What is proof of funds?
When buying a property your conveyancer will ask for proof that you have the monies available to pay for the balance of the purchase price (after taking into account any mortgage being used) plus legal fees and any Stamp Duty Land Tax payable. You will also be required to show how you came to acquire these monies.
Why do I have to provide this?
Conveyancing transactions are highly susceptible to fraud and money laundering due to the large sums of money involved and which pass through conveyancing firms’ accounts every day, making them a potential target for fraudsters and criminals.
Conveyancers are under a legal duty to comply with Anti-Money Laundering Regulations which means they must verify where the funds being used to purchase a property have come from. They are required to ensure that the funds came from a legitimate source in order to prevent money laundering and fraudulent transactions from taking place. Conveyancers can be subject to criminal sanctions if the funds are subsequently revealed to have been acquired by criminal activity.
In addition, if you are having a mortgage your mortgage lender will also require the conveyancer to check that the information you disclosed in your mortgage application is correct, and that you are not using any other loans or monies from third parties to fund your purchase.
I have already provided this to my estate agent/mortgage broker
Conveyancers are under separate, more stringent regulations and are unable to rely on the checks that your estate agent or mortgage broker may have carried out.
What do I need to provide?
You will need to confirm the original source of the funds being used and also provide evidence of the trail of these funds over the last 6 months. Such evidence will include:
- Savings – bank statements showing the full trail of the funds over the last 6 months.
- Sale of another property – if you have instructed a different firm to act in connection with your sale, or if it was a previous sale, a copy of the completion statement from your conveyancer and a copy of your bank statement showing receipt of the funds and the trail of these since receipt or over the last 6 months.
- Gifted deposits – if you are receiving a gift from a third party such as a family member, your conveyancer will need to make contact with them in order to carry out the same level of checks, including verifying their identity. They will also require them to sign a Gifted Deposit Declaration confirming that the money is a gift, is not repayable and that they will have no interest in the property. The evidence showing the trail of the funds over the last 6 months must be provided, as well as details of its original source.
- Inheritance – a letter from the executors confirming your entitlement, together with copies of your bank statements showing receipt of the funds and the trail of these since receipt or over the last 6 months.
- Release of Pension – a copy of your pension statement or correspondence confirming the release of the funds, together with copies of your bank statements showing receipt of the funds and the trail of these since receipt or over the last 6 months.
- Dividends from a UK company – a board resolution/minutes declaring the dividend payment, a copy of your dividend certificate and copies of your bank statements showing receipt of the funds and the trail of these since receipt or over the last 6 months.