When you purchase your home you will be asked for various documents to establish your identity, your residential address and the source of your deposit or purchase funds.
It is likely that such documents will also be asked by your mortgage lender and any sales agent involved in your transaction.
As a first time buyer, it is worthwhile, before you agree to buy your home, to prepare documents that will be legally acceptable to avoid any delays and any unnecessary scrutiny.
Why are money laundering checks necessary?
As a result of the vast amounts of money being transferred daily in the UK property market, the property industry is a target for money launderers and fraudsters. Purchasing a property can be how a criminal can launder the proceeds of crime.
Therefore, before anyone buys a property, rigorous checks are undertaken by conveyancing solicitors to verify identity, proof of address and the source of wealth and funds to ensure that they are not the proceeds of crime.
In addition, rules imposed by Land Registry require conveyancing solicitors to confirm the identities of clients. This confirmation is required before a property can be legally registered in a purchaser’s name. Land Registry have set a digital identity standard which means that many conveyancing solicitors now require their clients to confirm their identity via biometric and cryptographic technology.
Most conveyancing solicitors will commence identity and source of funds checks from receipt of instructions and have an ongoing duty to be vigilant and mindful of any suspicious activity throughout a transaction.
What documents are acceptable?
The type of documents that are acceptable to a conveyancing solicitor and the ones that you should ensure you have available are typically as listed below. Further documents may also be acceptable subject to the anti-money laundering policy of your conveyancing solicitor. The requirements will change if you are purchasing through a company or a trust.
Proof of Identity Documents
The following valid photograph identification will usually be accepted:
• Driving licence
• Passport
• HM Forces Identity Card
• EU Member State Identity Card
Proof of Address Documents
The following documents are usually acceptable but should be dated within the last three months prior to presentation.
• HMRC correspondence
• Driving licence
• Utility bill
• Mortgage statement
• Bank statement
• Council tax bill
• Benefits or pension correspondence
• NHS medical card
• Tenancy agreement
Source of Funds Documents
These documents are not the same as proof of funds documents which a developer, housing association or sales agent may require from you to prove that you have funds or funding to proceed with a property transaction.
Many conveyancing solicitors are now using open-source banking applications to verify source of funds which are identifiable through a participating bank.
The type of evidence required to show how you have accumulated funds for your house deposit or purchase amount is commonly from the following:
• Bank Account Statements – Minimum requirement will be for the last six months showing your income and savings enabling you to reach your deposit or purchase funds.
• Gifted Deposit – Where you are due to receive a gifted deposit from your parents or a friend, your conveyancing solicitor will usually ask them to sign a declaration to confirm that the funds being sent are a gift and not a loan or otherwise entitle them to an interest in your property. Also, the person gifting the deposit, will also need to provide proof of identity, address and complete their own source of funds checks.
• Property Sale – Where you are relying on funds from the sale of another property which has already completed, you will normally have to show the completion statement to confirm the funds being received and your bank statement showing receipt of completion funds.
• Investments – The sale of any shares or investments that are being used to fund the purchase will need to be evidenced by a confirmation of sale and a copy of your bank statement showing that you have received money from the sale.
Purchasers should be particularly careful when selling cryptocurrency as many mortgage lenders and conveyancing solicitors will not accept receipt of monies from cryptocurrency due to the unregulated nature of these investments.
• Inheritance - If you are using inheritance monies to fund your purchase, you will need a copy of a letter from the executors or the probate solicitors identifying the monies you will receive into your bank account together with a copy of your bank account showing the inheritance paid.
• Winnings – If you are lucky enough to win the lottery you will need to show evidence of the winnings and your bank statement to confirm receipt.
What if my purchase funds are being sent to me from outside the UK?
Difficulties can arise depending upon where your funds are coming from. Most EU countries are regarded as trusted sources of funds and their banks follow identical money laundering regulations. However, funds coming from non-EU sources may not be accepted by a number of mortgage lenders and conveyancing solicitors. It is important to check the position with your conveyancing solicitor at the earliest opportunity.
Hopefully, the above provides some guidance as to the type of documents you will be required to provide and the types of money laundering checks that will be undertaken before you purchase your property. Being prepared for these checks is becoming an increasingly important part of the conveyancing process for all home buyers.
Should you require any further information regarding the legal aspects of purchasing a property, please do not hesitate to contact me on E: bill.dhariwal@lawcomm.co.uk; DDI: 01489 864 117.
