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The financial crime risks facing the UK property sector are not new but measures by the authorities to tackle these have evolved in recent years, particularly with the expansion of sanction regimes and the introduction of additional offences or routes to liability for corporates (such as the new corporate offence of failure to prevent fraud in September 2025).
Physical property has historically been used to launder the proceeds of crime and to hide ownership of illicit wealth. High value assets and the increasingly complex nature of real estate transactions, as well as high levels of international investment, mean that the real estate sector in the UK is particularly exposed to financial crime risks. A national risk assessment carried out by the National Crime Agency in 2025 highlighted that property transactions represent a high risk of money laundering. The "Property and Related Services: Threat Assessment" published by the Office of Financial Sanctions Implementation ("OFSI") found that it was "almost certain" that designated persons ("DPs") had breached UK sanctions by making transactions relating to UK properties and that UK property and related services firms had acted as professional enablers for DPs and facilitated sanctions breaches. In January 2026, the Serious Fraud Office announced that it had arrested six people as part of an investigation into allegations of bribery and fraud worth £300 million by previous management at a social housing company.
2025 saw the introduction of a number of new legal and regulatory measures which seek to tackle such risks and the trend is likely to continue. From new obligations in respect of the prevention of fraud and sanctions reporting obligations to changes in HMRC's interpretation of the scope of the Money Laundering Regulations, recent developments have practical implications for day-to-day operations and firms' internal systems and controls. The UK Anti-Corruption Strategy 2025 (see our blog post here for further analysis of the strategy) and announcements in relation to the Illicit Financing Summit to be held in June 2026 suggest that the real estate sector is likely to remain an area of focus for law enforcement and the regulatory authorities.
This post summarises the key recent developments in UK financial crime landscape relevant to the real estate sector.
Financial Sanctions
The UK's sanctions landscape has undergone a significant change since the Russian invasion of Ukraine and many sectors have seen their sanctions risk exposure increase exponentially as additional restrictive measures have been imposed to target Russian oligarchs, and to limit the resources available to the Russian state.
The risk that a counterparty (such as a tenant, owner, purchaser, investor or beneficial owner) may be a designated person, and subject to an asset freeze, has increased for the UK real estate sector as the number of DPs has increased. The UK asset freeze regime prohibits dealing with assets which are owned or controlled by a DP and making any "economic resources" available to a DP. As a result, the risk of a sanctions breach may arise in situations beyond the sale or lease of a property. Rather, as highlighted in OFSI's threat assessment, broader activities connected to the maintenance and management of a property (such as payments for maintenance or service charges, the provision of staff and security, or concierge services, etc) could risk breaching sanctions where a DP owns or controls the property in question. The first monetary penalty for a breach of the Russia (Sanctions)(EU Exit) Regulations 2019 imposed by OFSI related to 26 payments which were made/received in connection with property management services, and the continued provision of those services to the owner of a property after they had been designated.
Reflective of the increased sanctions risk, letting agents have been subject to mandatory sanctions-related reporting obligations since 14 May 2025. As "relevant firms", letting agents are now required to report to OFSI as soon as practicable if they know or have reasonable cause to suspect that a person is a DP or that a breach of financial sanctions has occurred. The new reporting obligations apply to anyone who carries out "letting agency work" (as defined in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 ("MLRs")) and so apply more broadly than to just those who operate solely as letting agents. OFSI has published guidance to help firms navigate these new reporting obligations.
Money Laundering
As the money laundering risks associated with property are high, many of those who operate in the sector are subject to additional regulation set out in the MLRs. This includes reporting obligations, a requirement to register with HMRC for supervision and to have in place measures to mitigate money laundering risks (e.g. customer due diligence, training, etc).
In 2025, HMRC updated its Economic Crime Supervision Handbook, suggesting a narrowing of its interpretation of exclusions to the requirement to register for supervision (as set out in Regulation 15 of the MLR) and making clear that those firms carrying out estate agency or letting agency work could not benefit from the exclusions.
Recent figures published by HMRC show that it issued over 330 penalties to businesses for failing to comply with the MLRs between 1 April 2025 and 30 September 2025. Of those, almost half were issued to estate agency businesses (i.e. those carrying out "estate agency work" and "letting agency work" as defined in the MLR) and almost all related to a failure to register with HMRC for supervision. Although the number of penalties issued is lower than that for the period of 1 October 2024 to 31 March 2025 (during which over 880 businesses were fined, of which almost 60% were estate agency businesses), the numbers indicate a continued focus on the real estate sector and on ensuring that all relevant firms are appropriately registered with HMRC.
Failure to Prevent Fraud Offence
The new UK corporate offence of failing to prevent fraud, introduced by the Economic Crime and Corporate Transparency Act 2023 ("ECCTA") came into force on 1 September 2025. Similar to the failure to prevent bribery and tax evasion offences, in-scope organisations can now be held criminally liable if an associate (which includes employees, agents and subsidiaries) commits a fraud offence (such as fraud by misrepresentation or false accounting) with the intention of benefitting the organisation or any of its customers. This is a strict liability offence, but it is a defence if the company has reasonable fraud prevention procedures in place.
An organisation is in scope of the offence if it is considered a "large organisation", meeting two or more of the following criteria in a financial year:
- Net turnover over £36 million
- Balance sheet total over £18 million
- More than 250 employees
Even where an organisation is not itself in scope, counterparties, funders and joint venture partners may be, and may expect equivalent standards to be applied across projects. More detailed analysis of the offence is available in our briefing here.
Given that complex financial and/or commercial arrangements are common in the real estate, construction and asset management sectors, there is a higher risk that fraud may occur. This in turn creates a higher risk that a company may be held strictly liable for fraud committed by an associate if it does not have reasonable procedures in place to prevent fraud. As a result, businesses should consider whether their existing controls are sufficient and whether enhancements should be made in light of the fraud risks the business faces.
Looking Forward
The real estate sector is likely to remain in the spotlight and be a subject of scrutiny for regulators and law enforcement.
In June 2026, the UK will host the Illicit Finance Summit, to be attended by representatives from governments, civil society and the private sector, with the aim of improving collaboration to address corruption and to tackle international flows of criminal property. The UK Government has identified the use of property to launder illicit funds as one of the three key areas of focus for the summit. As a result, further measures focused on the sector are likely to be introduced. Further details of the summit will be published in due course, and we will cover them on our blog as they become publicly available.
In the interim, businesses operating in the sector should ensure that they are aware of, and continue to comply with, their legal obligations and that their compliance systems and controls are tailored to adequately address the financial crime risks that the business faces.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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