Money laundering – the process of disguising the origins of illegally obtained money – poses significant challenges for the UK’s property rental sector. Landlords must understand their responsibilities and prevent their properties being used for criminal purposes.

Legal framework: anti-money laundering laws for landlords

The UK’s legal framework to combat money laundering is anchored by the Proceeds of Crime Act 2002 (POCA) and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. While estate agents and letting agents are explicitly covered by anti-money laundering (AML) regulations, landlords – especially those managing their own properties – must also be vigilant.

• Proceeds of Crime Act 2002 (POCA): POCA criminalises acquiring, using or possessing criminal property. Landlords receiving rent from illegal sources (such as proceeds from the sale of illicit tobacco or other contraband), risk prosecution and confiscation of assets.
• Money Laundering Regulations 2017: These regulations require businesses, including letting agents, to conduct client due diligence, ongoing monitoring and report suspicious activity to the National Crime Agency.
• Right to rent checks: Under the Immigration Act 2014, landlords must verify that tenants have the legal right to reside in the UK. While primarily immigration-focused, these checks can intersect with AML compliance if tenants provide fraudulent documents or funds.

The Viscomi case

In 2019, Lincolnshire Trading Standards prosecuted Mr Viscomi, the owner of a property repeatedly used for selling illicit tobacco and alcohol. Mr Viscomi had received warnings and advice from Trading Standards and despite being informed of the criminal activity and the risks of accepting rent from such tenants, he continued to do so.

The court found that he knew of the illegal activity and had received specific correspondence outlining the consequences of his actions. Though he pleaded guilty and was of previous good character, the judge imposed a suspended custodial sentence, unpaid work, and set a timetable under the Proceeds of Crime Act for potential confiscation of rent received over six years.

This case demonstrates that:

• Landlords can be prosecuted not only for direct involvement but also for knowingly benefiting from the proceeds of crime
• The authorities expect landlords to take active steps once notified of illegal activity on their premises
• Ignorance or inaction is not an acceptable defence when provided with clear information about criminal use of a property

Landlords’ responsibilities: due diligence and best practices

Practical and reasonable steps landlords can take to ensure their properties are not used as vehicles for money laundering include:

• Know your tenant: Carry out identity and financial checks on all tenants. This may include requesting proof of income, bank statements and verifying the source of funds for deposits and rent.
• Ongoing monitoring: Stay alert to unusual payment patterns, such as rent paid in cash, payments from overseas accounts with no clear link to the tenant, or funds from multiple third parties.
• Respond to information: If authorities (for example, Trading Standards or police) alert you to criminal activity on your property, act promptly by seeking legal advice and considering tenancy termination if warranted.
• Record-keeping: Keep comprehensive records of all tenant checks, correspondence and rent receipts. Documentation may be vital should concerns arise.
• Report suspicious activity: If you suspect money laundering, submit a suspicious activity report (SAR) to the National Crime Agency without tipping off the tenant.

Enforcement and penalties

Failure to comply with anti-money laundering duties can result in:

• Criminal prosecution under POCA or other relevant laws
• Confiscation of rental income received from criminal sources
• Civil penalties and reputational damage
• Potential loss of the right to manage properties if found complicit or negligent

Landlords who demonstrate proactive compliance and good faith engagement with authorities are more likely to avoid severe penalties.

Fulfilling your legal responsibilities

Legal cases such as the prosecution of Mr Viscomi highlight the real-world consequences of failing to act on information about criminal activity by tenants. Landlords are not passive recipients of rent but are expected to exercise due diligence and cooperate with enforcement agencies. By understanding and fulfilling their legal responsibilities, landlords can play a crucial role in ensuring the rental market is not exploited by criminals and can protect themselves from serious legal and financial risks.