What to Expect During a Money Laundering Check for Home Buyers

2024-06-04

It’s an unfortunate reality, but organised criminals regularly use the UK property market to launder their illegal proceeds. Real estate provides them with a seemingly legitimate facade, and the large amounts of money involved means being able to ‘clean’ huge sums in a single transaction. This creates the appearance of legitimacy, and is why in 2018 the European Parliament passed the Fifth Money Laundering Directive on the prevention of money laundering and terrorist financing. As a result, estate agents are legally obliged to check that any money used to purchase a property comes from a legitimate source.

How to Provide Proof of Funds

If you put an offer in, expect to be asked for proof of funds, although it’s important to remember you don’t have to provide this information at this stage of the process. An agent may ask, however, because they want to ensure your interest in the property is genuine, which will, of course, mean peace of mind for the seller. Once you do put an official offer in, you will then have to provide proof of funds if requested.

There’s a range of ways to provide the necessary proof of funds when asked to do so. For mortgage and cash buyers, bank statements will prove you have the deposit. Further statements will show how you’ve built up money over time, and can provide evidence of selling a property if you’re using those funds to purchase another home.

Proof of ID is simply an estate agent doing their due diligence, maintaining their reputation and ensuring their doing their legal duty. Proof of name is as simple as showing a valid passport, driving licence or residence permit. Proof of address requires a current council tax bill, a recent mortgage statement, or a current UK/EU driving licence.

Proof of ID simply means being able to show you are who you say you are. Your estate agent will ask for bank statements that show you’re able to meet your deposit. They may also ask for evidence of you having sold a property if you plan to use the funds to purchase a new one. Or, if you’ve been gifted the money, a letter from whoever did this for you may be required. If money has been left to you in a will, you’ll need to show evidence of this, and the same applies if you have shares that you’ve sold.

A current passport or driver’s licence will prove your name, as will a residence permit, an inland revenue tax notification or a state pension book/letter of notification. For proof of address, a current tax bill from your local authority, a tenancy agreement, a recent mortgage statement or utility bill or bank statement will all suffice.

Who Else Requires Proof of Funds

Any mortgage lender, conveyancer or solicitor is legally required to ask for proof of where the money has come from, so don’t be surprised if you’re asked more than once. It’s simply part of the process. The legal transfer will be handled by a solicitor or conveyancer. They’ll assist you every step of the way, but finding the person who’s right for you is crucial. Once you’ve found someone you can work well with, you’ll find the rest will quickly fall into place.