New anti-money laundering (AML) rules came into force on 14 May 2025 – and landlords can’t afford to ignore them.
When I wrote about the new rules a couple of months ago, several people got in touch to tell me that they do not apply to landlords.
It is true that the wording of the regulations is a bit ambiguous as regards landlords. However, if the authorities find someone is using your property for criminal purposes, it is highly likely that you will be penalised if it is clear that you did not carry out the proper checks before renting to them.
Compliance experts warn that landlords who fail to carry out proper ID and sanctions checks could face heavy fines, loss of business, or even prison. So whether or not you believe the rules officially apply to you, the safest option is to follow them.
In this guide, we explain how criminals target the rental market, the checks you should carry out on tenants and guarantors, and how to protect yourself from penalties.
1. Why Landlords Should Care About the 2025 Money Laundering Rules
Criminals are increasingly using the rental sector to ‘clean’ illicit funds and the lettings industry is now a key target for criminals wanting to launder money.
Even though the rules are aimed mainly at letting agents, landlords who skip checks risk letting to criminals – and could still face enforcement action if found to be complicit or negligent.
The safest approach? Carry out identity and sanctions checks on all tenants and guarantors, keep proper records, and report anything suspicious.
2. How Criminals Use Rental Properties to Launder Money
Compliance expert Lori Thompson of EA Compliance highlights common tactics in this LandlordZone post:
- Rent-to-rent ‘drip feed’ payments – Smaller payments under £5,000 often bypass bank scrutiny, allowing criminals to move illicit funds undetected.
- Upfront rent repayments – A large rent payment is made after the tenancy begins, then refunded when the tenant ends the tenancy early. This will remain possible even after the Renters’ Rights Bill bans large advance payments before a tenancy starts.
- Fake identities and Airbnb subletting – Criminals rent using false ID, then sublet illegally to generate ‘clean’ income.
- Using properties for crime – Such as cannabis farms, human trafficking, or illegal subletting.
3. The Step-by-Step Tenant Identity Check for Landlords
Once you have an applicant, take these steps:
Collect:
- One official photo ID (passport or driving licence)
- Proof of address dated within the last 3 months (utility bill, bank statement, or council tax bill)
Best practice:
- Check ID in person to confirm the tenant matches the photo
- Compare signatures on different documents
- Look for tampering (blurry edges, misaligned text)
- Use online verification tools like SmartSearch or Onfido to authenticate documents
Red flags:
- Refusal to provide ID
- Fake-looking or inconsistent documents
- Mismatched addresses
- Insistence on paying large sums in cash
If in doubt – do not let the property and consider reporting the applicant.
4. How to Carry Out Sanctions Checks
Run a sanctions search before finalising the tenancy using the UK government’s free service and keep a screenshot of the search result:
🔗 OFSI Sanctions List Search
If a prospective tenant appears on the list:
- Report the finding to the Office of Financial Sanctions Implementation (OFSI)
- Do not proceed with the tenancy to this person
Full guidance here: Suspected Breach of Financial Sanctions – What to Do
5. Don’t Forget Guarantors – They Must Be Checked Too
If a guarantor will pay rent or deal directly with you or your agent, they must undergo the same identity and sanctions checks as tenants.
6. Record-Keeping Rules: What You Must Keep and For How Long
Under the new AML rules:
- Keep copies of all ID documents and verification results for at least 5 years (ideally 7 years after the tenancy ends)
- Include:
- Copies of ID
- Sanctions search results with dates
- Reports to OFSI (if any)
- Evidence of staff training and compliance procedures (for larger landlords and agencies)
A simple but effective safeguard is to screenshot your search results with the date.
7. Reporting Suspicious Activity – Your Legal Duties
You must report if you suspect criminal activity at any stage – not just before the tenancy starts.
For example:
- Tenants offering large sums in advance and refusing inspections
- Sudden changes in payment patterns
- Refusal to cooperate with checks
8. ‘Tipping Off’ – What It Is and Why It’s a Criminal Offence
Under the Proceeds of Crime Act 2002 and the Terrorism Act 2000, it’s illegal to inform a suspect that:
- They are under investigation
- A report has been made about them
- They should take action that could hinder an investigation
Conviction can mean imprisonment and heavy fines.
9. Penalties for Non-Compliance – Fines, Restrictions, and Prison
Failing to comply with AML obligations can result in:
- Civil penalties running into thousands of pounds
- Loss of business licence (for agents)
- Removal from professional bodies such as Propertymark
- Restrictions preventing landlords from letting property
- In serious cases, up to 7 years in prison
10. Final Thoughts – Protecting Yourself and Your Business
Even if you believe the rules don’t apply to you, the risks of ignoring AML checks are simply too high.
Carry out thorough ID and sanctions checks on every tenant and guarantor, keep detailed records, and stay up to date with sanctions list updates.
If you can prove you’ve done everything by the book, you’ll be in a far stronger position if the authorities ever come knocking.