Buying a home is an exciting milestone, and it is only natural to want the keys as soon as possible. However, behind the scenes, conveyancers are obligated to identify how any funds have been accumulated as part of our compliance with anti-money laundering obligations.
As a result of this, you may notice one of the first questions we will ask of you is to verify your source of funds. This is one of the most crucial, yet often misunderstood, steps in a purchase transaction.
It might feel unnecessary and intrusive, but these checks act as a legal backbone for the entire transaction. They protect buyers, sellers, and solicitors alike from financial risk, fraud and criminal activity.
In this blog trainee solicitor, Amelia Buchanan, will explore the different sources of funds, how we verify them, and how you can help expediate the process.
What is source of funds?
When buying a property, we need to be confident we know where the funds are coming from. Conveyancing is one of the most susceptible areas of law to money laundering due to the large sum of money changing hands, which is why we need to be vigilant.
The ‘source’ of your funds refers to the origin of the money being used. This is not just where the funds are being held, but how they were accumulated in the first place. Your conveyancer is responsible for checking the source of the funds and the source of the wealth.
At the outset of your transaction with us we will always ask you to provide information on how you intend to fund your purchase. Examples of funds may include:
- Mortgage
- Savings from employment
- Inheritance
- Gift
- Sale of another property.
- Re-mortgage of another property.
What is verification of funds?
Once we know how you intend to fund your purchase, whether you are using your savings, or a gift from your parents, we will then need to verify these funds.
Each type of funds comes with its own specific proof requirements, which we have outlined below:
Mortgage:
Please pass on our details to your mortgage provider. They will then send your offer directly to us, however if you can confirm the details of your offer in the meantime, we can begin progressing your file.
Savings:
Where your funds come from savings built up over a period of time, we’ll ask to see a minimum of six months bank statements from the account (s) where the funds are currently held. We’ll also need supporting evidence to show how the savings were accumulated, for example, payslips from your employment.
If the funds have been moved between accounts, six months of statements for those accounts will also be required.
Inheritance:
If you intend on using funds which you have inherited, we will ask for a copy of the letter from the executors, or the solicitors dealing with the estate, evidencing your entitlement and the amount. We will also need to see bank statements showing the funds entering your account, and who they were received from.
Gifts:
A gift is when you are receiving a financial contribution from someone, often a family member or friend, that is to be used solely for the purchase of the property. If someone is providing you with a gift, we will need their contact details to reach out to them, so please make sure they are aware they will be contacted and asked to provide ID.
Gifted deposits require the same proof of fund requirements as all other funds we receive, and therefore we will need evidence of the source of the funds prior to it being gifted.
Sale of a property:
If we are not acting on the sale of your property, we will require a copy of the completion statement and confirmation of proceeds due to you. We will also need to see a copy of your bank statement evidencing receipt of the funds following completion.
Remortgage of another property:
If we are not acting on the remortgage of your other property, we will need evidence from your solicitor or mortgage provider about the equity being release. We will also require evidence of this coming into your bank account.
Funds from overseas:
If you are receiving a gift from overseas or intending on using funds from a bank outside of the UK, please note these will be subject to an enhanced due diligence process. This may involve documents being verified by a notary local to that country.
Further information on high risk countries can be found at High-risk third countries for AML purposes | The Law Society.
If you are wanting to use funds from a source not mentioned above, please do not hesitate to contact us so we can advise you on what we will require in your specific circumstances.
Why is this so important?
All law firms are regulated by the Solicitor’s Regulation Authority (often referred to as the SRA). They require all solicitors, conveyancers and firms to be vigilant in transactions which involve holding or transferring client funds. There is also the legal duty to comply with anti-money laundering regulations.
Additionally, if you are getting a mortgage, your lender will expect us to check that the information disclosed in your mortgage application is correct, and that you are not using any other loans to buy the property.
How can you help?
Verifying your source of funds is one of the most integral steps in the conveyancing process, and we are limited with how far we can proceed with your transaction until you have provided this. To avoid any unnecessary delays, please see our top tips below:
- Please try providing as much information as possible during the initial stages. Providing bank statements for any current accounts, saving accounts and ISAs that the funds have passed through or are held in really helps us create a clear trail of where the funds have come from. There is no harm in sending us too much, rather than too little.
- Please try ensuring all documents are clear and easy to read, as well as being addressed to you. It is also helpful if they can be provided in PDF format, however this is not essential.
- Let us know as soon as possible if you expect to be receiving a gift from a family member or a friend, as we will need to contact them.
- Try avoiding any unnecessary transfers between accounts in the lead up to instructing us, as this can complicate the audit trial.
- Please ask if you have any questions or queries on what you need to provide. It is always best to ask and there are no silly questions.
For more information about the services the team can support with, visit the residential conveyancing page. To get in touch with the team, email enquiries@mincoffs.co.uk or call the office on 0191 281 6151.
