Protecting Tenants and Landlords: Rental Fraud and New AML Regulations
With rental fraud on the rise and new Anti-Money Laundering regulations coming into force in May 2025, it is more important than ever to strengthen security measures. This blog explores the risks, strategies to prevent rental fraud, and how Cope & Co. is taking proactive steps to protect our clients.
Rental fraud is an escalating issue, costing tenants and landlords millions each year. Fraudsters are becoming more sophisticated, exploiting gaps in verification and targeting unsuspecting renters, particularly students and those relocating. At Cope & Co., we are committed to staying ahead of these threats by implementing rigorous referencing, educating tenants, and keeping landlords informed.
The Importance of Thorough Referencing
One of the most effective ways to combat rental fraud is to implement rigorous tenant screening processes. Thorough referencing not only protects landlords from unreliable tenants but also helps prevent fraudulent applications that could lead to financial and legal complications. It is imperative to stick to stringent referencing procedures, ensuring all prospective tenants are thoroughly vetted before a tenancy agreement is signed.
Key Strategies to Prevent Rental Fraud
To protect all parties involved in the rental process, we recommend the following best practices:
Verifying property ownership is essential before listing any property. It is vital to ensure that landlords have legitimate ownership or management rights by conducting Land Registry checks or reviewing official documentation, reducing the risk of scammers posing as landlords.
Conducting comprehensive tenant referencing is another key measure. By utilising robust referencing services, we validate tenant identities, employment statuses, income verification, and rental histories, significantly minimising the risk of fraudulent applications from individuals with false documentation.
Educating prospective tenants about rental fraud is also crucial. Fraudsters often prey on unsuspecting tenants, particularly students and individuals relocating from abroad. We inform tenants about common scams and advise them to avoid making payments before viewing properties in person, be cautious of deals that seem too good to be true, and steer clear of listings that lack property photos or use stock images.
Transparency throughout the rental process is equally important. Fraud thrives in environments with limited information, so we ensure that all terms, fees, and conditions are documented and easily accessible to clients. Clear communication builds trust and reduces the chances of fraudulent activity.
Encouraging secure payment methods is another way to mitigate fraud risks. Tenants should always use traceable payment methods, such as direct bank transfers to verified accounts, rather than cash or anonymous payment services. Implementing in-person verifications also enhances security. Where possible, we conduct physical property checks and meet tenants before signing agreements. If an in-person meeting is not feasible, secure video verification can be an alternative.
Reporting suspicious activity is an essential step in preventing further fraud. If a listing appears suspicious or if a tenant reports a potential scam, it is crucial to act swiftly. We promptly report fraudulent activities to Action Fraud and relevant authorities to help protect future victims.
New Sanctions Reporting Obligations for Letting Agents from May 2025: What Landlords Need to Know
From 14 May 2025, letting agents in England will, for the first time, be subject to 'sanctions reporting obligations'. These requirements, already in place for estate agents and other financial firms, mean that letting agents must report any reasonable suspicion that a landlord or tenancy applicant is a designated person under financial sanctions regulations.
This change effectively aligns letting agents with estate agents, who are already required to report suspected matches to individuals or entities on the UK’s consolidated sanctions list when handling property sales. Now, landlords must understand how this impacts their lettings and what steps they may need to take to remain compliant.
When Do Letting Agents Need to Report?
A key aspect of these new rules is that the reporting obligation does not apply the moment a landlord or tenant makes contact with an agent. Instead, it is triggered when a business relationship is formally established.
For Landlords
Letting agents must report a suspected designated person once a landlord has:
✔ Formally instructed the agent to let their property
✔ The agent has taken action in response to those instructions (e.g., marketing the property, conducting viewings, or tenant referencing)
Simply advertising a property or providing a platform for landlords and tenants to communicate (such as a noticeboard or online listing service) does not count as forming a business relationship.
For Tenancy Applicants
The obligation to report a tenant is triggered once the landlord has accepted their offer to rent a property. Before this point, there is no requirement for letting agents to check or report tenants.
What This Means for Letting Agents and Landlords
These changes introduce stricter compliance for letting agents, ensuring that landlords are not unknowingly engaging with sanctioned individuals. However, a key point to note is that a letting agent may hold details of a designated person for some time before a reporting obligation is triggered.
This delay makes sense from a regulatory standpoint. Large letting agencies hold extensive databases of landlords and tenants, many of whom never proceed to a formal transaction. By requiring reports only at the point of economic activity, the system avoids being overloaded with unnecessary alerts where no financial transactions occur.
For landlords, this means:
✅ Greater assurance that their tenants are compliant – Letting agents will be screening all applicants to prevent landlords from inadvertently breaching sanctions laws.
✅ More due diligence from letting agents – Expect stricter identity verification and compliance checks before entering into a tenancy agreement.
✅ No minimum rent threshold – Unlike anti-money laundering (AML) regulations, which only apply to rentals above €10,000 per month, sanctions obligations apply to all tenancies—regardless of rent value.
✅ Severe penalties for non-compliance – Letting agents who fail to conduct these checks or report designated persons face serious legal and financial consequences.
How This Fits with Anti-Money Laundering (AML) Laws
The sanctions regime operates alongside existing AML laws, but it introduces broader obligations.
🔹 AML laws apply only to high-value lettings where rent exceeds €10,000 (approx £8600) per month.
🔹 Sanctions laws apply to all lettings, regardless of rent value - meaning all landlords and tenants must be screened.
What Should Landlords Do?
To stay ahead of these changes, landlords should:
🔹 Ensure they are working with a compliant letting agent – Ask about their sanctions screening processes.
🔹 Prepare for additional verification checks – Be ready to provide identity and ownership documents when instructing an agent.
🔹 Understand the penalties for non-compliance – Sanctions breaches can lead to severe consequences, including financial penalties and property freezing orders.
By being proactive and informed, landlords can navigate these regulatory changes smoothly, ensuring their lettings remain compliant and secure.
Final Thoughts
The 14 May 2025 deadline brings a new layer of compliance and responsibility for letting agents, aligning them with estate agents in terms of sanctions reporting. While this means more checks and processes, it ultimately protects landlords and the wider property market from financial crime.
For more updates on landlord regulations and compliance, check our blogs and follow Cope & Co. on social media.
