Money laundering checks when buying a house

Purchasing property in the UK is a common method used by organised criminals to launder the proceeds of criminal activity. The sheer size of the property market in the UK and the high value of property assets means that extremely large amounts of criminal funds can be ‘cleaned’ in a single transaction, giving it the appearance that it has been acquired legitimately.

In April 2018, the European Parliament passed the Fifth Money Laundering Directive on the prevention of money laundering and terrorist financing. For this reason, estate agents must do these checks on everyone buying a property to make sure the money is coming from a legitimate source—they can be fined or imprisoned if they don't.

Proof of funds

We may ask for proof of funds at two different stages and for two different reasons. If we ask for proof of funds before you put an offer in, it may be because we want to make sure you have a genuine interest in the property to avoid any disappointment for the seller. However, you don’t have to provide proof of funds before putting an offer in.

If we ask for proof of funds once you've put an offer in, we are not only checking you have the money to purchase the property but also that you haven’t aquired it through criminal means. It is at this stage that you must provide proof of funds if asked.

How can I provide proof of funds?

When it comes to providing proof of funds, you can do so via the following means:

  • an agreement in principle/mortgage in principle

  • bank statements of your deposit amount (for mortgage buyers)

  • bank statements of your cash amount (for cash buyers)

  • further bank statements from past months/years to show how your money has built up over time

  • evidence of you selling a property (if using the funds to buy the new property)

  • if you've been gifted the money, a letter from whoever gifted the money

  • evidence of money being left to you in a will

  • receipts of shares being sold

In more unique circumstances, if you've been lucky enough to win the lottery, you may be asked to prove so. Likewise for gambling winnings where you could be asked for receipts/evidence of winnings. It's best practice to retain evidence of where all the funds going towards your purchase have come from, this way you can be prepared should your we ask for it.

PROOF OF ID

As it is our legal duty to make sure that you are who you say you are, we will ask you for proof of your current address and your identity. This process is called ‘Due Diligence’ which forms part of our checks. You will be asked for some of the following forms of proof of identification.

Proof of name:

  • current passport

  • residence permit

  • current UK/EU photo driving license

  • HMRC (Inland Revenue) Tax Notification

  • state pension or benefits book/notification letter

Proof of address:

  • a current tax bill from your local authority

  • rent card or tenancy agreement from your local authority

  • recent mortgage statement

  • bank statement

  • utility bill (not mobile)

WHO ELSE REQUIRES PROOF OF FUNDS?

Your mortgage lender, solicitor/conveyancer will also ask for proof of where your money has come from. Do not be put off if you get asked for proof more than once—it is a legal requirement for everyone to check where your money has come from.

Like us, lenders and solicitors can be fined or imprisoned if they don’t undertake these checks. We, your lender and your solicitor are all separate; unfortunately just because you’ve shown proof to one, doesn’t mean the others will have seen it.

Choosing a Conveyancer or Solicitor

A solicitor or conveyancer will handle the legal transfer of your property. They are a vital part of the process so it’s important to pick one that’s right for you.

If you do not already have one, please ask us for guidance.