Why do Solicitors ask for source of funds information when buying a property?

Why are you asking for source of funds information? 

We know it can be intrusive, and you probably feel that it is an invasion of your privacy. You are ready to proceed with your conveyancing transaction and wonder why your solicitor needs to know where the funds have come from and/or where the wealth has come from. 

Under the Money Laundering Regulations, we are required to request source of funds information and source of wealth information to check whether the funds are coming/the property has come from a legitimate source. 

What source of funds information would we require? 

Source of funds relates to where the funds are coming from to finance the transaction. 

Example of source of funds information would include but are not limited to: 

• Bank statements (we require at least 3 months of bank statements. If there have been transfers into the account where funds are coming from, we will require at least 3 months of bank statement from the accounts where funds were transferred from) 
• Investment account statements
• Payslips
• P60 
• Inheritance documents including estate accounts and a bank statement showing funds in
• Completion statement from a sale transaction and a bank statement showing funds in
• Pension Statement 
• Mortgage Offer

What source of wealth information would you require? 

Source of wealth relates to how you have generated your wealth. We require a detailed summary of the economic, commercial and/or personal activities that have contributed to your wealth. For example, if your wealth has been generated from savings from employment, please confirm what your salary has been, how long have you been saving for, how much have you saved year on year. We require a full understanding of how you came to accumulate your funds. 

Example of source of wealth information include but are not limited: 

• Employment Income
• Rental Income from investment properties 
• Sale of properties 
• Trust Fund
• Divorce Settlement
• Lottery Win 
• Inheritance 
• Business Ownership 

How do I complete the Source of Funds and Wealth Statement received from you? 

In respect of Source of Funds, we need to fully understand where the funds are coming from for the particular transaction. If you are selling the property or transferring a property where you are not paying any funds, you will not need to provide source of funds. If you are purchasing the property or paying for a share of the property in a transfer, you will need to provide source of funds information. Please state where the funds are coming from. Please account for where every amount is coming from. If it is a purchase of a property at the price of £100,000 and there is stamp duty of £5000 to pay, an example of how to clearly set out the source of funds would be to state that you have a £64,000 mortgage, £28,000 from sale proceeds of a house sale, £13,000 from savings account. You would then need to provide evidence of this information such as completion statement for the house sale and a bank statement showing the sale proceeds in from the house sale. You will also need to provide at least 3 months of bank statements for savings account. We will also need to see at least 3 months of statements of each account where funds have been transferred from into the savings account.

In respect of Source of Wealth, we need to understand how you have generated your wealth. Please confirm how the wealth was generated. We will still require this information even if you are selling or transferring a property where you are not paying any funds.  For example, if wealth has been generated from savings from running a business with profit, please provide details such as details of your company, what the profits have been and what share of the profit you have taken, confirm how long the company has been running on profit, provide company accounts, confirm how long you have been saving, what amounts you have saved each year. If you are an attorney, trustee or an executor, you will need to confirm how the property owner generated their wealth.