WHY YOU WILL BE CHECKED FOR MONEY LAUNDERING WHEN BUYING A PROPERTY

When you think of money laundering, your mind may turn to the world of Hollywood movies and gangsters, however, in reality, it is a genuine problem here in the UK, with the property industry particularly vulnerable. Every year billions of pounds are laundered, and the recent release of the Government Russia Report further demonstrates the opportunity there is for illicit money to be used in large property transactions.

As a result, when you buy a property in the UK your estate agent, solicitor and mortgage lender are required to carry out important checks to confirm your identity and to ensure that your finances are all above board.

This guide explains why these checks exist, how they are carried out and all the documents you will need to satisfy them.

Money Laundering and The Law

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

For this reason, anyone buying a property must adhere to Money Laundering Regulations and provide proof of their identity and their funds to make sure their money is coming from legal sources.

As purchasing property can be expensive, it means that criminals can potentially clean a lot of money at once. For this reason, estate agents must do these checks on everyone buying a property through them, to make sure their money is coming from legal sources.

Who carries out the checks?

The selling estate agent, your mortgage lender, and your solicitor or conveyancer will all carry out money laundering checks at some point during the house buying process.

If you get asked for proof more than once, do not be put off; it is a legal requirement for everyone to check where your money has come from. The estate agent, lender or solicitor could be fined or imprisoned if they don’t undertake these checks.

Remember, your agent, lender and solicitor are all separate; just because you’ve shown proof to one, doesn’t mean the others will have seen it.

Make sure you keep all your evidence together so that you can easily show it to everyone who will need to see it.

What documents will I be asked for?

Proof of Identity

To make sure you are who you say you are, you will be asked for proof of your current address and your name. You will be asked for a copy of at least two of the following documents, which you should have on hand to speed up the process.

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

• Current tax bill from your local authority
• Current UK/EU photo driving license (if not used as proof of name)
• Rent card or tenancy agreement from your local authority
• Recent mortgage statement (within the last 3 months)
• Bank statement (within the last 3 months)
• Utility bill (not mobile & within the last 3 months)

Proof of Funds

To check that you have legally acquired the money you are using to buy the property, you will be asked to supply a proof of funds.

You may find that that you are asked for proof of funds initially by some estate agent because they want to make sure you are a genuine buyer who is interested in the property. However, you don’t have to provide proof of funds before putting an offer in if you don’t want to.

We will ask for proof of funds after you put an offer in, as we are not only checking that you have the money to actually pay for the property, but also carrying out our money laundering checks. You must provide proof of funds if asked for it at this stage.

Similarly, you will also be asked by your solicitor or conveyancer and your mortgage provider once the ball is rolling on your property purchase.

Examples of Proof

Proof of funds can be shown with:

• 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)
• Evidence of you selling a property (if using the funds to buy the new property)
• Evidence if the money has been gifted

We can ask you to provide more details of where your money has come from. This is normal practice as all estate agents must conform to the Money Laundering Regulations, and doing thorough checks is standard practice.

Further Proof

Depending on where you got the money for your deposit or the property’s price (if you are a cash buyer), you may be asked for further proof to show that the money has come from where you have claimed.

We may require, for example:

• A letter from whoever gifted your money (e.g. your parents have given money towards your deposit, won the lottery, left money in a will)
• Further bank statements from the past months/years (to show how your money has built up over time)
• Evidence or receipts for gambling winnings, sale of shares or other large amounts of money in your bank account

Best practice is to keep evidence of where all the funds going towards your property purchase have come from; that way you can be prepared if anyone asks for it.

Use an NAEA Propertymark Protected Agent

Agents who display our logo are well-informed on the checks they must undertake on their customers and abide to the Government regulations. They will guide you through what proof is required. Different agents may have different procedures in place to check your identity and your source of funds.