When you buy a property, you will be asked questions about where the money will be coming from. This ‘source of funds’ check is required by law under anti-money laundering regulations.
You will also usually need to provide information to satisfy a ‘source of wealth’ check in addition, showing the economic or commercial activities that generated the money.
All law firms and conveyancers need to establish where funding is coming from in property purchases as part of their compliance with anti-money laundering laws. The large amount of money that changes hands in conveyancing transactions is attractive to criminals who want to move money around in and through the UK.
The Solicitors Regulation Authority supervises law firms, ensuring that adequate checks are carried out and that when there is cause for concern, a suspicious activity report or SAR is submitted so that further investigation can be carried out. Where a solicitor fails to carry out adequate anti-money laundering checks, they could face heavy penalties including criminal sanctions.
We know that providing the necessary information to satisfy anti-money laundering rules can add to the work you need to do when buying a property, but it is a regulatory requirement that aims to reduce criminal activity, including in the areas of terrorism, the drugs trade, people trafficking, firearms trade and fraud.
Your solicitor will need to establish both the source of funds and the source of wealth for your property transaction. Source of funds refers to the origin of the money that you will be using. This goes beyond establishing which bank account it came from to look at where the money originated. This could be from the following:
Source of wealth refers to where all of your assets came from, such as your business activities, commercial transaction or how your family wealth was accumulated. This could include:
Your solicitor will need to carry out checks for each transaction you enter into, even if you are not a first time buyer. For example, if you were to buy a second property as an investment at a later date, anti-money laundering rules mean that it would again be necessary to establish both where the funds are coming from as well as the background of your wealth.
You will need to provide a range of documents by way of evidence showing where the money you will be using as your source of deposit and purchase price has come from. Your solicitor will give you more details as to the information required, but it could include the following:
Bank or building society statements for the previous six months showing income from relevant sources, such as salary, dividends or pension income that demonstrates money coming into the account over time. This will be necessary for each active bank account that you are using for the purchase.
The completion statement provided by the solicitor who acted on the sale together with a copy of the bank statement showing the sale monies coming into the account and a certified copy of the sale contract.
If the money you will be using is coming from a relative, they will need to provide a signed gifted deposit letter confirming that they are giving you the money and the basis on which it is being given to you, for example, that it will not be repaid.
Your solicitor will be required to carry out further investigations in respect of a gift, to include verifying the identity of the person making the gift and the source of funds and wealth. This means that your relative will need to provide full documentation showing where the money is coming from.
A copy of the completed share transfer and evidence from your broker that the transaction has been completed as well as a copy of your bank statement showing the sale proceeds.
Copies of the dividend vouchers or certificates setting out how much was paid and a copy of your bank statement showing the dividend income.
A certified copy of the court order and a copy letter from your solicitor confirming the amount of the settlement, plus a copy of your bank statement.
Copies of the pension statement and bank statement showing the transfer of the lump sum.
Correspondence and an account from the asset holder showing the amount that has been encashed along with a copy of your bank statement.
A copy of the winnings cheque and any correspondence plus copy bank statement.
A copy solicitor’s letter or a copy of the judgment confirming the amount of compensation to be paid plus evidence of it being paid into your bank account.
A copy of your business accounts showing the amount of profit and drawings that you have taken along with your bank statement showing that this has been paid to you.
As well as asking you to provide payslips, we may also need a letter from your employer, signed by them in person, confirming your salary and any other income as well as your position, the amount of time you have worked for them and the position you held.
Copy estate accounts and a letter from the solicitor who dealt with the probate, or where no solicitor was involved, a letter from the executor advising of the inheritance and sending payment. A copy of the bank statement showing receipt of the money will also be needed.
We appreciate that the amount of information you will need to provide may seem onerous. We will do all we can to keep matters as simple as possible, but all solicitors are bound by the rules to secure sufficient evidence in respect of identity and money. Your mortgage lender and the estate agent dealing with the transaction are also likely to ask for evidence in relation to your funds.
We cannot accept cash for any part of the payment and we are unlikely to be able to accept funds from overseas unless it does not come from a high risk country and you are able to adequately establish exactly where the funds are coming from.
If you are thinking of buying a property, by contacting us early on, we can explain to you what you will need to provide so that you can start putting the documents together. This can help avoid any delays later on once your transaction is under way.
For more information, request our free conveyancing and property guide.
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