More and more prospective property buyers are having to rely on the bank of Mum and Dad or Grandparents or some other wealthier benefactor to give them the boost they need to get onto the property ladder.
All buyers need to complete our identification, anti-money laundering and source of funds checks. The same applies for giftors of money.
The Conveyancer needs to satisfy themselves that they have correctly identified the people involved in a property purchase and also the money involved.
Paying with cash? Where did you get it from?
Where mortgages or other secured loans are concerned, this is fairly straightforward where the lender is a professional body regulated by the Financial Conduct Authority. With cash buyers and gifted deposits in cash, it is a more complex task.
Conveyancers are required to not only check the source of the funds being gifted/used in the purchase BUT must also check the overall source of wealth of the person gifting (paying the cash). This is because cash is a fluid source, a bit like water from a tap.
It is not enough to know that the cup of water being gifted comes from the kitchen tap, the source of the water is even beyond the water works, it goes right back to the reservoir and the rivers and lakes that feed into it.
Likewise, it isn’t enough to see the bank statement showing the cash available, but we need to know where that cash came from and how it was accumulated. We need to know the account holder’s general income and outgoings and where there are large deposits or payments to/from the account, we need to understand what these are and why they happened.
This is all to enable us to build a picture of the how the wealth has been generated. In some case, it will be a one-off deposit, such as a lottery win or inheritance payment. With others, it may be a build up of wealth over a longer period of time, such as investment dividends or accrued interest. Everyone’s circumstances will be different, and the evidence required will depend on the particular circumstances of each case.
Our accounting rules do not allow us to act in the same way as a bank. So, if the funds are coming from multiple sources, please ensure you gather them into one account and
make a single transfer to our client account. Some accounts have daily limits on the amount that can be transferred, if this applies then we can accept more than one transfer as long as all are from the same account.
Using Company Money
If the funds are being drawn down from company account(s), then there are accounting rules for companies, and you are advised to speak to your company accountant or financial advisor before making the transfer to us.
Usually, sole traders, who are not limited companies can use their company money as they would their own, but if the company is a partnership or a limited company, it is not so straightforward. We cannot receive gifted funds directly from a company account. They must be drawn down first to a personal account before being sent to us.
If the company is a partnership, the funds transfer must be shown to have been agreed by all profit-sharing partners of the company.
Limited companies have strict rules about gifting and drawing down funds from company accounts.
If the funds are part of your salary, then we need to see wage slips or accountant documentation confirming the salary paid; if the funds are dividends, then we need to see the dividend certificate(s), if the funds are a Directors’ loan, then we need to see the signed loan agreement. Your company accountant should know what is required.
Why is this so important?
It is a hard fact that property conveyancing is targeted by criminals as a means of fraud and money laundering. Those of us in the industry are required to do our bit to ensure the criminals can’t launder their dirty money through the conveyancing process. Consequently, we require much more information from clients and giftors providing cash to fund a property purchase than those using funds from a high street lender because this is how the criminals work and use the process to “clean” money. By making the process as transparent as possible, we can satisfy our regulators that we have done all we can to identify the true source of the funds used in the transaction, which in turn provides greater protection for all of our clients now and in the future.
We thank you for your cooperation in our efforts to stamp out money laundering in conveyancing.
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