Your step-by-step guide to staying compliant, reducing risk, and protecting your agency from financial crime.
Estate and letting agents play a crucial role in the UK property market. That makes them a prime target for criminals looking to launder money or hide assets. Under the Money Laundering Regulations 2017, particularly Regulation 33A, estate and letting agents are legally required to identify Politically Exposed Persons (PEPs) and sanctioned individuals, and apply Enhanced Due Diligence (EDD) where needed.
This guide explains what you need to know. How to screen effectively. And what red flags to look out for, all in plain English!
What is a PEP?
A Politically Exposed Person (PEP) is someone who holds (or has held) a high-profile public role, as well as their close family members and known associates. They pose a higher risk of corruption and bribery.
Examples of PEPs include:
- Heads of state or government ministers
- Members of parliament (MPs)
- Senior military officers or judges
- Executives at state-owned companies
- Close family (spouses, parents, children)
- Business associates of any of the above
💡 Flex Tip: Don’t rely on names alone. Always confirm matches using date of birth, nationality, and address for better accuracy.
What is a Sanctioned Individual or Entity?
A sanctioned person or business is subject to restrictions imposed by the UK, UN, EU, or other authorities, usually due to involvement in:
- Terrorism or financing of terrorism
- Corruption or serious crime
- Human rights abuses
- International conflicts
Sanctions can include asset freezes, bans on business dealings, or restrictions on travel.
💡 Flex Tip: A “near match” doesn’t always mean a hit. Sanctions screening should be part of a wider due diligence process, not a tick-box exercise.
Who Needs to Be Screened?
As an estate or letting agent, you’re required to screen all relevant parties in a transaction, including:
- Buyers
- Sellers
- Landlords
- Tenants (especially those paying large amounts up front)
- Beneficial owners of any companies involved
Use a trusted sanctions and PEP screening tool and document every check, including results.
💡 Flex Tip: Be especially alert when dealing with offshore companies, third-party payers, or corporate landlords. These can be red flags.
What to Do if You Find a PEP or Sanctions Hit (EDD Process)
If your client (or someone associated) is a confirmed PEP or appears on a sanctions list:
✅ Carry out Enhanced Due Diligence (EDD):
- Obtain extra ID and verify source of funds
- Conduct a full risk assessment
- Get senior management approval before proceeding
- Apply ongoing monitoring and update their risk profile at least annually
💡 Flex Tip: A PEP renting a luxury property might be trying to disguise asset ownership. Ask: Does this make commercial sense?
Record-Keeping Requirements
Keep clear and secure records of your due diligence process for at least 5 years after a client relationship ends. This includes:
- Names and roles of all parties screened
- Screening results and match scores
- Any red flags or risk assessments
- Notes of approvals and escalation decisions
- Monitoring actions and review cycles
💡 Flex Tip: Always log rejected clients too, including the reason (e.g. sanctions hit, incomplete EDD). It shows you’re taking compliance seriously.
Ongoing Monitoring for High-Risk Clients
Don’t stop after onboarding. For high-risk or PEP clients, you should:
- Reassess risk levels quarterly or annually
- Update screening results regularly
- Track any changes (e.g. political status or sanctions updates)
- Keep your senior team in the loop
💡 Flex Tip: Use automated tools to stay on top of changes. Real-time alerts save time and keep you protected.
Common Red Flags in Property Transactions
Here are some key red flags that should trigger deeper investigation or escalation:
- Cash buyers unwilling to explain source of funds
- Properties bought via offshore companies without clear reason
- Reluctance to provide ID or documents
- Payments made by third parties
- Use of multiple ownership layers
💡 Flex Tip: If a deal feels overly complex, rushed, or secretive. Always trust your instincts. Escalate internally and document everything.
Ask This During Onboarding
Use a clear client declaration:
“Are you, or any associated person, a Politically Exposed Person (PEP), or currently subject to UK or international sanctions?”
A refusal to answer, or a “yes,” means you must conduct EDD before proceeding.
Add a Clause to Your Terms & Conditions
To protect your agency, include a compliance clause:
“We conduct AML and sanctions checks on all clients. We reserve the right to decline or withdraw from any relationship where an individual is identified as a PEP or subject to financial sanctions.”
This sets clear expectations and gives you a legal safeguard.
Staff Training & Escalation
Your team should be trained to:
- Spot red flags in real-life situations
- Follow internal escalation protocols
- Know when to pause transactions and involve senior decision-makers
💡 Flex Tip: Run mock scenarios in team meetings to improve confidence and understanding. E.g. “What would you do if a sanctioned company wanted to rent via a proxy?”
Rejection Policy (Optional)
Some agencies choose a zero-tolerance policy:
“We do not onboard any individual or entity identified as a PEP or subject to sanctions. Any exceptions require documented senior approval and full EDD.”
You don’t have to go this far, but it’s worth considering depending on your risk appetite.
Quick Checklist for Estate & Letting Agents
| Compliance Step | Action |
|---|---|
| Screen all parties | ✅ Use a trusted screening tool |
| Document checks | ✅ Save names, dates, and results |
| Apply EDD where needed | ✅ Collect extra documents |
| Monitor high-risk clients | ✅ Set review dates and alerts |
| Retain records | ✅ Minimum 5 years |
Real-Life Scenarios: PEP & Sanctions in Practice
Understanding the theory is one thing, but real-world application is where compliance really counts. Here are three relatable examples of how estate and letting agents can encounter Politically Exposed Persons (PEPs), sanctioned individuals, or suspicious activity. And what to do when it happens.
Scenario 1: The Offshore Tenant with Upfront Rent
Letting Agent | London | High-Value Rental
A letting agent was approached by a representative of an overseas company wishing to rent a £6,500/month penthouse in central London for a “senior client” relocating for business. The rent was to be paid 12 months in advance by a third-party offshore company.
Upon screening, the agent discovered:
- The individual was a close associate of a former government minister (a PEP).
- The offshore entity funding the rent had limited transparency on ownership.
The agent:
- Flagged the case as high risk.
- Carried out Enhanced Due Diligence (EDD), including verifying the source of funds.
- Escalated to senior management and declined the tenancy due to unverifiable ownership and high exposure risk.
💡 Flex Tip: Third-party payments and vague company structures are common red flags. Always identify who controls the funds.
Scenario 2: The Silent Seller
Estate Agent | Midlands | £900k Property Sale
During onboarding, a seller refused to answer the client declaration about PEP or sanctions status. They also declined to provide ID documents for two weeks, despite several reminders.
On screening, the agent found:
- The seller’s business associate was on the UK sanctions list for links to corruption overseas.
- The property had been purchased recently in cash via a trust.
The agent:
- Flagged the relationship and ran company and associate checks.
- Informed their MLRO (Money Laundering Reporting Officer).
- Made a Suspicious Activity Report (SAR) to the National Crime Agency (NCA).
- Declined the listing and documented the decision.
💡 Flex Tip: Refusal to engage or provide documents can be as telling as a confirmed red flag. Escalate and document.
Scenario 3: The Politically Connected Buyer
Estate Agent | Manchester | New-Build Investment
A buyer based in the Middle East wished to purchase five new-build properties as an investment. The buyer passed initial checks, but when re-screened 3 months later during the reservation stage, their spouse had just been appointed to a national government position.
As a result, the client became a close family member of a PEP.
✅ The agent:
- Re-classified the buyer as high-risk due to new PEP status.
- Conducted EDD and obtained enhanced source of funds verification.
- Sought approval from senior management to proceed with the sale.
- Set up ongoing monitoring due to the client’s changing status.
💡 Flex Tip: Always review risk profiles at key stages — onboarding, offer accepted, contract exchange — especially in long sales cycles.
Helpful Tools & Resources
- HMRC AML Supervision for Estate Agency Businesses
- UK Sanctions Lists (OFSI)
- Companies House – Check PSCs
Need Help with PEP & Sanctions Checks?
Flex AML offers:
✅ AML templates & guides
✅ Client screening policies
✅ Customised staff training
Just drop us a message or contact us here, we’re always happy to help.
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