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Money Laundering

By: Liz Lennox - Updated: 2 Oct 2017 | comments*Discuss
 
Instruction Forms Terms & Conditions

It is a sad fact that global terrorism and crime has had an effect on our everyday lives. From having our bank accounts plundered by lowlifes to more stringent checks at the airport, we cannot escape the fact that we are all at risk. This has, inevitably, had an effect on the way property is bought and sold.

When you receive your instruction forms there will, or at least there should be, a section in the terms and conditions which sets out the procedure followed by the firm. As with any legal document you should read it through thoroughly, not only will it make it much easier for you to understand what is happening later; it will mean that you can prepare any paperwork ahead of time and prevent lengthy delays.

More Paperwork!

Yes, more papers will be required than if you moved say 5 years ago. Let’s say that you are putting down a deposit of £20,000. You will need to be able to prove where that money has been and where it came from. So, if you have been quietly stashing fivers in an old bean tin then you really need to get it into a bank – now!

The time period that the conveyancer will need to be able to look at on your bank statements is, at the time of writing, three months. If your savings have been merrily building up in one account for longer than this then the statements covering that one account should be all you will need to provide. If, however, the money is spread across several accounts you can’t just transfer it all into one account and then get statements for that one account, you will need to provide 3 months of statements for each account. Confused? You will be!

Let’s go back to that £20,000. If we assume that you had £5,000 in each of four accounts. You will have to provide three months worth of statements for each account and if any one of the amounts was made up of a lump sum then you will need to provide evidence of where that amount came from.

A Gift from a Relative

It is often the case, especially with first time buyers, that a part of the deposit will be provided by a generous family member. This can often be a thorn in the side of the conveyancer, tempering the effect of the gift for all concerned.

It need not cause too much of a problem however if you have read your conveyancer’s terms and conditions; you will be well prepared and have geared up every contributor to provide what they need to.

Just as you had to provide identification and proof of address, so will the person who is giving you the money. They will also need to provide evidence of where the money came from in the form of bank statements. In addition they must also provide a letter to confirm that this money is a gift and not a loan. This last requirement is in deference to your mortgage lender as any other form of borrowing may prevent you from getting the mortgage in the first place. In any event, a gift will need to be revealed to your lender and their consent must be obtained before you can complete. Therefore it is essential that you tell both your lender and your conveyancer at the earliest opportunity to prevent delays.

But it’s Personal!

Your conveyancer should guarantee the safety of your personal information so there should be no need for concern there. The contributor becomes another client of the firm and is entitled to the same privacy and duty of care as you are. If they are concerned then they are free to obtain independent advise, at their own cost.

Isn’t this Just More Bureaucracy?

As I intimated at the beginning, the reason behind all of these new rules is a response to terrorism and crime – a large amount of money is laundered through the property markets every year and, although you are undoubtedly entirely innocent, these checks must be made to catch those who are less than honest. At the end of the day, if you have nothing to hide then there should be no problem with these new additional procedures, should there?

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Anoyed - Your Question:
We have been asked by our conveyancer to provide evidence of where purchase monies are sourced from, as we are buying some land. I have provided my wife's current P60 as the net income is greater than the value of the land by a comfortable margin. The Conveyancer has stated that this is not sufficient evidence. I have decided to push back, as gold plating of rules appears to be a British Speciality. According to Government guidance a business must provide evidence of the source of the monies for purchase are from a legal source. A P60 is almost the perfect document. It is an HMRC recognised summary of an individual's income, thus if the net income available to an individual is greater than the price of land the risk assessment must be low to negligible, and therefore passes the test. I strongly believe that the practise that is acting for me have lost sight of the purpose of the regulations and is not using a properly thought out risk assessment.

Our Response:
If there is no mortgage, can you show a bank balance as evidence of available funds? In general the accepted categories for proof of where monies are sourced from are:
Savings
Release of pension
Sale of shares
Sale of another property
Inheritance
Dividends from a UK company
Gambling winnings
Compensation award
Gift from parents (read our complete article on Gifted Deposits)
DIYConveyance - 3-Oct-17 @ 3:49 PM
We have been asked by our conveyancer to provide evidence of where purchase monies are sourced from, as we are buying some land. I have provided my wife's current P60 as the net income is greater than the value of the land by a comfortable margin. The Conveyancer has stated that this is not sufficient evidence. I have decided to push back, as gold plating of rules appears to be a British Speciality. According to Government guidance a business must provide evidence of the source of the monies for purchase are from a legal source. A P60 is almost the perfect document. It is an HMRC recognised summary of an individual's income, thus if the net income available to an individual is greater than the price of land the risk assessment must be low to negligible, and therefore passes the test. I strongly believe that the practise that is acting for me have lost sight of the purpose of the regulations and is not using a properly thought out risk assessment.
Anoyed - 2-Oct-17 @ 4:31 PM
Hey I undergoing to beginning of starting to get a property my mom is giving me 24,000 and I have raised the rest my finance who will not be on the mortgage due to bad credit history will not be on the mortgage a while ago he transfer 4,000 into my account for the wedding he has asked for it back to book the venue and I intend to make up my salary for the remaining balance and selling my designer handbag collection. By transferring back his money will they think i am money laundering
Lis - 15-Aug-15 @ 8:00 PM
@NigeF. The sale would need to be done in your brother's name so effectively you would have to give him the cash to buy the property. Bear in mind, the council have the right to first refusal if the property is sold in the next 10 years.
DIYConveyance - 10-Nov-14 @ 2:01 PM
Hi we want to purchase a flat from the local council, my brother has a discount, and due to his age (63) he can not get a mortgage. Him and his wife are retired, they have savings but we intend to give them the money so they are cash buyers. There will be no mortgage involved and a deed of trust signed between us that they will pay us back in due course. we are happy to do this. I am happy to do the conveyanceing myself, it is straight forward. Any advice in regards to money laundering? we have all trace of where money comes from that is no problem Also, how do we pay the stamp duty to the land registry?
NigelF - 8-Nov-14 @ 9:21 AM
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