Understanding the Importance of Establishing Source of Funds and Source of Wealth in Property Transactions

When you’re buying a property, you may feel like you’re already providing a lot of information: bank statements, identification, mortgage documents, and more. When we, as your conveyancing solicitors, ask you to also provide details about your Source of Funds and Source of Wealth, it might seem excessive or even intrusive. However, there are very good reasons why we must request this information, and it’s important that you understand both the legal requirements and the protections this process affords to you as a client.

What is Source of Funds and Source of Wealth?

Source of Funds (SoF) refers specifically to where the money used for a transaction is coming from. This could be:

• Savings built up over time

• Sale of a previous property

• Inheritance

• A gifted deposit from a family member

• Proceeds from investments or shares

We’ll need to see evidence of these funds, such as bank statements, completion statements, or a formal gift letter.

Source of Wealth (SoW) is broader. It relates to how you accumulated your overall wealth, in short, your financial background. This might include your employment history, business interests, investments, or other long-term financial activity that explains how you were able to acquire the funds in the first place.

Why Is This Necessary?

1. Legal and Regulatory Obligations:

As solicitors, we are regulated by the Solicitors Regulation Authority (SRA) and must comply with the UK’s anti-money laundering (AML) regulations. These laws are in place to prevent criminal activity such as money laundering, terrorist financing, and fraud. Failing to comply puts both us and you at risk of legal and financial penalties.

We are legally required to:

• Verify the legitimacy of the funds used in a transaction

• Ensure that no part of the transaction is funded by illicit means

• Report any suspicious activity to the National Crime Agency (NCA)

2. Protecting You and Your Transaction:

Establishing SoF and SoW isn’t just about fulfilling legal obligations; it’s about protecting you. If funds cannot be properly verified, your transaction may be delayed or even stopped. Worse, if any part of the funds is later found to be from a suspicious or unlawful source, your property could be subject to investigation or even confiscation.

By establishing a clear and documented financial trail, we are helping to secure your investment and ensure the process is as smooth and transparent as possible.

What You Can Expect

We understand this process can feel personal and even frustrating. Rest assured, we treat your information with strict confidentiality and use it solely for the purposes of compliance and safeguarding your transaction.

We will typically request:

• Bank statements (3 months’ worth) showing funds being held and/or transferred

• Evidence of savings such as payslips, P60s, or pension statements

• Inheritance documentation, if applicable

• Gifted deposit letters with ID and SoF from the giftor, if applicable

• Details of property sales or business proceeds if used to fund the purchase, if applicable

The sooner this information is provided, the smoother the process will be.

Final Thoughts

Establishing your Source of Funds and Source of Wealth is a key part of the conveyancing process. It’s not about distrust; it’s about due diligence, legal compliance, and protecting you and your investment from risk. Our role is not only to facilitate the legal transfer of property but to ensure the transaction is secure and legitimate at every step.

If you have any questions about what’s required or how to provide it, please don’t hesitate to ask. We’re here to help you through the process.