Sanctions Checks for Letting Agents - a deep dive.

OFSI Letting Agent Guidance Advice

Executive Summary

I have reviewed the OFSI guidance published on March 2025 (“the guidance”) as well as the Sanctions and Anti-Money Laundering Act 2018 (“the act”) which gives the government powers to enact sanctions and dictate their enforcement. I have been asked to advise on the extent of these checks, particularly whether all tenants need to be checked.

I find the guidance to be unhelpfully ambiguous over the scope of what a ‘prospective tenant’ is, so I turned to the act to see if I can infer what the broader intention is behind these rules and work from there. I have also emailed the OFSI to get their opinion on my conclusions.

Taking the act into account, it makes no sense for the scope of ‘prospective tenant’ to be limited, and the ambiguous language used by the OFSI may be just to cover all eventualities rather than trying to omit certain types of tenants. With this in mind I think it would be sensible, pending further guidance from the OFSI, to treat the requirement as applying to all tenants. This can be outsourced to a referencing agency.

Checks on tenants only need to be done at the point a tenancy agreement is being discussed (i.e. referencing) rather than at the point of initial enquiry.

Methodology

This issue has reached the industry’s attention through the publication of the guidance on the rules for letting agents, but the legislative framework for these rules is set out in the act. The main issue for letting agents is do I need to check all tenants at the point of agreeing a contract? I take issue with the guidance because it appears, to me, that the definition of ‘prospective tenant’ is blurry. On this basis I must refer to the act to get a broader picture of these rules and why they are being implemented.

The act makes broad provisions about sanctions relating to ‘land’ – including ‘making available’, ‘acquisition of’ and ‘for the benefit of’ sanctioned individuals. Land includes ‘leases’ of land i.e. tenancies.

It is clear to me that the intention of the act is to prohibit sanctioned landlords from making money from their UK assets and to prohibit sanctioned tenants from leasing properties. With that in mind, I turn to the guidance.

In my opinion the guidance is poor because of the vague definition of ‘prospective tenant’. For clarity, there is no vagueness on ‘prospective landlord’ – the only issue is with the tenant definition. It is possible to come to an initial conclusion from reviewing the tenant definition that it only applies to tenants who instruct agents to find a property that is not currently listed with that agent i.e. a ‘moving agent’. I have set out some sections of the guidance below which support that position:

‘a person (a “prospective tenant”) seeking to find land to rent…’

‘“Instructions” here are considered the result of a prospective tenant formally instructing, engaging or authorising a letting agent to act on their behalf to find land to rent’

These two sentences run contrary to the way in which most letting agents would understand their roles to be.

A prospective tenant does not ‘instruct’ a letting agent to ‘find land to rent’. A prospective tenant would usually contact a letting agent in response to a specific property listed with that agent. A prospective tenant does not ‘instruct’ a letting agent insofar as they do not sign formal terms of business – but there may be a less formal instruction such as a broad outline of the type of property a prospective tenant is looking for.

The words ‘seeking to find’ also suggest that a property has not yet been ‘found’ i.e. it is not already listed with that agent’.

There is one paragraph which suggests that these rules apply to all tenants:

‘you are not obliged to report if you have knowledge or reasonable cause to suspect that a prospective tenant is a designated person or has breached financial sanctions – until the point that a prospective tenant’s offer is accepted by the landlord. This is because of the large number of prospective tenants a letting agent could encounter during the course of their work for the prospective landlord.’

This suggests that the OFSI expect a ‘large number’ of tenants to be affected by this. This is not in-keeping with a ‘moving agent’ model, but it also does not fully support the idea that all tenants are captured by these rules because an agent could still face a number of enquiries that do not lead anywhere.

I suspect that the issue with the ‘prospective tenant’ definition is that it could have been clearer, particularly because the requirement to check only starts at the point where an agreement is being entered into and so other referencing checks will likely be happening as well. That said, I think the language is purposefully broad and vague to capture all tenants rather than omit certain classes of tenants.

I have contacted the OFSI who have suggested a two week turn-around time on a response. Hopefully their guidance can be definitive, but I think it makes sense to err on the side of caution – particularly because it could be incorporated as part of a referencing check – until we have confirmation either way.