds are coming from or they're not sanctioned individuals and, you know, understanding what that money is, it would make sense that, you know, somebody who is a permitted occupier or somebody that is going to be a guarantor could still have a sanction checker gun tax done against them. Especially considering, you know, a guarantor especially there is a high chance that a guarantor will have to contribute towards, for example, the rent or maybe a permitted occupier is contributing towards the rent and you want to make sure that you're comfortable that where the money is coming from is not from a sanctioned individual. So it's definitely better to check rather than not. So our recommendation would be, would be to do that.
Can agents do this check themselves? And that's a really, really common one that I have seen.
And the answer is yes. You know, the databases for UK sanction lists are public. However, the lists are long. You know, they're constantly changing, as we saw on the previous slide. You know, one and a half people added per day in the last couple of years. So, you know, it's really, really important that a letting agent kind of looks and understands that although manual checks can be done, they are time consuming, they are open to human error, and we'll kind of come on to that a little bit shortly.
How long should the records be kept? Ideally throughout the tenancy and a period after the tenancy is concluded, usually in line with existing data retention policies. So that shouldn't be too outworldly.
And do we need consent, do we need consent to run the checks on these individuals? And the reality, again, of that one is the answer is no. The sanction lists are public data.
They do not require consent to be searched.
So, kind of moving on, you know, what will I need to do? What's expected of me as a letting agent? And the regulation is asking that before transacting with a landlord or a tenant, you have completed screening, checking against these lists.
And there are two specific OFSI lists as a kind of minimum that you'd be expected to check. Both of them are available on the government website.
One is called the OFSI Consolidated List of Financial Sanction Targets. And the other is called the OFSI List of Persons Named in Relation to Financial and Investment Restrictions.
That screening should happen early in your dealings with the landlord or a tenant and before a transaction. Now, if you find a match or if you have any suspicions, you should report it to the OFSI immediately, demonstrate that you've done the check and keep a record to prove that you've complied.
So, as we've mentioned earlier, a letting agent can absolutely do these checks manually if they want to, but obviously there are some risks involved in doing so. So just a couple of those. As an example, if a check is missed or someone in the office completes it incorrectly, then obviously you risk significant penalties and potential criminal liability that we kind of already covered.
And there's also a risk to your business reputation. You know, these kind of failures, especially when new legislation is coming into force, they typically do attract public attention and press attention and any kind of breach in compliance can create negative noise around your agency, which is something that we want to avoid.
But it's also about ensuring that you prevent transactions with sanctioned individuals. That's the whole point. It's not supposed to be a burden, as much as it feels like it. The whole point is protection. And we know that agents don't want to expose landlords to unnecessary risk or open up risk to your own businesses.
Relying on a manual process that is prone to human error can cause challenges. And showcasing your good governance and control to your landlord clients is more important than ever with the legislative climate changing.
Furthermore, if you complete the check in house, you've also got to ensure that you can evidence it. So you need to think through how that will work, what processes and systems need to be in place, especially at scale. Because remember what we said earlier, if there was no evidence that there was a check done, then no check was done.
So just to kind of recap, it's really, really important to integrate these checks into your own processes. These checks need to be completed ahead of transacting. So to that reason, it's advisable to do them as early as possible as part of your pretenancy processes.
Your team needs training as a whole. Get the whole team trained. Responsibility falls on everybody who has interactions with landlords and with tenants. So you need to ensure that teams are aware of the changes and what is required for compliance.
And also make sure you keep a record of these checks. Work out how you're going to demonstrate the evidence that you have completed them and actually where you're storing them and where you're keeping the information to access it at a later date.
So I suppose it begs the question, you know, what do we do if we find a match or a partial match?
And again, we're going to find quite a common theme here.
The reality is you should just pause, you know, pause any financial or tenancy related transactions immediately with the individual. Now this is if you've obviously got a confirmed match or a partial match. It's slightly different to if you have suspicions. You would do your additional due diligence and make sure you've eliminated that person from your suspicions, if possible. But if your suspicions are upheld or you believe if you have found a match or a partial match, you pause any financial or tenant related transactions immediately. You must make a report to the OFSI without any delay.
Include all the relevant details so things like names, addresses, the nature of the match, any assets that may be involved.
You are not allowed to continue dealings, including signing a tenancy or collecting any rent with that person or the business or the entity or on their behalf without a license from the ofsi. So to be clear, you must not continue to transact or do business with that tenant or landlord unless the OFSI gives you explicit permission. You cannot let the property to the individual, you cannot receive payments to or from them. You cannot return holding deposits or rent. You know the deposits or the funds are considered frozen at that point and you must immediately contact OFSI for guidance what to do with those funds, as holding onto them without OFSI permission could in itself be a breach of the sanctions.
You cannot proceed with the tenancy or engage in any financial transactions linked to them. So doing so without a licence is a criminal offence under the UK sanction laws and could result in civil penalties or prosecution. Now, that all sounds really scary, but I think the way to really summarise it is if you have any concerns whatsoever, you report it to the OFSI and you wait for their guidance. It may well be that they grant a license and if they grant you a license, you can carry on working with those individuals.
If they don't provide a license, they will obviously give you the guidance of what to do next.
So, kind of worst case scenario, if you don't know what to do, you report it to the OFSI and follow their advice.
Now, I think it's prudent. We've kind of gone through quite a lot of information and I think it's really important to understand why these checks actually matter.
You know, a couple of common conversations we're having with TLH agents is, you know, why does the government want letting agents to do this now? Why? They want to make our life more difficult. And I suppose that's not. That's not the point. The expansion of the compliance requirements is aimed at curbing financial crime within the property sector, ensuring that letting agents play a pivotal role in identifying and reporting suspicious individuals or transactions. What the government actually wants to do is prevent the rental property market from being used for financial crime, particularly by individuals or entities that are subject to those. International sanctions is about preventing criminal exploitation in the UK letting sector.
The letting sector has proven to be a valuable avenue for exploitation, with criminals frequently using rental properties to conceal or legitimise illicit funds, either by paying rent and deposit with unlawfully obtained money or by creating convoluting ownership structures to obscure true beneficiaries.
These practices allow large sums of criminal proceeds to appear as legitimate income from genuine tenancies or, or landlord operations and thereby completely undermining the integrity of the property industry.
Historically, requirements to prevent financial crime across letting was actually really less stringent, often focusing on higher value transactions and leaving gaps that criminals could exploit.
The new legislation closes many of these loopholes by removing financial thresholds for sanctions and requiring all letting agents, regardless of their portfolio size or rental value, to screen and monitor their clients.
This expansion reflects the recognition that even lower value rentals could be exploited by sanctioned individuals as vehicles for layering illicit funds. And monitoring only select high end rentals leaves a wide margin for abuse further down the market, which the government want to close.
Though these measures place a greater administrative burden on letting agents, they also serve as an essential safeguard against detrimental impact on financial crime.
Ultimately, the strengthened regulations position the letting sector as a frontline defence in the broader effort to preserve the integrity of the UK financial system and deter criminals who have long viewed property as a highly effective means of obscuring illicit wealth.
Now, there are currently around about four and a half thousand entries on the OFSI consolidated list and it changes regularly as we've kind of already touched on. Although the chances of a letting agent finding a genuine match are very low, implementing these sanction checks is a crucial compliance measure to prevent inadvertently facilitating transactions with sanctioned parties and ultimately to meet these obligations. Because remember, you can be fined for not carrying out the checks, not reporting the matches, and not for keeping adequate evidence of the checks that have been collected. So really, really important.
Now obviously there are agents out there who will decide to do this themselves, but for our clients at tlh, that isn't necessary. For over three years now, we've offered sanction checking that meets the level and obligation that's required as of May 14th. So it couldn't actually be easier for our already existing customers. And it's a fully automated and scalable solution that stores everything you need to evidence your agency's compliance box.
We've got a fully integrated sanction check built into our box tenancy management platform. It's been available since 2023 and we've completed over 150,000 fully compliant sanction checks on tenants and landlords in that time, you know, so we're already fully prepared for this. A fantastic feature of our service is that you can complete your sanction checks right at the start of the pre tenancy process within the TLH referencing checks.
So you don't need to do it manually in your agency and your tenants don't have to give us any more information or complete any additional applications. It's all built well within the system we also have the functionality within Box to allow agents to select purely standalone sanction checks that aren't linked to any tenant referencing. These are fantastic. For any checks that need to be completed that aren't linked to a property within our service, you actually get much more than just a standalone check.
Sorry, just a sanctions check. It can include a full AML, PEPs and sanctions, full KYC as well as Right to Rent as well.
So our system we do all the checks of the list that you would expect us to and then some. There's actually over 100 lists that our platform checks by default and then also as well for the next 12 months after a check has been done on an individual, we will check daily the two lists that we mentioned earlier as a minimum and if a name flags on there post check being done in the first 12 months, we will notify you of it as well.
Because we know that the lists are updated regularly, we'll send that alert if we find the match. And Box will also notify you as well every 12 months that a check hasn't been done for at least 12 months and now should be the time to maybe do another one. So although it's great that we will do the daily reminders and if the OFSI list do flag a tenant and or a landlord who will notify you, it's also good practice to make sure you do the full check at least every 12 months.
So when's a good time to do it?
Realistically, the referencing stage is the ideal point, especially when it's within a referencing provider. So the referencing stage is the ideal point in the tenancy process to carry out the sanction screening, enabling you to meet your reporting obligations. The rules do state that landlords or letting agents are required to report any sanction matches or suspicions, but only once the tenant's offer has been accepted.
So as referencing plays a key role in the landlord's decision making process, this stage presents the perfect opportunity to identify any potential concerns before a formal agreement is in place. So this does mean a letting agent or landlord can take a holding deposit before any screening, but the screening should be carried out well before any agreement or contract is signed.
Finally, that automated and effortless compliance is another key feature in our solution. As well as providing a link through to the OFSI reporting tool directly from the box Platform Box is constantly prompting and recording all of the team's activities so you can pull an audit trail from the platform to evidence that checks have been done at the touch of a button for new landlords that you're onboarding, you can use Box to complete your due diligence. Within Box, you can select from either a straightforward sanction check or a more comprehensive AML and sanction check or our full know your customer product that includes PEPS and sanctions, full AML checking, ID and address verification, the liveness and facial biometric checks as well as digital footprint checks including adverse media screening. All of those same audit trail reportings and evidence is included and all complete via a link to a secure digital journey within Box that you can provide your landlord to quickly and compliantly complete the checks that you selected for them. As an agent. You'll get a full report breakdown of the results within the Box platform and this is all live in the platform. Now if you're already a customer, then you're already adding these landlord details to Box, so it's no extra details for you or for your team.
To be clear, the legislation states the rules apply to prospective landlords and prospective tenants, the Office of Financial Sanction implementation. So the OFSI has not explicitly stated that letting agents are required to retrospectively screen all existing tenants or landlords. However, the OFSI also emphasizes the importance of ongoing compliance within financial sanction regulations. So we know many of the Letting harbour agents want to remain vigilant and review their existing client base to ensure compliance. And we agree that this is a really proactive approach and we can help prevent inadvertent breaches of sanction regulations. So already Box can cover this for you with either standalone sanction checks that you can run any individual tenant or landlord through straight away or Box will also allow us to run all of your in situ or current tenants and landlords through the platform in a bulk upload, with any alerts being flagged to you immediately to allow you to report any matches through to the ofs.
So this is great if you want to do a consistent check across your whole portfolio. So you're starting with every kind of landlord, tenant and guarantor or permitted occupier fully checked. But remember, because it's a public list, we don't need any consent to carry it out.
So that kind of brings us to the end really. So in summary, kind of the main points to cover the changes are effective as of the 14th of May, as I'm sure you're sick of hearing about now, the new agent requirements and additional penalties. You know, it's super, super important to make sure that agents are following the rules because there are significant penalties for those that don't comply. Obviously today we've covered the Letting Hub solution that's live and available in Box now to support our customers. Things like the sanction checks for prospective tenants and landlords, completing the checks integrated with tenant referencing and one off standalone sanction checks as well, and how agents can upload their existing portfolio and clients for existing tenants and landlords so that sanction checks can be done for that belt and braces approach.
Obviously, we have the QR code on screen as well if you'd like to learn a little bit more about how Box can simplify your sanctions process. Thank you very much for your time today and I'm happy to cover any questions, if anybody has any.
[00:26:30] Speaker A: Perfect. We do have a couple of questions.
So the first one is do we need to check. Do. Sorry, do we need to do a new check on all parties when a tenancy is renewed?
[00:26:44] Speaker B: No.
So. Well, I say no. Again, it's all down to interpretation, but the reality of the legislation is it applies to prospective tenants and prospective landlords. So I'll kind of COVID this off as a secondary question because we've had it as well where we've been asked, you know, if you've got a landlord that you've invested, instructed, and he has one property or maybe two properties, you let out one property the next week, do you have to do the check again for his second property the next week? And again, the answer is no. It's about checking the sanctioned individual. So if you've recently done a sanction check on somebody and you don't deem it necessary or have any suspicions to renew that check, you don't need to. The act was the important part is before you transacted with them in the first place, I started to exchange funds with them. Did you do a financial sanctions check on them, yes or no? If the answer is yes, then you've covered yourself for the legislation purposes. However, it is best practice to do it at intervals because as we've already mentioned, the legislation shows that the lists are updated constantly. They change daily. So whilst you can assume that if you check them once, they're probably okay, it can happen where the next day they're on the sanction list. So best practice is to do it at regular intervals, but they don't have to be too close together.
[00:28:06] Speaker A: Okay, perfect. There's quite a lot of questions that are asking the same sort of thing. So, yeah, I think that's kind of covered off all of the questions that we do have.
So if anybody does have any other questions after the webinar has finished, they think, oh, we should ask that if you send an email over to
[email protected] we can get those passed on to Matt and he will get back to you.
So I just want to say thank you, Matt, for your time and thank you for everybody who has joined us. You will all receive a recording of the webinar as well.
So, yeah, just thank you and have a really nice rest of your day.
[00:28:51] Speaker B: Fabulous. Thanks, Rachel. And thanks everyone for tuning in.
[00:28:54] Speaker A: Thank you.
[00:28:54] Speaker B: Bye.
[00:28:54] Speaker A: Bye.
