AML (Anti Money Laundering) Checks For Landlords Explained

You may not have thought about it before, but anti-money laundering legislation applies to landlords and letting agents. You should be aware of these laws and how they apply to you to prevent any chance of being accused of fraud, money laundering or other illegal activity. Failure to comply could lead to fines, criminal charges, or even imprisonment. As the UK continues to crack down on economic crime, including fraud and money laundering, landlords are now expected to play a more active role in preventing illegal activity. This blog will explain the new AML rules as of May 2025, what they mean for you as a landlord, and how to remain compliant.

Table of Contents

What is Money Laundering?
Legal Updates as of May 2025
What is an AML Check?
AML Checks for Landlords
AML Checks for Tenants
Suspicious Activity – What To Do
Consequences of Non-Compliance with AML Laws

What is Money Laundering?

Money laundering is a technique used by criminals to hide money gained from illegal activities and make it look legitimate. Someone could use rent payments, deposits, or property deals to conceal stolen or illegal money, avoid taxes and fund other crimes. This could also be connected to using properties for illegal activities, such as dealing drugs. Even if you are unaware of this activity, failing to carry out proper checks could put you at risk of prosecution.

Legal Updates as of May 2025

As of May 2025, anti-money laundering checks are now mandatory for landlords, tenants and guarantors. If you work with a lettings agency or property management company, they may be doing these checks for you, but don’t assume this is being done automatically – check to make sure. Until now, AML checks were only required for high-value rental properties, e.g. those with a monthly rental value of over £8,300. Under the new UK property sanctions, this threshold no longer applies, and all rental properties are subject to the new compliance requirements. This only applies to new tenancy agreements that started on or after May 14th, 2025, so there is no need to check on tenants or landlords who already have a tenancy agreement in place.

What is an AML Check?

An anti-money laundering check, or AML check, is done to verify a person’s identity and make sure that their money is from legitimate sources.

AML checks typically include:

Identity verification (e.g. passport or driving licence)

Proof of address (e.g. utility bill or bank statement)

Source of funds checks (e.g. bank statements, salary information, or business records)

Sanctions and politically exposed person (PEP) checks to ensure individuals aren’t on government watchlists

FAQ: What is a PEP (Politically Exposed Person)?

As per the Money Laundering Regulations 2017, a PEP is someone who is entrusted with a prominent public function, making them a higher risk for potential bribery or corruption. These are usually heads of state or government, members of parliament, judicial or military officials, and other similar roles. Being a PEP doesn’t mean someone is automatically involved in wrongdoing, but it does mean that extra due diligence is required to verify the legitimacy of their funds and activities.

Sanctions are legal restrictions placed by governments or international bodies (like the UN or UK government) on individuals, companies, or even entire countries. These sanctions are typically used to fight terrorism, international crime, or human rights abuses. If a person appears on a sanctions list, it is illegal to enter into a financial transaction with them, such as renting out a property. Letting a property to someone on a sanctions list could result in severe penalties, including prosecution.

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AML Checks for Landlords

As a landlord, you may now be subject to an AML check, especially if you are entering into a new tenancy agreement or dealing with a new letting agent. You may need to provide evidence of your own identity and address, proof of property ownership such as HM Land Registry records, where the funds came from for property investment or refurbishment, and demonstrate compliance with AML obligations, i.e. checks on potential tenants.

AML Checks for Tenants

You should verify the identities of all new tenants before a new tenancy agreement is signed – you should be doing this anyway to fulfil Right To Rent checks and as part of your due diligence as a landlord. You can verify the identity of every adult tenant living at your property by checking official photo IDs such as a passport or driving licence, proof of address such as a utility bill, and proof of a legitimate income such as paychecks, bank statements or other proof of employment. Be sure to meet the tenants in person so you can make sure their ID matches, and be on the lookout for signs of tampering. If your tenant doesn’t provide ID or makes excuses as to why they can’t, offers to pay large sums of rent upfront in cash, or cannot provide proof of their address or income, you should not rent to this person.

Check to see if they appear on the UK Sanctions List, an official government register of individuals, organisations, and entities that are subject to financial, trade, or travel restrictions imposed by the UK. You can check if potential tenants appear on the UK Sanctions List here. If a tenant, landlord, or guarantor appears on the sanctions list, it is illegal to proceed with the tenancy.

You should keep records of these checks for at least 5 years following the tenancy – this will provide proof that you performed all required checks before entering into a tenancy agreement. Keep these records secure to comply with data protection requirements – use a lockable filing cabinet for physical documents, or digital storage secured with a password.

Suspicious Activity – What To Do

If you suspect or discover that your tenants are engaged in money laundering through your property, do not alert or confront them. This could be considered to be tipping them off and could land you in legal trouble. You can report them to the National Crime Agency (NCA) as soon as possible. This is the legal way to report suspected money laundering. You don’t need proof of money laundering, just a reasonable suspicion. If your prospective tenant appears on the UK Sanctions List, you can report them to the Office of Financial Sanctions Implementation (OFSI).

Consequences of Non-Compliance with AML Laws

These new anti-money laundering laws aren’t just a box-ticking exercise – they are essential legal obligations that have serious consequences for non-compliance. If you fail to comply, you could be subject to a fine, criminal prosecution, confiscation of assets and irreparable damage to your reputation.

While these new changes to AML laws make extra work for landlords and letting agents, they are essential for protecting the UK’s property market from criminal abuse. By carrying out sanctions checks, landlords help to ensure they are not unwittingly allowing sanctioned individuals to use UK property for illegal purposes, such as laundering money or evading government restrictions. Landlords have a legal duty to help prevent money laundering. Reporting suspicious activity protects not only the wider community, but also your reputation and property business.
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