The majority of property transactions involve clients sending some money to their solicitors. For a purchase, that sum might be tens or even hundreds of thousands of pounds. Since the 2002 Proceeds of Crime Act came into force, solicitors have been required to carry out ever more stringent checks on their clients, and where their client’s funding comes from. The reason for this is to verify, as far as solicitors can reasonably do so, that the funds are not the proceeds of crime.
Figures released recently by Fortytwo Data suggest that 32% of “suspicious activity” reports made to the National Crime Agency (NCA) related to residential property transactions. Money laundering is, according to a definition given on Wikipedia, “concealing the transformation of profits from illegal activities and corruption into ostensibly ‘legitimate’ assets.” Where any suspicious activity is noted by a solicitor, that solicitor must make a report to the NCA of their suspicions – the NCA will then consider the report and decide within a week whether the solicitor may proceed.
It should be noted that the “profits from illegal activities” mentioned in the definition above does not just relate to the sort of money laundering that you would expect to see in Narcos – if it becomes apparent to a solicitor that a client has not paid their taxes, a report will need to be made to the NCA.
When a client transfers funds to their solicitor, the solicitor must enquire as to how the client has acquired the funds, to verify that the funds are not in any way suspicious. It is not sufficient that the client’s money is held in a bank before being transferred to the solicitor – we must still query the original source of the funds.
It is the querying of the original source of the funds which often irks clients – if you are using funds from long-held savings, or receiving a gift, why would we have to ask questions? Simply, it is because the lender would not be “laundering” the funds themselves – but we would be by allowing the money to pass through our account. Accordingly we must verify the source of every last penny that we receive towards the acquisition of a property.
The money laundering obligations imposed upon us are no respecter of persons and we must ask everyone. We will not be able to process your transaction without these items and a failure to provide them can result in a delay to your transaction.
If a client tells us that he is a student but somehow has £100,000 in savings, we will have to ask how he has acquired those funds. On the other hand, if a client is receiving a small gift from her very wealthy parents, we still have to ask the parents how they have acquired those funds, and we must verify the identity of the parents.
So, please remember, when your solicitor asks you apparently intrusive questions about the source of your funds, we are merely asking you to assist us in upholding the rule of law.
So what evidence would be appropriate? In the first instance we need the bank statement from which the funds will be sent to us. There is no hard or fast rule but in the first instance provision of the following may assist:
Copy ID from the person providing the gift
A letter from them (hard copy needed) confirming that the funds are a gift not incurring interest or requiring repayment, and confirming how they have acquired the funds.
Confirmation as to how the person providing the gift have acquired the funds:
A copy of their bank statement showing the funds arriving in their account (if via a lump sum), or a copy of their last 3 months’ statements showing the funds held therein.
A copy of the giftor’s statement showing the funds being sent to you, and your corresponding statement showing receipt of the funds.
if from a property sale, we will need a letter from their solicitor confirming the payment to you.
Sale of shares or pension payment:
If from a sale of shares or pension payment etc, we will need a letter from your accountant, broker and/or pension provider (as applicable) confirming this.
If you have acquired the funds over time via salary, we will need confirmation of your jobs and a copy of your last P60’s confirming your income.
If from an inheritance, we will need a letter from your solicitor confirming the payment to you.
Profit from your business:
If from the profit of your business, we should like to see a copy of your profit and loss sheet for the last three years endorsed by your accountant.
Meaby&Co is authorised and regulated by the Solicitor’s Regulation Authority (SRA Number 447880) and registered in England and Wales with registered number OC322672 at 2 Camberwell Church St, London, SE5 8QY.