Why do we need to verify your source of funds and what kind of information do you need?

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Lease Law
by Jade Thomas

When you’re buying a property or paying a premium for an interest in a property (for example, a lease extension or purchase of a share of the freehold interest), one of the key steps your solicitor must take is verifying the source of your funds. This isn’t about questioning your finances—it’s a legal requirement.

Why Verification is Required

Solicitors are bound by strict Anti-Money Laundering (AML) legislation and regulations. These rules require law firms to confirm that all funds used in property transactions come from legitimate sources and are not linked to criminal activity. We are required to keep detailed evidence on file of where your monies have come from to ensure they are from legitimate sources and not from the proceeds of crime.

Failure to carry out thorough checks can lead to serious consequences, including disciplinary action, fines and  even criminal liability for the firm and individual solicitors (even where there is no suspicion of wrongdoing if we do not hold the information on file).

In fact the ultimate penalties for solicitors who fail to carry out proper source of funds checks (and fail to keep evidence on their file) are unlimited fines, up to 14 years imprisonment and SRA disciplinary action.

That’s why every client, without exception, must go through this process.

How the Process Works

To make the process as simple and secure as possible we use a secure online portal to guide you through the typical documents that you may need to provide to satisfy our requirements depending on where your money is coming from.

Some common sources of funds and evidence that we would typically require includes:

Source of Funds Evidence Required
Employment Income (employee) Last 6 months of payslips, P60 for the most recent tax year and at least 6 months of bank statements showing your salary being paid into your account
Employment Income (self-employed) At least 6 months business bank statements, at least 6 months personal bank statements showing the funds being paid from the business and tax return for the most recent year.
Employment Bonus Payslip showing the bonus payment and bank statement showing the bonus credited to your account.
Rental Income Tenancy Agreement and at least six months bank statements showing the rent received.
Savings

 

(please note that we need to see how the savings accumulated – not just that the balance exists)

 Bank or savings account statements covering the period funds were built up (often 6–12 months, sometimes more). Please note that if large deposits appear, you’ll need to explain and evidence each one (e.g. salary, sale, inheritance) and we will need an explanation and evidence for any significant cash deposits.
Mortgage secured on the property Mortgage offer
Mortgage secured on another property Mortgage offer, completion statement from the solicitor acting on the remortgage confirming the balance released to you and the bank statement which shows the receipt of those funds.
Sale of another property The completion statement from the solicitor acting on the sale confirming the balance released to you and the bank statement which shows the receipt of those funds.
Personal Loan Loan agreement and the bank statement which shows the receipt of the funds. If the lender is an individual (and not a large corporation) then we will also require the lender’s ID documents and evidence of the lender’s source of funds.
Gift Signed Declaration of Gifted Deposit from the person providing the gift, the giftor’s ID documents and source of funds. The giftor’s bank statement showing the gift amount and the transfer to you and your bank statement showing receipt of the gift.
Funds from a divorce settlement Court Order/Consent Order/Separation Agreement or similar confirming the settlement terms and amount and bank statements showing funds received into your account.
Inheritance Grant of Probate/Letters of Administration and Estate accounts or Executor or Solicitor’s letter confirming your entitlement and the amount received. Your bank statement showing the funds received from the estate.
Stocks & Shares or other investments At least six months Portfolio statements, Investment Statement/Broker’s account summary showing the ownership and sale of the assets and bank statements showing the funds received into your account.

IMPORTANT ADDITIONAL NOTES:

  1. If your money has moved between accounts, we’ll also need to see evidence of those inter-account transfers so we can trace the funds back to their original source.
  2. If you have received a lump sum payment (for example, inheritance or sale of a property), in addition to the bank statement showing the amount being transferred to your account, we also require the subsequent bank statements showing that the funds are still in the account.
  3. For any funds coming from overseas, additional checks will be required.
  4. It is much easier and much less time consuming to verify source of funds if all the information is collated and clearly labelled in one email, especially where funds have been transferred between multiple accounts.

Why This Matters

We understand these checks can sometimes feel intrusive or inconvenient, but they are essential to ensure compliance with the law and also safeguard the integrity of your transaction and protect you from potential risks.

Conclusion

Please note that we cannot accept or use your funds for  your transaction unless we have sufficiently verified the source of funds and you have provided to us acceptable evidence for our  file.

Your cooperation in providing the necessary documents promptly helps keep your transaction on track. By working together, we can ensure everything proceeds smoothly, securely, and in full compliance with the law.

Contact us today