Estate Agents Face Tighter AML Oversight Amid Rising Penalties
Fines surge 177% as estate agents face stricter AML rules.
The regulatory screws are tightening on Britain’s property sector as HM Revenue and Customs intensifies its crackdown on anti-money laundering failures. Estate agents have emerged as the most penalised sector under HMRC supervision, with fines surging by 177% over the past four years and enforcement activity showing no signs of abating.
Between October 2024 and March 2025, some 194 agents incurred penalties totalling more than £1 million for breaches of the Money Laundering Regulations 2017. The vast majority of these fines stemmed from a single, easily avoidable error: failing to register for AML supervision on time. Individual penalties ranged from a few thousand pounds to tens of thousands, with some reaching above £50,000 for more serious infractions.
The scale of the problem has prompted alarm across the property industry. In 2024 alone, HMRC issued fines exceeding £1.6 million to estate agents for compliance failures, with more than 250 firms named and shamed for breaches including inadequate risk assessments, poor customer due diligence, and failure to submit suspicious activity reports to the National Crime Agency.
The Money Laundering Challenge
The intensified scrutiny reflects growing concern about the vulnerability of UK property to illicit finance. The National Crime Agency estimates that up to £10 billion could be laundered through the UK property market each year, making real estate one of the country’s most significant channels for financial crime.
Research by Transparency International UK has identified more than £11 billion of suspicious wealth linked to UK properties since 2016, with more than half of these assets purchased using shell companies registered in Britain’s overseas territories. The British Virgin Islands alone accounts for over 90% of suspect funds routed through these jurisdictions, equivalent to £5.5 billion in value.
The 2025 National Risk Assessment, published by the government in July, reinforced these concerns. It placed estate agents among the property sectors with the highest risk of exposure to money laundering, noting that property transactions feature in virtually all typologies of financial crime, from corruption and sanctions evasion to modern slavery, drug trafficking, and fraud.
Property offers criminals multiple advantages: the ability to move large sums in a single transaction, assets that typically appreciate over time, and the potential to distance purchases from criminal origins through complex ownership structures. Overseas companies, opaque trusts, and multiple intermediaries continue to obscure beneficial ownership, even after the introduction of the Register of Overseas Entities in 2022.
Rising Costs of Compliance
The regulatory burden on estate agents is set to increase further following HMRC’s confirmation of higher supervision fees. From December 2025, the annual premises fee rose from £300 to £400, a 33% increase that the regulator justified by citing inflation since the last adjustment in 2019 and the escalating costs of effective supervision.
HMRC has also reintroduced a £300 application fee for newly registered businesses, while the fit and proper test fee for money service businesses and trust or company service providers increased from £150 to £500. A new minimum sanction of £2,000 for compliance breaches replaces the previous penalty structure, signalling the regulator’s determination to make non-compliance financially painful.
Industry estimates suggest the property sector already spends more than £125 million annually on anti-money laundering requirements. Individual branches face costs of approximately £6,300 per year when accounting for staff time, training, technology, and registration fees. The fee increases threaten to squeeze smaller, independent agents hardest.
Propertymark, the trade body representing property professionals, has warned that higher costs could risk undermining compliance by pushing resource-constrained firms away from the formal supervisory system. The organisation has pressed for clearer HMRC guidance, proportionate reform, and a joined-up approach between regulators and industry.
Common Failures and Red Flags
Analysis of enforcement actions reveals a pattern of basic administrative failures that continue to trip up estate agents. The most common breach remains failure to register for AML supervision, accounting for more than 500 fines in the 2024/25 period. Other frequent infractions include inadequate written risk assessments, incomplete customer due diligence records, insufficient staff training, and failure to report suspicious activity.
Recent data from compliance specialists has identified the red flags most commonly raised during AML checks in property transactions. Buyers without mortgages account for 22% of alerts, followed by purchases partly or wholly funded by gifts at 20%. Overseas funds, high cash deposits, and frequent cash deposits also feature prominently among concerns flagged by diligent firms.
Estate agents are expected to verify the identity and beneficial ownership of every client, challenge inconsistencies in source of funds documentation, and maintain comprehensive records for at least five years. Enhanced due diligence applies to higher-risk transactions, including those involving politically exposed persons, complex corporate structures, or jurisdictions with weak AML controls.
The consequences of failure extend beyond financial penalties. Firms named by HMRC face reputational damage in a market where clients and partners increasingly expect transparency and strong governance. In the most serious cases, individuals can face criminal prosecution, with potential penalties including unlimited fines and prison sentences of up to two years.
Reform on the Horizon
The government has signalled its intention to overhaul the home buying system in ways that could transform AML compliance across the property sector. Proposed reforms include mandatory digital identity verification for buyers and sellers, higher professional standards for estate agents and conveyancers, and strengthened corporate transparency through expanded beneficial ownership registers.
Ministers have also committed to bringing greater transparency to overseas trusts holding UK property, responding to a 2024 consultation on improving the Money Laundering Regulations. These changes are expected to take effect in early 2026, coinciding with the UK’s planned summit on illicit finance.
For estate agents, the message from regulators is unambiguous: AML compliance is not optional, and the costs of non-compliance will only increase. Engaging specialist compliance support, investing in staff training, and implementing robust due diligence systems are no longer matters of best practice but essential protections against financial penalties, reputational harm, and criminal liability.
The property sector’s central role in the UK economy makes it an obvious target for those seeking to launder illicit wealth. With enforcement intensifying and regulatory expectations evolving, estate agents that fail to adapt risk finding themselves on the wrong side of an increasingly aggressive supervisory regime.
The fragmented nature of AML supervision across professional services has long been criticized as a vulnerability that criminals can exploit. With more than 22 bodies overseeing compliance in the non-financial sector, powers and resources vary considerably, and enforcement action has often failed to provide a credible deterrent. The government’s stated ambition to reform this landscape could bring more coherent oversight, but also potentially tougher scrutiny for property professionals who have grown accustomed to lighter-touch regulation.
For now, estate agents must navigate an environment where the regulatory floor continues to rise. Those who treat compliance as a low-priority administrative task rather than a core business function do so at their peril.
