It’s not enough to prove that you have the money to buy property, you have to prove where that money has come from and that it is not the proceeds of crime.
Why is this so important?
The Solicitor’s Regulation Authority (SRA) requires all firms of solicitors to be vigilant in all transactions involving the holding and/or transfer of funds on behalf of clients and apply the UK anti-money laundering laws.
UK anti-money laundering regulations are built on three main legislative pillars that create a complete framework to prevent financial crimes:-
POCA defines three main money laundering offences:
Criminal property concealment, disguise, conversion, or transfer
Setting up transactions with criminal property
Criminal property acquisition, use, or possession
Criminal property is assets or money gained from criminal activity which includes benefit fraud, tax evasion and the misuse of funds belonging to another.
POCA requires businesses to report any suspicious activities to the National Crime Agency.
The Financial Services and Markets Act 2000 (FSMA) – established the Financial Services Authority and since further amendments, the Financial Conduct Authority (FCA) which regulates the financial services industry.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), which came into force on 26 June 2017.
The Office for Professional Body AML Supervision (OPBAS), the SRA’s oversight regulator for anti-money laundering (AML), has confirmed its view that conveyancing work is considered a high-risk area for money laundering. This is the view globally, not just in the UK. As such, we are required to verify with all clients the source of the funds to be used in property transactions.
How do you verify the source of funds?
The funds used in the purchase of property can come from many different sources and our requirements will depend on the particular circumstances of your matter. The guidance below is not exhaustive but gives an overview of some of the more common sources of funds. We need to satisfy our regulatory requirements that we have checked that funds used in the transaction are from a legitimate source and are not the proceeds of crime. Proving a negative is difficult but we ask that our clients be understanding and open with us about how they have obtained the money to be used in a transaction. Our requests for evidence and information are a regulatory requirement and are for the protection of all parties concerned in property conveyancing.
Mortgage and deposit
We will need to see an original mortgage offer letter on headed paper (this can usually be obtained by your conveyancer directly with your provider). If there are any conditions to the offer, we will need to see evidence that you have or will meet those conditions by the completion of your purchase.
Deposit funds are often in the form of cash (savings, earnings or gifted funds) – see below as for cash purchasers.
House sale proceeds
We will need to see the completion statement and/or letter from the conveyancing solicitors confirming the source of the funds and the payment into your account.
Inheritance
Inheriting money is often a bittersweet moment. A loved one has been lost but you have come into money and wish to put it towards a property. We will need to see evidence of the inheritance, such as the following:
a copy of the Will showing the intention to leave a sum to you (either by legacy or share of the residue estate) and
a copy of the solicitor’s letter distributing the funds to you or,
if no solicitors were involved, a copy of the grant of probate (if obtained) and
copies of statements showing the transfer of funds to you
Gifted monies
Your conveyancer needs to understand where and from whom money is coming from to purchase property. You might be the “buyer” but if your funds are being gifted or loaned to you from someone else then we will need to know more about them. We onboard giftors and lenders of purchase funds in the same way that we do for our clients. Your giftor will have to go through the process of our identity and source of funds checks.
Cash Purchasers and Cash Deposits
Using cash is often how criminals launder money into purchasing property to legitimise their wealth. Consequently, we must take extra measures to verify the source of the cash to be used in any property transaction. Cash may be generated by various means and we will need to understand how you (or your giftor) has accumulated the amount to be used in the purchase but it doesn’t end there. Cash is a “fluid” means of funding and the exact identity of the source of purchase funds cannot be separated from your overall wealth. So, we may ask for more information about other funds in your accounts, your employment status and your day-to-day expenditure to get a full picture of your general lifestyle, your income and outgoings.
Cash generated from stock market trading is acceptable provided you can show the paper-trail of transactions for a period of at least six months. You may be asked to provide evidence of the original investment, if your funds have not been generated purely from dividends/interest/market growth. If your stocks are held and managed via a fund manager or IFA, they will be able to assist with this.
Cryptocurrencies – e.g. Bitcoin
We do not accept payment by cryptocurrencies at all. Cryptocurrencies are, by their nature, largely anonymously traded peer to peer and across country borders. Specialist software programmes are required to analyse crypto transactions (blockchain technology). This is not a service we provide.
We cannot currently accept instructions from anyone wishing to purchase property with cash generated purely by the trading/mining of cryptocurrencies for the same reasons as above.
You may instruct a separate firm to carry out the blockchain analysis and provide their report on the source of funds but beware that we may still not be able to accept your instructions if the report does not meet our requirements.
Company accounts – drawdowns, dividends, unpaid salary and Directors’ loans
If you (or your giftor) own(s) a business and monies are held in a business account (separate from your own funds), you may be asked to provide the business accounts and confirmation from the company accountant or secretary of the legality of the drawdown. Where the business is a limited company, there are strict rules about taking money out of a business for personal use and you are advised to seek financial advice before agreeing to gift or use company money to purchase property in your personal name.
We need to see the legal instrument allowing the use of company funds, e.g. dividend certificates, Directors’ loan agreement, wage slips showing salary/ bonus due etc.
If your giftor is drawing down company funds, then the monies need to be transferred to you (our client) first and cannot be paid to Macmillans Solicitors directly from the company.
The only time we can accept payment from company accounts is if the property is being purchased by the company as a company asset.
We need to complete the verification of your source of funds before work begins on your transaction. It is vital that you provide us with the information requested as early in the transaction as possible. Please check with your conveyancer if you are unsure of the evidence you need to provide.
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