The government has published updated guidance on money laundering risks in the real estate and letting agency sector, refreshed in September 2025 following the National Risk Assessment 2025.

The guidance identifies the property sector as carrying a higher risk of money laundering, with estate agents specifically named as one of the highest-risk groups within it. Law firms are directly implicated as regulated entities with their own due diligence and reporting obligations wherever they act in property transactions — and given the NRA’s findings, this is an area where regulatory scrutiny is only likely to increase.

The UK Financial Intelligence Unit recently published a podcast in which senior figures from HMRC’s Economic Crime Supervision team and Cluttons’ compliance director set out in clear terms the money laundering risks facing the real estate and letting agency sector, and what regulated businesses are expected to do about them.

We are sharing this with our law firm clients because the guidance is relevant to you. Law firms are explicitly identified alongside estate agents and banks as regulated entities involved in property transactions, each carrying their own legal obligation to submit Suspicious Activity Reports. If your practice includes conveyancing, property work or advice to real estate clients, this is not background reading – it describes your obligations. Here is what the guidance covers and what it means in practice. We also act for estate agency and letting agency businesses that are regulated by HMRC under the Money Laundering Regulations, and the issues discussed in this article are equally relevant to them.

The scale of the risk

The 2025 National Risk Assessment makes clear that property transactions appear across all money laundering typologies – corruption, sanctions evasion, modern slavery, human trafficking, organised immigration crime, drugs and fraud. Estate agency businesses are assessed as medium risk, with the level of risk within that category having risen since the previous assessment. Property is attractive to criminals at all values and in all locations across the UK.

For law firms involved in property transactions, this is the landscape in which you are operating. The question is not whether your clients or counterparties could be involved in suspicious activity – it is whether you have the processes in place to recognise it and act on it appropriately.

Many law firms focus their AML training on their own direct client relationships. The regulator’s message goes further than that: firms need to be thinking about the wider transaction, i.e. who else is involved, what red flags might be visible from their position in the deal, and whether their policies reflect the specific risks of property work as distinct from their other practice areas.

The red flags your fee earners should be alert to

HMRC and the panel identified a number of specific red flags that regulated businesses – including law firms – should be alert to in property transactions:

• Super prime property – defined as £5 million or over in London and the South East, or £1 million or over elsewhere. These transactions have appeared repeatedly in overseas corruption and fraud cases.
• Customers linked to high-risk countries or secrecy jurisdictions, or organisations with connections to those territories.

• Cash-intensive businesses as purchasers or tenants – hairdressers, barber shops, vape shops and similar are specifically cited as vehicles used to launder illicit cash through property.

• Complex corporate structures, special purpose vehicles, offshore entities or trusts used to obscure beneficial ownership or source of funds.

• Fake source of funds documents – presented as part of a transaction but not withstanding scrutiny.

• A property being sold shortly after purchase, particularly at a lower price —-the Land Registry’s proprietorship register is highlighted as a valuable and underused tool for identifying this pattern.

• Unusual rental payment patterns – multiple payments, different amounts, from different locations for a single tenancy.

• Clients who appear to be taking instructions from a third party rather than acting in their own right.

• Customers unwilling or unable to verify their identity or explain their source of funds.

The panel’s overall message is straightforward: if something doesn’t make economic sense, ask why. And if the answer doesn’t satisfy you, report it.

This checklist has direct practical value for law firms. Many firms have general AML policies but lack sector-specific guidance for their property teams. Translating these regulatory red flags into practical, team-level guidance that fee earners can actually apply in their day-to-day work is something we can help with, and it is increasingly what the regulator expects.

You can’t assume someone else will file the SAR

One of the most important messages from the guidance is one that applies directly to law firms: never assume that another party in a transaction i.e. the estate agent or the bank, will submit a Suspicious Activity Report on your behalf. If you have developed a suspicion, you have your own legal obligation to report it, regardless of what others may or may not do.

HMRC was explicit: they would rather receive multiple SARs on the same transaction from different parties than receive none at all. The Proceeds of Crime Act and the Terrorism Act both require reporters to submit a SAR as soon as practicable after developing knowledge or suspicion, not after checking whether someone else has already done so.

The guidance also highlights a specific misuse that HMRC has observed: regulated businesses using the Defence Against Money Laundering (DAML) SAR process as a mechanism to continue a business relationship with a suspicious client, rather than ceasing it. This is not what the DAML process is for, and HMRC is actively identifying it in its interventions. If your property team’s understanding of when and how to use the DAML process is not current, that is a live compliance risk.

It is worth noting that enforcement extends beyond money laundering failures. The podcast flags the first conviction for failing to report under Section 21A of the Terrorism Act – a significant signal that the obligations around terrorist financing are being enforced with equal seriousness.

What HMRC is looking for in interventions

HMRC’s intervention approach gives a clear picture of how compliance will be tested in practice. During interventions, HMRC will ask whether SARs have been submitted and require businesses to explain if they have not. They will examine specific transactions to assess whether they should have triggered a report. They have the power to obtain copies of SARs and underlying documents. And they report annually to the Treasury on the quality of SARs submitted by the sector.

The sanctions available include financial penalties and censuring statements. Trading whilst unregistered under the Money Laundering Regulations is itself a criminal offence.

While law firms are supervised by the SRA rather than HMRC for their own AML compliance, the intervention framework described here mirrors the scrutiny that the SRA applies. Ensuring your AML policies, training records and SAR processes can withstand that level of examination – and reviewing them before you are asked to – is exactly the kind of audit-readiness work we support our clients with.

The quality of SARs matters as much as the quantity

A recurring theme throughout the guidance is that a poorly drafted SAR is of limited value to law enforcement (we wrote about this earlier in the year). The UKFIU is specific about what makes a quality SAR: it must clearly articulate the money laundering or terrorist financing suspicion, identify the criminal property, and, in the case of a DAML, clearly set out what the firm is seeking a defence for and in respect of which specific acts.

The guidance is also clear about what a SAR is not for: it is not a route to report predicate crimes in themselves, and it should not be submitted simply because something unusual has occurred without connecting that to a money laundering or terrorist financing suspicion.

One practical point worth noting: once a SAR has been submitted via the portal, neither the reporter nor the UKFIU can provide a copy of it. Firms must print and save SARs at the point of submission and store them securely, with appropriate consideration of their obligations under POCA and data protection legislation.

For many firms, this is a training and process gap. Fee earners may understand that they should submit SARs but not how to draft one that meets the UKFIU’s quality expectations. Reviewing SAR templates, internal referral processes and MLRO guidance to ensure that when a SAR is submitted it does the job it is supposed to do is something we can work through with you.

The training requirement – generic isn’t enough

Both HMRC and Vicki Moss from Cluttons were emphatic on the importance of ongoing, tailored training. The Money Laundering Regulations require businesses to provide staff with training on how to recognise and deal with suspicious activity. But the guidance goes further than the bare legal requirement: training needs to be specific to the type of work each team is actually doing.

A fee earner working on residential conveyancing faces different red flags from one working on commercial property, lease advisory or valuations. Generic annual AML training that covers the basics may satisfy the letter of the requirement, but it does not equip people to recognise suspicious activity in the context of their day-to-day work. That is the standard the regulator is now articulating clearly, and it is the standard against which your training provision will be measured.

This is an area where we see a genuine gap in many professional services firms. If your current AML training is a one-size-fits-all annual refresher, it is worth asking whether it is actually preparing your people to spot the red flags that are specific to the property work they are doing. We can help you assess that and design training that meets the standard the regulator expects.

How Enderley Consulting can help

Whether you need to review your AML policies for property work, assess your training provision, strengthen your SAR processes, or ensure your MLRO guidance is current, Enderley Consulting has extensive experience helping professional services firms build compliance frameworks that are practical, current and audit-ready. We advise both law firms and estate agency and letting agency businesses regulated by HMRC. If any of the issues raised in this article give you pause, we would be glad to talk them through.

This article draws on Episode 28 of the UKFIU Podcast series, published by the National Crime Agency, May 2026. It is intended for general information purposes and does not constitute legal advice.