You’re a solicitor, not a bank – why are you asking about my finances?

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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 from your parents, and your lender has already approved your use of those funds, 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.

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 how you can actually afford your dream property, we are merely asking you to assist us in upholding the rule of law.

If you are buying or selling a property, please contact Andy Roscoe at Meaby&Co for advice: andy@meaby.co.uk or call 020 7703 5034.

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