Anti-Money Laundering Rules Hit Landlords
We have seen multiple queries from landlords being charged for anti-money laundering (AML) checks by letting agents and we know others do not realise that every landlord MUST now perform an anti-money laundering check on every tenant. Where is the line between something you MUST do and something where someone is just using it as an excuse to bill you for something?We try to explain.
The Rules
AML checks used to be mandatory on very large rents (think £10,000/month) but since April this year, they are required for ALL rental agreements. This applies to a landlord taking on a new tenant as well as a letting agent taking on a landlord or a tenant, they will need to AML check them both.
The official wording reads, "For self-managing landlords, the main anti-money laundering (AML) rules include conducting upfront identity and beneficial ownership checks for tenants and landlords, performing risk assessments, and maintaining an audit trail of all documents and transactions for a minimum of five years. Landlords must also conduct annual sanctions checks on tenants and landlords. If you use a letting agent, they are responsible for compliance, but you should discuss your responsibilities with them. "
What Does This Mean If You Self-Manage?
It is no longer acceptable to take on a tenant without running an AML check. It is possible to do this yourself using the gov.uk website but it is not easy to find the person you are checking. Even before the Renters Rights Bill becomes law we recommend that every landlord uses a referencing service for every tenant – the costs are not that high and as these checks become more sophisticated it will be harder and harder for bad tenants to find accommodation, which is good for everyone.
If you do use a referencing service, not only will they check your prospective tenants credit history but typically, it will also cover the necessary AML and Right to Rent checks as well as a range of other measures which will ensure you know exactly what you are getting.
(And we can all make this system work better if we ensure that when we get a bad tenant, with say arrears, we always use the Money Claim Online service to ensure that CCJ's are logged against that person).
What Does This Mean If You Use An Agent?
We could argue that as you are paying to have your prospective tenant referenced, that will include AML checks and therefore there should be no additional charge. Some agents play it this way, many do not.
Similarly, once a tenant has passed an AML check there appears to be no need for an annual repeat of the process but many agents have chosen to make it an annual charge – presumably on the grounds that they are renewing the contract and a new contract warrants a new check. As with all of these laws, until someone appears in court charged with failing a check on an annual basis, these things are open to interpretation – but if you find your agent is charging for a check on both you and your tenant annually, we would suggest they are taking advantage of your ignorance. So feel free to push back or accept that you are paying for an unnecessary service (if there is a service here at all).