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 we need to verify your funds
Conveyancing is recognised by UK and international regulators as a higher‑risk area for money laundering. Because of this, the Solicitors Regulation Authority (SRA) and its oversight body, the Office for Professional Body Anti‑Money Laundering Supervision (OPBAS), require us to confirm where the money being used in a property purchase or sale has come from.
Michelmores is regulated by the Law Society and the SRA, who require all law firms 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. Legal action could be taken against the firm or the individuals who work here if the appropriate checks are not carried out and appropriate evidence is not obtained.
To help prevent financial crime, UK law requires all law firms to carry out certain checks when dealing with property transactions (both residential and commercial transactions). These rules come from three main pieces of legislation that together form the UK’s anti‑money laundering framework.
This means we will ask you to provide documents or information showing the source of the funds you intend to use.
The laws behind these checks
The main UK laws that govern anti‑money laundering are:
- Proceeds of Crime Act 2002 (POCA): This sets out offences relating to handling money or assets gained from criminal activity. It also requires businesses, including law firms, to report suspicious activity to the National Crime Agency.
- Financial Services and Markets Act 2000 (FSMA): This Act established the current regulatory framework for the financial services industry, overseen by the Financial Conduct Authority (FCA).
- Money Laundering Regulations 2017 (MLRs): These regulations set the detailed requirements on how businesses must prevent money laundering and terrorist financing.
Please be assured that these checks are a routine part of our work and are required for all clients.
Our aim is to make the process as simple as possible for you while meeting our legal and professional obligations.
How do we verify the source of your funds?
- Money used to buy a property can come from many different places, and the information we need will depend on your individual circumstances. The guidance below is not exhaustive, but it explains some of the more common types of funds we review.
- As a regulated law firm, we must confirm that the money being used in your transaction comes from a legitimate source and is not, and has never been, connected to criminal activity. Although proving that something is not the result of wrongdoing can feel difficult, we ask clients to be open and straightforward with us about how their funds have been obtained.
Any requests we make for documents or information are legal and regulatory requirements. These checks are in place to protect you, us, and all parties involved in the conveyancing process.
The easiest way for you to send documents to us for source of funds verification is through the Legl link which will be sent to you as part of the file opening process. This will enable documents to be reviewed and signed off swiftly by our compliance team, enabling us to proceed with the legal work on your transaction quickly.
If you have difficulties with using the Legl link, please do not hesitate to contact us as our team are happy to assist, or discuss alternative ways to get documents to us.
Types of source of funds
Mortgage
We will need to see an original mortgage offer letter on headed paper (this will usually be sent to us directly by your lender if it relates to the Property you are purchasing. If not, we will need you to forward this to us). 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.
Cash purchasers and cash deposits
Cash is one of the most common ways criminals attempt to disguise the origins of illegal money, particularly through property transactions. Because of this, we are required to take additional steps to verify the source of any cash being used in your purchase.
Cash can be accumulated in many different ways, and we will need to understand how you (or anyone gifting you funds) built up the amount being used. However, our checks may go further than the specific sum for the purchase. Because cash is a “fluid” form of wealth, we often need a broader picture of your financial circumstances. This may include information about:
- other funds in your accounts
- your employment and income
- your general day‑to‑day spending
- how savings have accrued.
This helps us confirm that the funds fit naturally within your overall financial position.
Cash generated through stock market trading is generally acceptable, provided you can supply a clear paper trail of transactions covering at least the previous six months. If your investments are managed by a fund manager or independent financial adviser (IFA), they should be able to provide this information for you.
House sale proceeds (if Michelmores are not acting for you in the sale of your existing property)
We will need to see the completion statement and letter from the conveyancing solicitors acting in the sale confirming the source of the funds as well as a bank statement showing the payment from the solicitors arriving into your account.
Inheritance
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 funds arriving in your account.
Gifted monies
Many people are gifted money from family members to assist them in purchasing a property. We need to understand where and from whom money is coming from to purchase property. You are the “buyer” and our client but if your funds are being gifted or loaned to you from someone else then we will need to know more about them and will ask how the giftor has acquired the funds (be it via savings, inheritance etc). 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 via Legl in the same way that you will.
Company accounts – drawdowns, dividends, unpaid salary and Directors’ loans
If you (or your giftor) own a business and the funds are held in a business account (separate from personal funds), you may be asked to provide the business accounts together with confirmation from the company accountant or company secretary that the drawdown is lawful. Where the business is a limited company, there are strict rules governing the withdrawal of company funds for personal use. You are therefore strongly advised to seek financial advice before agreeing to gift or use company money to purchase a property in your personal name.
We will need to see the legal documentation authorising the use of company funds, such as dividend certificates, a director’s loan agreement, wage slips showing salary or bonus due, or similar evidence.
If your giftor is withdrawing money from a company, the funds must be transferred to you (our client) first. Company funds cannot be paid directly to Michelmores.
The only circumstance in which we can accept payment directly from a company account is where the property is being purchased by the company as a company asset.
Cryptocurrencies – e.g. Bitcoin
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).
We have to look very carefully at any source of funds involving cryptocurrencies so if you plan to use such funds in your transaction, please let us know as soon as possible so that we can assess whether we are able to satisfy our obligations regarding the monies coming from cryptocurrency.
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.
