At Astle Paterson, we know that there is a lot at stake when buying or selling a house. The process is complex, and it can be difficult to understand what exactly is required of you. In order to clear the confusion, we’re writing a series of blogs with valuable conveyancing advice, starting with providing proof of funds.
This four-part series will focus on different steps in the process of buying/selling a house, from the perspective of the different parties involved. However, it is important to understand that this is not a comprehensive guide; we highly recommend that you consult with our solicitors when dealing with any legal matters in conveyancing.
When purchasing a house, one of the very first things that buyers need to consider is providing proof of funds to their solicitors. In order to comply with anti-money laundering regulations, it is necessary for solicitors to carry out the necessary checks to establish the source of funds being utilised towards the purchase of a property.
Providing a source is a very important part of the conveyancing process – if you are unable to do so, the transaction cannot proceed. The reason for this is that due to conveyancing being an area where huge sums of money are involved, it is heavily targeted by fraudsters and criminals in an attempt to launder money acquired by criminal activity.
Unfortunately, there is no set protocol followed by law firms in respect of establishing the source of funds and the information required by each firm may differ. This is due to the onus being on the conveyancer to satisfy themselves that the source of funds are legitimate.
There have been highly publicised reports in the legal press where solicitors have failed to establish the source of funds due to not carrying out the necessary checks. Had these checks been done, they would have revealed that the funds had been accumulated by criminal activity. Such cases have resulted in heavy fines and even prison sentences being imposed on the solicitors involved. Given the severity of the consequences, solicitors and conveyancers take a diligent approach when checking documentation provided by the clients to establish their source of funds.
At Astle Paterson, at the start of the house buying process, we ask clients to begin collating proof of funds. This is in order to avoid any delays further down the line. It is not sufficient to provide a bank statement showing a balance for the sum required for the purchase; we need to see how the funds were accumulated. You can demonstrate this by producing bank statements showing the build-up of funds over time from savings, wages, pension payments, rental income, etc.
When explaining what evidence I require to clients, I say that I need to see the whole picture of where the funds are coming from. For example, if funds are being transferred between accounts, then we will also need to see those bank statements showing the funds being credited and debited from the accounts.
Additionally, if lump sum payments are made into your account, we need documentary evidence for the source of funds. So if, for example, they are proceeds from a sale of a property, a completion statement or letter produced by the solicitors who acted in the sale will usually be sufficient.
If funds are gifted by a third party, they will also be required to provide proof of the funds, together with statements evidencing the transfer of funds to your account.
There is no hard-and-fast rule as to what each client is required to provide, as everyone’s finances differ. At times some clients find these checks to be intrusive, but as explained they are now an integral part of the conveyancing process – and Solicitors have to ensure compliance, due to the penalties which can be imposed for not following money laundering regulations.
This is just a brief overview of the documentation that can be provided, and it is often necessary to guide clients through the process and advise them of the information required. If you would like to contact us for advice on buying a property, you can choose one of the following:
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Astle Paterson, Clay House,
5 Horninglow Street, Burton upon Trent
Staffordshire DE14 1NG
Tel . 01283 531366
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