What are Anti Money Laundering checks?
If you are planning to buy a property in the UK, you may have heard of the term "money laundering check" or "anti-money laundering check". But what does it mean and why is it important?
Money laundering is the process of concealing the origin of illegal funds by moving them through legitimate businesses or transactions. The property market is one of the sectors that can be vulnerable to money laundering, as large amounts of money are transferred every day.
To prevent money laundering and comply with the Money Laundering Regulations, anyone buying a property in the UK must provide proof of their identity, address and source of funds to their conveyancing solicitor and other third parties involved in the transaction. This is known as a money laundering check or an anti-money laundering check.
Proof of Identity and Address
The first step of a money laundering check is to verify your identity and address. This is to ensure that you are who you say you are and that you are not using a false or stolen identity.
You will need to provide one document from each of the following categories:
- Documents to prove identity: UK/EU photo driving license, passport, residence permit, HMRC tax letter, state pension, benefits letter
- Documents to prove address: bank statement, utility bill, latest mortgage statement, council tax bill, rent card or tenancy agreement from your local authority
You may need to provide original documents or certified copies, depending on the requirements of your solicitor or estate agent. You may also need to provide additional documents if you are buying a property with someone else or if you are acting on behalf of someone else.
Proof and Source of Funds
The second step of a money laundering check is to provide proof and source of funds. This is to show that you have enough money to buy the property and that the money comes from a legitimate source.
You will need to provide one or more of the following documents, depending on how you are funding your purchase:
- Mortgage agreement in principle: this is a document from your lender that shows how much they are willing to lend you based on your income and credit history
- Bank statement of deposit if using a mortgage: this is a document from your bank that shows how much money you have saved for your deposit and where it came from
- Bank statement of full price of house if cash buyer: this is a document from your bank that shows how much money you have in your account and where it came from
- Evidence of sale of existing property: this is a document from your solicitor or estate agent that shows how much money you have received from selling your previous property
Your solicitor will also ask you to explain where your funds came from, which is called the source of funds. For example, the source of funds might be your savings, a gift, an inheritance, a loan or a business income.
You may need to provide additional documents or evidence to support your source of funds, such as:
- A gift letter: this is a letter from the person who gave you the money that confirms it is a gift and not a loan
- An inheritance letter: this is a letter from the executor of the estate that confirms how much money you have inherited and from whom
- A loan agreement: this is a document from your lender that shows the terms and conditions of your loan
- A business account statement: this is a document from your business bank account that shows how much money you have earned and spent
Your solicitor will check that your funds are consistent with your income and lifestyle and that they do not come from any illegal or suspicious sources.
Why Are Money Laundering Checks Important?
Money laundering checks are important for several reasons:
- They help to prevent money laundering and combat financial crime
- They help to protect you and your solicitor from being involved in any illegal or fraudulent transactions
- They help to ensure that your purchase goes smoothly and without any delays or complications
Money laundering checks are part of the legal duty and responsibility of your solicitor and other third parties involved in the property transaction. They are also required by law under the Money Laundering Regulations.
If you fail to provide the necessary documents or evidence for a money laundering check, your solicitor may not be able to act for you or may report you to the authorities. This could result in your purchase being cancelled or delayed, or even in legal action against you.
Therefore, it is advisable to prepare for a money laundering check as soon as possible and cooperate with your solicitor and other third parties throughout the process. This will help you to buy your property quickly and safely.
The following links provide more information.
Money Laundering Checks When Buying a House UK | Compare My Move.
Anti-money laundering in the property market | The Law Society.
