Understanding Money Laundering Requirements in Conveyancing Transactions

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Money laundering is “the process by which criminal proceeds are sanitised to disguise their illicit origins”. It is estimated that up to £57 billion is laundered through the UK every year. There are large sums of money changing hands in the conveyancing sector making this an area of law heavily attacked by fraudsters as they can legitimise a large amount of money in one go.

The government have introduced compulsory checks to make it more difficult for criminals to illegally launder money. When instructing a solicitor to act for you in the purchase of a property you’ll need to:

  • Residential Sale (leasehold and freehold)
  • Provide Proof of Identity & Address

Proof of Identity & Address

In accordance with Anti-Money Laundering Regulations, you will be required to supply documentation that proves your identity and address. Your solicitor will insist on seeing photographic ID, such as a valid current passport, photocard driving licence, armed forces ID card, or National Identity Card.

Your solicitor will also need to see two separate pieces of evidence to prove you reside at the address you are living at. This is normally your main residence where you are registered on the electoral roll. A bank statement, PAYE tax coding notice, HMRC letter, utility bill or council tax bill can be used as evidence for proof of address. The reason for needing proof of address for the client’s current address and for limiting what types of correspondence are acceptable is that some fraudsters or money launderers will simply break into an empty property and use any mail addressed to the previous occupier to begin creating a new identity.

Your solicitor will ask to see originals of the documentation provided, of which copies will be taken and certified as being true copies of the original for the file. If you are unable to provide your solicitor with original copies of the required documentation to prove identity and address, your solicitor can accept copies certified as being true copies of the original by another solicitor, licensed conveyancer, accountant, teacher, post office, Minister of Religion, judge, barrister, police officer or a member of staff at a British embassy. The individual that certifies your documents must be FSA Regulated.

Proof of Funds

Proving your source of funds for the purchase of your property is the most important task in the conveyancing process. A solicitor cannot by law proceed with your purchase without knowing the source of your funds. This is to limit the potential for fraud, protecting the solicitor, the legal sector and most importantly, the buyer.

Proof of funds can be categorised into:

    • Savings

The best evidence of savings will be bank statements for the last 3 months showing an accumulation of funds in your bank account. If you have more than one bank account containing savings, you will need to provide statements for the last 3 months for those accounts.

    • Pension

A copy of your pension release document and a copy of your bank statement showing the money being received from the pension company.

    • Sale of Shares

A copy of the share release schedule and a copy of your bank statement showing the money being received from the shares.

    • Sale of another property

A copy of the completion statement from your solicitor and a copy of your bank statement showing the money being received from the solicitor following the sale.

    • Inheritance

A copy of the letter from the executors stating how much you are being paid as a beneficiary and a copy of your bank statement showing the money being received from the solicitor/executor’s bank account.

    • Dividends from a UK Company

A copy of your dividend certificate, a copy of the company’s accounts and a copy of your bank statement showing the money being received from the Company.

    • Gambling Winnings

A copy of your receipt proving your winnings and a copy of your bank statement showing the money being received.

    • Compensation Award/Court Settlement

A copy of your letter confirming your compensation settlement from a solicitor and/or Court and a copy of your bank statement showing the money being received from a third party/Court/solicitor.

    • Gift

We will require a letter from the person making the gift. The person making the gift will also have to prove the source of the funds in the same manner as you would have to. Read our blog post on Gifted Deposits here.

If the deposit/full funds are across separate accounts, we will need to see statements for ALL accounts and a final statement showing funds transferred to the main account for the deposit or full proceeds of the cost of the property.

The Law Practice UK Ltd is accredited by the Law Society’s Conveyancing Quality Scheme so you can be assured that you will receive a high standard of service and client care. For further information and advice, please contact us to speak to a member of our property team.

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