Solicitors always ask clients for lots of information when they are buying a property. Two of the most important pieces are identification and Source of funds.
Solicitors gather this information to ensure their clients are who they say they are and to play their part in preventing crime.
In this Article Katie Easter, trainee with MJP Conveyancing, looks to explain the reasons behind the inquiries solicitors undertake to ensure as best they can that they are not used a a conduit for criminality.
Source of funds is closely linked to anti-money laundering purposes. Identification takes away the possibility to commit money laundering whilst remaining anonymous. It can also make it easier to catch previous offenders. Establishing the source of a client’s funds when purchasing a property allows law firms to be vigilant against any suspicious sources. This helps to prevent criminals passing the proceeds of crime though law firms’ client accounts.
The ‘risk profile’
Law firms are encouraged to build a ‘risk profile’ of their clients with the information gained from identification and source of funds. Each client can be considered low or high risk in relation to money laundering depending on the source of their funds and any discrepancies between identification documents.
Once a client’s risk is ascertained, any changes to this throughout the transaction can alert a law firm to the possibility of untoward behaviour.
At MJP we use a Source of Funds form with questions such as:
· Are you purchasing with the help of a mortgage?
· Please also ask [any other] party concerned to produce evidence of identification in the form of a passport or photo card driving licence and a utility bill delivered within the past two months
These help us to build a picture of each client to enable us to monitor the possibility of criminal activity throughout every transaction.
Law firms are advised to ask for additional documentation to show their client’s source of funds where there is the potential for more risk.
Cash purchasers can be considered more of a risk compared to individuals purchasing with the aid of a mortgage because mortgage providers carry out their own checks against each customer. In contrast, cash in a bank account is not necessarily ‘clean’ and cash purchasers can therefore find that they are asked for more information about where their funds originate from.
Why has the person giving me a cash gift for my property also been asked for identification?
All money coming into a law firm should be monitored with the use of identity and source of funds checks. This includes money that comes from an individual that may not actually be a client. This is intended to prevent clients attempting to purchase property with another person’s funds that could be the proceeds of crime.
The main thing to note
Clients can be concerned that law firms are actively seeking to accuse them of money laundering. This is not the case. Although law firms and particularly conveyancing departments are responsible for ensuring that the proceeds of crime do not pass through the firm’s accounts, they are not policing money laundering.
Law firms strive to maintain constant vigilance to prevent crime without handing in every cash purchaser and wealthy client that is purchasing a property!