New sanctions rules: what property managers need to know

From 14 May 2025, sanctions checks will be a legal requirement

Firstly, what are sanctions?

Sanctions come in a few shapes and sizes, but they are ultimately a set of tools used by governments to target, restrict and penalise specific people and companies (and ships) associated with an organisation or regime that is considered a threat to national security, international peace or who are associated with human rights violations, corruption or terrorist financing. Sanctions can include:

• Targeted asset freezes
• Directions to cease all business
• Travel bans
• Restrictions on a wide variety of financial markets and services, including using UK financial services to execute property transactions

In the UK, the Office for Financial Sanctions Implementation (OFSI) – a branch of the UK’s HM Treasury – is responsible for the implementation and enforcement of sanctions. 

What is changing from 14th May 2025?

From 14th May 2025, all commercial and residential lettings agents in the UK are required to comply with UK financial sanctions regulations. Previously, sanctions checks performed by lettings agents formed part of standard customer due diligence under the UK’s Money Laundering Regulations (MLRs); however, this was only relevant to letting agents who dealt with tenancies that had a rental value in excess of 10,000 euros per month, under the UK’s Money Laundering Regulations (MLRs). The OFSI has now determined that all letting agents are required to report to the OFSI as soon as possible if they know or have reasonable cause to suspect that a landlord or tenant is subject to financial sanctions (is a ‘designated person’), or has committed a breach of financial sanctions regulations.

Why are the rules changing?

The UK has vastly expanded its sanctions in response to the Russian invasion of Ukraine. In response to this, the OFSI conducted a report to assess threats to sanctions compliance involving UK property and related services firms (including letting agents) since February 2022. The report concluded, amongst other things, that UK property and related services firms (such as letting agents) are under-reporting suspected sanctions breaches and have enabled or facilitated sanctions breaches. These new rules aim to close this gap and bring every property manager, regardless of size, under the same level of accountability.

What are the penalties for non-compliance?

The OFSI has the power to issue fines of up to £1 million or 50% of the value of the total breach, even if the person had no knowledge or suspicion they were committing an offence. When considering enforcement action, the OFSI will take into account mitigating factors, such as:

• evidence of neglect or failure to take reasonable care;
• whether a person is unaware of their responsibilities; and
• the level of due diligence performed

When should you do sanction checks?

From 14 May 2025, sanctions checks must be performed on all tenants and guarantors before a tenancy agreement is signed or a new guarantor is added. It is advised to run checks upon lease renewal or if sanctions lists are updated too. 

OFSI hasn't confirmed retrospective requirements however it is best practice to begin applying checks to all new contracts and renewals from 14 May 2025 onward.

So how can you perform sanctions checks?

Sanctions checks can be performed against tenants and landlords manually or by using an automated sanctions checking system, offered by Concurrent. Manual checks can be performed using the OFSI Consolidated List search but can be prone to human error, searches should be performed carefully and evidence of each check would need to be recorded; searches can produce false positive results, so any possible or partial matches would need to be appropriately investigated. 

How is Concurrent helping out?

To help comply with the new regulation, Concurrent is launching automated sanctions checks to help property managers keep on top of checking tenants and guarantors. This system mitigates risks associated with manual checks and processes, giving property managers peace of mind while running automated sanctions checks at scale, and remaining compliant. 

Here’s how it works:

• Checks can be run automatically during the contract signing process as tenants and guarantors sign. Property managers can choose whether they want tenants and / or guarantors checked as part of the tenancy signing process.
• Results are instantaneous, with clear results detailed in the contracts dashboard. 
• If a possible match is found, Concurrent will investigate to determine ‘matches’ from false positives.
• All checks are priced at £1 + VAT

Busting some myths

Myth: PBSAs are exempt from reporting requirements 

• Fact: Unlike the Renters’ Rights Bill, which has detailed exemptions for the Purpose Built Student Accommodation sector, no such provisions have been detailed or communicated by the OFSI when referring to the need to comply with the updated sanctions regulations.

Myth:Student tenants don’t need to be checked

• Fact: the updated sanctions reporting requirements state that all letting agents – both residential and commercial – are required to report on suspected sanctions breaches or if there is reason to believe they are dealing with a designated person (a sanctioned individual.) There is no mention of any exemption applied to student tenants.

Myth: Checks don’t need to be run on British tenants

• Fact: British nationals (including dual nationals) can and do feature on the UK sanctions lists.

Myth: Only letting agents registered with HMRC for money laundering purposes or those businesses registered with the FCA are required to perform checks

• Fact: The rules here are clear that if a business or person performs ‘letting agency work’, they are required to comply with the sanctions reporting requirements. This is independent of whether or not the business or person is registered with the FCA or HMRC.

For more information, please contact Concurrent to ensure you stay compliant. 

You must report to OFSI via email (ofsi@hmtreasury.gov.uk ) as soon as possible if you know or have reasonable cause to suspect that a person (i) is a designated person, or (ii) has committed a breach of financial sanctions regulations.