When acting on the purchase of a home, conveyancers are obligated to identify how any deposit has been generated as part of their anti-money laundering compliance.
Legal and Regulatory Requirements
Proving source of funds is a regulatory requirement because conveyancing is susceptible to fraud due to the large sums of money which change hands. If the source of the funds you are using for your purchase cannot be proven, your purchase will not be able to proceed.
Please be aware, if we suspect all or part of your funds are proceeds of crime, we are legally obligated to report this to the relevant police body.
BakerLaw’s approach to source of fund requirements
Please be assured we take our obligations regarding source of funds extremely seriously. We require proof of source of funds from ALL clients. It is our clients’ responsibility to prove the source of any funds they wish to use towards their purchase.
Proving source of funds can be complex. We would always rather you provide us with as much evidence and information as you possibly can. This will ensure we are satisfied our proof of fund requirements have been met.
Sources of Income
There are a variety of sources of income, each with specific proof requirements. Below, we explain the proof we require for the most frequently utilised source of funds.
Savings are usually made up of regular small payments from your salary or other income. As proof of savings, we require a minimum of 6 months’ bank statements, showing the incoming salary. Often, savings are moved into a separate bank account, to the one that the salary is paid into. In this case, we would also need at least 6 months’ f bank statements of any accounts your savings are transferred into.
Sale of another property
If we are acting on both your sale and purchase, we will receive the proceeds of sale from your purchaser’s solicitor and hold this money on account to put towards the deposit on your purchase. This reduces the number of times the money will changes hands, reducing the risk of any fraudulent transactions.
If you have instructed a different firm of solicitors for your sale and purchase, we will require a copy of the completion statement from the conveyancer acting on your sale and a copy of your bank account statement evidencing receipt of the funds following completion.
A gifted deposit is most commonly a lump sum gifted by a family member of the purchaser. Gifted deposits are used frequently by first time buyers.
There is a mandatory process which must be followed when purchase is made using gifted money.
Firstly, we require a gifted deposit declaration from the gift provider confirming the sum they are giving and the conditions under which it is given. A copy of this must also be provided to the mortgage lender. If you will be relying on a gifted deposit for your purchase, we can provide a template declaration which can be adapted to the specific circumstances.
We must receive identity documentation from the gift provider. Our anti-money laundering procedures require us to verify the identity of anyone we will be receiving funds from. We require a copy of their passport or photo card driving licence and a recent bank statement or utility bill which clearly states their address (not a mobile phone bill and in either case, not more than 3 months old).
Finally, gifted deposits are subject to the same proof of fund requirements as any other funds we receive. Therefore, the requisite evidence from the source of the funds prior to it being gifted must be provided, as set out above and below.
Some mortgage providers have different requirements for gifted deposits, please ensure your familiar with your lender’s requirements and that all of them are met.
Please note, we cannot advise on the Inheritance Tax implications of receiving a gifted deposit. We request you seek independent tax advice in this regard.
If you wish to use inherited funds, we will require a copy of the letter from the executors confirming your entitlement and a copy of your bank account statement evidencing receipt of the funds from the solicitor or executor’s bank account.
Release of Pension
In order to use funds from a release of pension, we require a copy of your pension statement as well as a copy of your bank statement evidencing receipt of the funds.
Sale of shares
In order to use funds made through the sale of shares, we will require a certified copy of the share release schedule and a copy of your bank account statement evidencing receipt of the funds.
Dividends from a UK company
If you wish to use dividends from a UK company, we require a certified copy of your dividend certificate, a copy of the company’s accounts and a copy of your bank statement evidencing receipt of the funds.
Please note, if you wish to use dividends from a company based outside the UK, different requirements may apply. Please see the below section on international funds.
If you wish to use gambling winnings as all or part of your deposit, we will require a copy of your receipt proving your winnings and copy of your bank statement evidencing receipt of the funds.
Please be aware, it is difficult to proof source of funds for cash winnings. Please see the below section on cash.
You many have received a lump sum as compensation following a dispute or claim you have brought. If you wish to use these funds, we require a letter confirming the agreed compensation from a solicitor or court and a copy of your bank account statement evidencing receipt of the funds from the court, solicitor or third party.
We are unable to accept cash as all or part of your deposit. It is almost impossible to prove the source of cash funds.
We must assess the country of origin of all funds. If your funds are from or connected to a high-risk country, we may have to decline to act on your purchase.
Current Money Laundering Regulations deem ALL countries high risk EXCLUDING: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Japan, Republic of Ireland, Italy, Luxembourg, Malta, The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, UK or the USA.
If you would like further information on any of the above, would like to use funds from a source not mentioned, or want advice relating to the requirements in your specific circumstances, please do not hesitate to contact a member of our Conveyancing team on 01252 733 770.