New rules that require letting agents to check whether prospective landlords and tenants appear on the UK’s national financial sanctions list will kick into action tomorrow (14 May).

As part of the changes, letting agents will have to report any matches on the list, or concerns, to the Office of Financial Sanctions Implementation.

Sanction checks are mandatory for all prospective landlords and tenants. Letting agents must screen landlords at the point of formal instruction, which means verifying the landlord’s identity and checking them against the government’s consolidated sanctions list before proceeding with any property-related activities.

For tenants, agents will be required to conduct sanctions checks on prospective tenants once their rental offer has been accepted by the landlord to ensure that no tenancy agreements are made with sanctioned individuals or entities.

Previously, these checks were only required where monthly rents topped €10,000 (£8,275).

By removing the threshold, the Government aims to close the loophole and ensure that no sanctioned individuals can enter into rental agreements unnoticed.

Goodlord director of referencing Nishma Parekh says: “This week is critical for letting agents. New rules around sanctions checks represent a major shift for the industry and it would be very easy for letting agents to unwittingly fall foul of them.”

“Every single landlord and tenant, no matter the rental value, must now go through sanctions checks. With four in five landlords feeling unprepared for the changes, it’s vital that they get their ducks in a row immediately if they want to stay on the right side of the law.”

“If they fail to comply – even if it’s a genuine mistake – they could be facing unfathomable fines of up to £1m.”