AMLG2300 - Sector Specific Guidance: Letting Agent Business Guidance
1. Who is this Guidance For
This guidance should be read in addition to Parts 1 and 3. The following applies to LABs under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (referred to as “the Regulations” in this guidance).
We use the term “illicit finance” in this guidance to mean money laundering, proliferation financing and the financing of terrorism.
2. LAB Definition
A LAB is defined in the Regulations under regulation 13(3) to (5) of the Regulations as:
A LAB is a firm or sole practitioner who, or whose employees, carry out letting agency work.
“Letting agency work” means work consisting of things done in response to instructions received from:
a prospective landlord seeking to find another person to whom to let land, or
a prospective tenant seeking to find land to rent, and
done in a case where an agreement is concluded for the letting of land—
for a term of a month or more, and
at a rent which during at least part of the term is, or is equivalent to, a monthly rent of £10,000 or more (or equivalent in any currency).
The letting or rental of land includes tenancy agreements, leases, licences, or any other agreement to let or rent any property, building or land over the threshold.
Instructions received from prospective landlords and tenants include instructions from a third party acting on the landlord or tenant’s behalf, such as joint agents or relocation agents.
Important note: the instruction does not need to be from both a landlord and a tenant. Instructions from either a landlord or tenant would bring a business in scope, for example businesses renting their own property (see paragraph 6 below).
Any of the above activities are referred to as LAB activity below.
3. Exemptions to Letting Agency Work
There are some exemptions to “letting agency work”:
Publishing advertisements or disseminating information.
Providing a means by which a prospective landlord or a prospective tenant can, in response to an advertisement or dissemination of information, make direct contact with a prospective tenant or a prospective landlord.
Providing a means by which a prospective landlord and a prospective tenant can communicate directly with each other.
The provision of legal or notarial services by a barrister, advocate, solicitor, or other legal representative communications with whom may be the subject of a claim to professional privilege or, in Scotland, protected from disclosure in legal proceedings on grounds of confidentiality of communication.
These exemptions only apply if your business does not do any activity covered in paragraph 2. If you conduct any activity mentioned in paragraph 2 along with any of the exempted activities, your business is a LAB, and you must register for supervision with HMRC and comply with this guidance.
4. Who is a LAB?
LABs could include:
High Street or online letting agents
Residential letting agents.
Commercial letting agents
Land agents that do LAB activity.
Commercial landlords - companies, or businesses that own properties, either directly, or via a special purpose vehicle, operate by way of business, and rent them out, are LABs and require to be registered.
Property developers, if they rent out property over the threshold.
Self-employed agents or consultants to a principal letting agent that conduct LAB activity.
Property management agents that conduct LAB activity.
A solicitors’ property centre (in Scotland), that does LAB activity.
Holiday lets serviced apartments and short-term rentals (if the rental term is a month or more and over the threshold).
Relocation agents, or property sourcing agents, who provide a property search and home finding service, where they act on behalf of the tenant in the rental transaction, which may include the negotiation of the terms of the rental agreement.
5. Who is not a LAB?
LABs do not include:
Rentals for a period shorter than one month.
Rentals under £10,000 per month.
Property management not including LAB activity.
6. Self-managed Agents and Private Landlords
Private landlords, who own property in their own names, over the threshold and market them to rent themselves, without going through an agent, are not within scope of the regulations as a LAB. If the landlord uses another person, or company, to market the properties or seek to find tenants on their behalf, that person or company would be an agent and would be in scope if the transaction is above the financial threshold for a let of a month or more.
Commercial landlords (businesses and companies who, by way of business, seek to find tenants for land or property over the threshold) are LABs. This includes any company that owns property and rents it above the LAB threshold.
If unsure about whether you need to register as a LAB, please contact MLRCIT@HMRC.gov.uk.
7. National Risk Assessment (NRA)
The NRA 2025 assesses the risk of money laundering through LABs to be low. However, it notes that there are inherent vulnerabilities in the sector of which you should continue to be aware of.
There is very little evidence to suggest that UK property transactions are used for terrorist financing and the risk of terrorist financing for letting agent businesses is assessed to be low.
Please read the NRA 2025 for further information on risks for LABs.
The NRA is a central part of the UK’s “risk-based approach” to countering ML and TF. The NRA sits alongside System Prioritisation which aims to publish a list of economic crime priorities to inform public-private resource. These are intended to support the regulated sector to effectively allocate their internal resources on a cost-neutral basis while maintaining their regulatory responsibilities.
Typologies in the NRA should be read in conjunction with the priorities published by the NECC & FCA under System Prioritisation. These priorities are intended to provide context to the risks in the NRA will provide more detail on the priority areas some sectors should note for certain typologies. The priorities are expected to be reviewed annually as well as on publication of a new NRA. When the priorities are published guidance will be provided on how to relate these to each NRA typology.
You should take account of the system priorities and pay particular attention to anything which might fall into one of the priority categories, making a meaningful SAR where possible, given these activities are of key interest to law enforcement.
8. Proliferation Financing
For more general information on proliferation financing, please see AMLG1100 section 1.6.
LABs must be aware of proliferation financing (PF) and assess the risk their business faces from PF in their risk assessment, training, and policies, controls and procedures (PCPs). Whilst the National Risk Assessment of Proliferation Financing does not mention LABs specifically, LABs must be aware of the risks of PF to their business.
They should specifically be aware of the higher risk of PF from transactions involving individuals or businesses that could be linked to PF, for example from the Democratic People’s Republic of Korea (DPRK) and Iran.
Please see the National Risk Assessment of Proliferation Financing for more information on specific risks.
9. How can LABs be used for Illicit Finance?
LABs handle funds. This increases the risk that LABs may unwittingly and directly facilitate money laundering. For example, the LAB may be used to launder money when a tenant requests that a holding deposit be returned as they are not following through with a tenancy agreement.
Criminals may buy property with the proceeds of crime, renting it out through a letting agent, giving the criminal an apparently legitimate source of funds.
Criminals may use rented property for criminal purposes. This could include modern slavery, human trafficking, manufacturing and distribution of drugs, facilitating prostitution, and terrorist activity.
Criminals may use ghost lettings in different forms. This could be renting a property where the tenant does not occupy the property.
To understand the specific risks you, as a LAB, faces for money laundering, terrorist financing and proliferation financing, please see Part 3 – Understanding Risks for LABs, of this guidance.
10. Registration & Approvals Checks
Anyone who engages in LAB activity must comply with the Regulations. A business must not trade as a LAB until they have applied to register with HMRC. See AMLG1500 for more information on registration.
All beneficial owners, officers and managers (BOOMs) of your business are subject to approvals checks by HMRC when applying for registration or when a new BOOM is appointed. You can trade as soon as you apply for registration for supervision, and all BOOMs specified on the application form can act in their roles: they do not have to wait for completion of the approvals check.
Please see AMLG1600 for more information on the approvals check.
Further information on who needs to register and how the registration process works is available in the HMRC’s money laundering supervision registration guidance.
11. LAB Threshold
The LAB threshold (see 1.1 above) applies to the monthly rental value, rather than the total value of the transaction. Thus, if a letting arrangement exceeds £10,000 due to deposits, management charges, floats or similar, it will only be a relevant let for the purposes of the Regulations if the let is for a term of a month or more at a monthly rent of £10,000 or more.
Where the value of a rental is just below the threshold it is important to consider whether there is a realistic likelihood of the rental value rising above the threshold during the lifetime of the agreement or contract. If so, you must identify and verify your customer (see paragraph 18 below) before the signing of the tenancy agreement. See AMLG11300.
For example, a let for 7 years with a value of £8,000 per month, increasing 10% per year would fall into scope before the contract ends. The same also goes for periodic tenancies if the rental amount is below the threshold but is likely to increase to over the threshold. A letting agent carrying out such transactions would need to be registered for supervision with HMRC and apply this guidance, completing CDD at the start of the agreement or contract.
The LAB threshold applies to individual rental agreements. For example, in a block of flats the threshold applies to each unit, rather than the building as a whole (unless the whole building is rented to the same person).
12. Turnover Rent
Turnover rents are where a tenant pays a base rent which represents a discounted market rent, plus a top up based on a fixed percentage of gross turnover for the year. If either the base rate, or the turnover rate, or total of both, goes over £10,000 this is LAB activity. A letting agent carrying out such a transaction would need to be registered for supervision with HMRC and apply this guidance, completing CDD at the start of the agreement or contract.
13. Pooled Client Bank Accounts
Many letting agents use pooled client accounts (PCAs). The use of a PCA by a LAB does not necessarily bring you into scope of the Regulations. You are only a LAB if you meet the definition in 1.1. above. HMRC only supervises LABs trading over the threshold, or who are likely to soon be trading over the threshold. You should not register for supervision and do not need to apply the Regulations to your activity if you do not and are unlikely to execute any letting agreements that exceed the threshold.
14. Communal Housing and Houses of Multiple Occupancy (HMOs)
A house share can be in scope of LAB activity, if there is a single agreement in place where the total rent is over the threshold.
For example: If multiple tenants are sharing a property on one rental agreement and the total rent is over the threshold, this is in scope of the Regulations.
This includes student and university properties.
If multiple tenants share a property and have individual rental agreements, this would only be relevant activity if the individual rent was over the threshold. Combined rents from separate agreements for the same shared property are not within scope of the Regulations.
15. Holiday Lets and Short-Term Rentals
Holiday lets, short-term rentals and serviced apartments are within scope of the Regulations if the rental term is for a month or more and the monthly rental amount is over the £10,000 threshold.
This can include booking companies and travel agents, but only if the rental terms are for a month or more and over the £10,000 threshold. This does not apply to companies that only provide a means to contact the landlord.
16. Sub-lets and Guaranteed Rent Schemes
When a business, or individual, rents a property themselves and sub-lets it to another tenant for a rental term of one month or more, and the rental amount is over the threshold, they are acting as a LAB.
Guaranteed Rent Schemes, where a letting agent will guarantee the rent of a property are also within scope, when the rental term is one month or more, and the rental amount is over the threshold.
17. Customer Due Diligence (CDD)
The Regulations require that LABs complete CDD:
Before establishing a business relationship with the customer.
Before carrying out an occasional transaction.
The level of due diligence will depend on your risk assessment of each person in line with your overall risk assessment. LABs must verify that all parties to the rental agreement are who they say they are. You must carry out CDD on all customers even if you knew them before they became your customers. This is because you must be able to demonstrate that you know all your customers.
In most cases the rent of land involves an element of duration so will be a business relationship rather than an occasional transaction. For more information on business relationships see AMLG11300 and AMLG11411.
18. Who is your customer?
The customer is the person or entity with whom you form a business relationship. The customer will usually be a landlord or tenant involved in a rental of land over the threshold. All entities, including those acting on behalf of the parties, involved in a relevant rental agreement must be treated as a customer for the purposes of CDD. This could include special purpose vehicles, agents, sub-agents, managing agents, trustees and guarantors.
Guarantors are a party to a tenancy agreement, and you would therefore be establishing a business relationship with the guarantor before any funds are called upon.
19. Timing of CDD
CDD must be undertaken as soon as practicable after first contact is made and at the latest by the time that a business relationship is established. See AMLG11300 for more information.
Where you are marketing a property for rent, your business relationship starts with the landlord.
CDD measures should be undertaken as soon as practical after first contact is made and at the latest, must be completed, by the time that a business relationship is established.
LABs must complete the ID verification aspects of CDD (Regulation 28(2)(a) & (b)), on the landlord before any terms of engagement, terms of business or any other contract or agreement between you and the landlord is made, and before the property is advertised.
You must complete ID verification aspects of CDD on the landlord before any terms of engagement, terms of business or any other contract or agreement between you and the landlord is made, and before the property is advertised.
Your business relationship with a prospective tenant starts at the point at which the tenant’s offer is accepted by the landlord. You must have completed the ID verification aspects of CDD on the tenant, guarantor or trustee before any agreement or contract is made.
HMRC recommends, that all aspects of CDD, including the assessment of the intended nature and purpose of the transaction, is completed as soon as practical after first contact is made with the customer – as a LAB cannot establish a business relationship (see above), with a customer if they have not completed all aspects of CDD, as per regulation 30.
No deposits can be taken to secure a property before CDD is completed, and a contract cannot proceed without CDD being satisfactorily completed.
In the case of an occasional transaction, the CDD must be completed before the transaction is completed.
Where you are unable to apply customer due diligence measures as required by regulation 28, you:
Must not carry out any transaction through a bank account with the customer or on behalf of the customer;
Must not establish a business relationship or carry out a transaction with the customer otherwise than through a bank account;
Must terminate any existing business relationship with the customer;
Must consider whether you are required to make a Suspicious Activity Report (SAR).
20. Ongoing monitoring of Business Relationships for LABs
You must continue to monitor a business relationship after it is established and for its duration. More information about ongoing monitoring is available in Part 1 paragraph 14.11 of this guidance.
In the event that a tenant renews a residential tenancy agreement through the LAB, updated CDD must be completed.
If the tenancy pre-dates LABs coming into scope of the regulations and no CDD has previously been completed, CDD needs to be conducted despite the previous relationship. If CDD has previously been conducted, the LAB will have to ensure the CDD previously obtained is adequate, and, if necessary, conduct fresh CDD.
21. Source of Funds and Wealth
As there is an element of duration to all transactions involving the rent of land, see section 17 above, you will have business relationships with your customers. This will require you to conduct ongoing monitoring throughout the course of the relationship, which may require you to verify both source of funds and wealth. You may decide to verify source of funds or wealth on other transactions if your risk assessment requires it.
Verifying your customer’s source of funds and wealth may be required when conducting enhanced due diligence (EDD). Where your customer is a politically exposed person or from a FATF Call for Action country you must, as part of your EDD measures, verify the source of wealth and source of funds.
It would be necessary to verify source of funds and wealth for all customers making a payment – this includes when guarantors pay, or when a third party pays the rental amount.
For more information, please see AMLG11630.
Things to consider:
Has the source of funds from which the rent is paid, changed during the course of the agreement. Extra care should always be taken where a tenant wants to pay their rent in cash due to the increased risk of money laundering.
Is there a deposit being paid by someone other than the tenant?
Does the tenant want to pay the rent in advance and is this proportionate with their income and means?
Is there a last-minute change of account from which rental payments are to be made from?
Is the source of the funds to rent, or fund the deposit, of the property proportionate with the customer’s income?
Document your rationale and decision-making - if HMRC asked you what you had done to establish the source of funds or source of wealth, would you be comfortable explaining and evidencing the decision you had made, why you made it and what you had done to satisfy requirements?
22. Right to Rent
All LABs in England are required by law to perform right to rent checks on tenants. This is separate from CDD but could form part of your CDD checks. Right to Rent checks do not replace the requirement for CDD.
For more information on Right to Rent please see the Home Office guidance.
23. Situations where you do not need to carry out CDD
You do not need to carry out customer due diligence on persons when:
You provide information to a potential customer, such as property location details. Simple requests for information may not result in any further contact or interest and does not form a business relationship.
A potential tenant makes an offer after you have ceased a business relationship with a landlord and therefore you will not be letting that property.
24. Commercial Lease Extensions
The initial granting of a commercial lease will require the letting agent business to conduct CDD and they will need to regularly review CDD whilst in a business relationship with either the landlord or tenant.
Subject to satisfying certain criteria, business tenants have a statutory right under S.28 of the Landlord and Tenant Act 1954 to extend the contractual term of their lease, usually a letting agent business will not be involved. If a LAB is involved in a commercial lease extension, as part of their ongoing monitoring, they may need to contact an existing client to review any information and conduct fresh customer due diligence.
25. Suspicious Activity Reports (SARs)
For more information on reporting suspicious activity see Part 1, paragraph 11 and Part 3 – Understanding Risks for LABs,of this guidance
These are some of the (non-exhaustive) factors to consider when deciding whether to submit a SAR in relation to letting transactions:
A third party, apparently unconnected with your customer pays rent or fees.
Rental or large deposit payments paid for fully in cash or a foreign currency.
The tenant will not disclose the source of the funds where required.
The landlord will not disclose their source of wealth where required.
The tenant does not appear to have the lifestyle or income that matches the amount needed to cover the letting value.
Complex corporate structures are being employed for no apparent reason.
Unusual source of funds, such as virtual currencies or funds from high-risk jurisdiction
A request is made for the LAB to hold a large amount of customer funds, which would seem unusual.
Full payment, or a large payment, for a rental is made up front.
Multiple lets are being taken up for no apparent reason.
Where it is known that a tenant is immediately sub-letting the land, and this would be considered unusual by the LAB.
A non-UK resident using intermediaries where it makes no commercial sense.
These factors could also be used for your business’ risk assessment.
26. Further Sources of Guidance
FATF risk-based approach guidance for estate agents - this guidance is mainly targeted at Estate Agent Businesses (EABs) but some of the risks also apply to LABs.
Home Office Right to Rent Guidance.
Letting agents in the UK must join a redress scheme. This is a separate requirement to money laundering supervision and is outside of the remit of HMRC, however, it is important to be aware of it. There are two approved redress schemes:
Letting agents need to be aware of the requirement to protect tenant’s deposits. Whilst this is separate to money laundering supervision and is outside of HMRC’s remit, further information on protecting tenant’s deposits can be found here.