Why the 3rd degree?

If you are currently buying, selling, renting or letting property, you may have noticed that estate agents are requesting more detailed identification documents and financial information than before. While this may sometimes feel intrusive or time-consuming, there is a clear reason: since May 2025, regulatory enforcement in the property sector has intensified.

HM Revenue & Customs (HMRC) has strengthened its supervision of estate agents under the UK’s Anti-Money Laundering (AML) regulations. In the most recently published enforcement period (April - September 2025), 170 estate agency businesses were fined a combined £835,842 for AML compliance failures, representing nearly half of all AML penalties issued across supervised sectors during that time. 

These figures signal that compliance expectations are now being actively enforced, not merely monitored. 

Why Is This Happening?

Property transactions involve high-value assets and can include overseas funds, complex ownership arrangements, or corporate structures. These characteristics make the property market attractive to criminals seeking to launder illicit money, and regulators therefore view estate agents as essential gatekeepers against financial crime.

The recent escalation in enforcement is part of a wider effort to strengthen the UK’s defences against money laundering. Agents must not only register for AML supervision but also:

• verify client identities,
• assess the source of funds used in transactions,
• maintain accurate records, and
• report suspicious activity where appropriate.

Failure to comply can lead to financial penalties and publication on HMRC’s public list of AML breaches, which - between April and September 2025 - included 332 penalties for operating without required AML registration across sectors.

What This Means for You

As a client, the most visible change is the increased amount of information you are required to provide. Estate agents are legally obligated to verify the identity of buyers and sellers and often to understand how a purchase is being funded. This typically involves supplying:

• photographic identification,
• proof of address, and
• documentation showing the origin of funds (e.g., bank statements, inheritance paperwork, or evidence of business income).

Where transactions involve higher-risk factors - such as overseas transfers, trusts or companies - agents may need to conduct enhanced due diligence, which can add time to the process.

Some agencies now apply administration or compliance fees, reflecting the cost of digital identity-verification tools, sanctions-screening systems and staff training required to meet regulatory standards.

The Positive Impact on the Property Market

Although these checks can add administrative steps, there are significant benefits. Stronger enforcement reduces the risk of criminal funds entering the property market, helping prevent artificial price inflation and market distortion.

More robust verification processes also lower the risk of fraud and improve security for both buyers and sellers. Over time, consistent regulation enhances the UK’s reputation as a transparent and well-regulated property market, supporting long-term stability and investor confidence.

The Challenges and Short-Term Pressures

Tighter enforcement also brings practical challenges. Clients may feel they are being asked for more paperwork than in the past, and transactions involving complex circumstances can progress more slowly.

Compliance systems raise operating costs for estate agents, and some businesses - particularly smaller ones - may find the transition demanding. However, HMRC’s enforcement data shows clearly that AML compliance is not optional, and scrutiny is increasing rather than easing.

A Permanent Shift in Expectations

What we are seeing is not a temporary crackdown but a long-term shift in regulatory expectations. Estate agents are now expected to take an active role in preventing financial crime, and identity verification alongside source-of-funds checks is firmly embedded in the transaction process.

For clients, this means that providing additional documentation and undergoing compliance checks will remain a standard and permanent feature of buying, selling, letting or renting property in the UK.

While these measures may add some administrative burden, they ultimately serve to strengthen the integrity of the property market and protect all parties involved. In the long run, a more transparent and accountable sector benefits buyers, sellers, landlords and tenants alike.

This article is for informational purposes. Always seek professional advice before making any property decisions.