How to Prove Your Source of Funds
When purchasing a home in the UK, saving for a deposit is often the hardest hurdle. However, once the money is sitting in your bank account, you face a critical compliance step before exchange of contracts can take place: proving exactly how that money got there, even if it is a gift from your mum and dad.
Conveyancing solicitors and licensed conveyancers are bound by strict anti-money laundering laws. They cannot simply take your word that your funds are legitimate, nor is it good enough to say the money has been in your account for years. In this guide, we detail the exact documentation you must provide to avoid catastrophic delays to your transaction; sometimes meaning your solicitor can no longer act for you..
The Essential Difference Between Source of Funds and Source of Wealth
Many home buyers conflate these two concepts, leading to immediate compliance rejections. Your legal team is required by their regulators to investigate both areas under Enhanced Due Diligence (EDD) protocols:
- Source of Funds (SoF): This focuses entirely on the immediate origin of the money being used for the property transaction. It answers the question: Where is the money right now, and which account is it being transferred from?
- Source of Wealth (SoW): This looks at the broader economic picture. It investigates the activities that accumulated your total net worth over time. It answers the question: How did you realistically get the money to put into that bank account in the first place?
Why your conveyancing solicitor interrogates your bank statements
Legal professionals do not look through your personal statements out of curiosity. Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) and the Proceeds of Crime Act 2002 (POCA), failing to scrutinise transaction origins is a serious criminal offence.
The property market is a primary target for washing illicit cash. If a conveyancer facilitates a transaction funded by criminal property, the firm faces structural fines from the Solicitors Regulation Authority (SRA) or the Council for Licensed Conveyancers (CLC), as well as potential criminal prosecution of its individual directors.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
The MLR 2017 is the primary statutory instrument that governs how property lawyers must operate.
- Regulation 28(11): Explicitly mandates that a relevant person (your solicitor or conveyancer) must conduct ongoing monitoring of a business relationship. This includes scrutinising transactions undertaken throughout the course of that relationship to ensure they are consistent with the professional's knowledge of the client, their business, and their risk profile, including, where necessary, the source of funds.
- Regulation 33: Dictates that Enhanced Due Diligence (EDD) must be applied in any situation that presents a higher risk of money laundering or terrorist financing. Property transactions involving gifted funds...automatically trigger this higher legislative standard.
The Proceeds of Crime Act 2002 (POCA)
POCA focuses on the criminal handling of dirty money. It applies directly to any professional operating within the UK regulated sector.
- Section 327–329 (Principal Offences): It is a criminal offence to conceal, disguise, convert, transfer, or acquire criminal property. If a solicitor permits illicit money to pass through their client account to buy a house, they can be prosecuted for actively facilitating money laundering.
- Section 330 (Failure to Disclose): This creates a separate criminal offence for failing to report suspected money laundering. If a professional has reasonable grounds to suspect that a transaction involves criminal property and fails to submit a Suspicious Activity Report (SAR) to the National Crime Agency (NCA), they have broken the law.
Solicitors Regulation Authority (SRA)
For solicitors in England and Wales, compliance is enforced by the Solicitors Regulation Authority (SRA). Under the SRA Code of Conduct, paragraph 3.1 mandates that law firms maintain effective systems and controls to mitigate risks to client money and assets. The SRA actively audits law firms to inspect their AML (Anti-Money Laundering) training, policies, and individual client files. Failing to evidence proper identity checks results in severe regulatory fines, suspension, or the firm being shut down entirely.
Council for Licensed Conveyancers (CLC)
Instead of the Solicitors Regulation Authority (SRA), specialist property lawyers are regulated by the Council for Licensed Conveyancers (CLC). Under section 9(e) of the CLC Code of Conduct, regulated professionals must implement Customer Due Diligence (CDD) policies that explicitly cover onboarding new clients, managing existing clients, and identifying beneficial owners.
Section 11.1 goes further and requires the licensed conveyancer to establish the client’s identity, obtaining formal proof to establish that a client is exactly who they say they are and actively lives at the address provided.
Are the identity rules different for an SRA solicitor versus a CLC conveyancer?
No. While solicitors are regulated by the Solicitors Regulation Authority (SRA) and licensed conveyancers are overseen by the Council for Licensed Conveyancers (CLC), both regulatory frameworks are bound by the exact same statutory legislation—the Money Laundering Regulations 2017. Both types of legal professionals face severe personal penalties and the risk of firm closure if they fail to properly verify your identity.
It could be a gifted deposit from your parents, an inheritance from a deceased relative or even money held in an overseas bank account.
Legitimate proof of funds for buying a house is essential, and getting it wrong can cause delays, further investigation or even the risk that your solicitor cannot continue to act. Not to worry, in this article we'll review how to prove the source of funds when buying a home in England & Wales, including:
What your solicitor needs to prove the source of funds
- Provide Proof of Photo ID & Residential Address
We explain what forms of ID are accepted in our article - What ID does your solicitor need? - Provide proof of funds for the money being used
A solicitor's obligation to prove the source of your funds is one of the most critical phases of the conveyancing process. In fact the Law Society states:
"In many ways, client identification and verification is secondary in anti-money laundering compliance to understanding the source of funds".
- Regulation 28 (S11(a)) - "... scrutiny of transactions undertaken throughout the course of the relationship (including, where necessary, the source of funds) to ensure that the transactions are consistent with the relevant person’s knowledge of the customer, the customer’s business and risk profile ;"
- Regulation 35 (S5(b)) - "... take adequate measures to establish the source of wealth and source of funds which are involved in the proposed business relationship or transactions with that person ;"
What counts as source of funds for different sources of income?
During the conveyancing process, the onus is on the buyer to provide adequate proof of the source of their funds to their solicitor in order to purchase the property from the seller. The different scenarios for proof of funds can be categorised into:
- Savings
- Release of pension
- Sale of shares
- Sale of another property
- Inheritance
- Dividends from a UK company
- Gambling winnings
- Compensation award
- Gift from parents - we explain this further in our article on Gifted Deposits
Solicitors have varying policies for proving the source of funds. The following examples are a best practice guide and may vary depending on your solicitor's own Money Laundering Procedure.
- 1
If you have multiple bank accounts for your savings, then provide 6 months' bank statements for each of the bank accounts.
- 2
- 3
- 4
- 5
- 6
- 7
Gambling is a red flag to a mortgage lender!
If you are applying for a mortgage, you may encounter challenges if you are a regular gambler. Mortgage lenders see gamblers as a high risk and there may be some mortgage lenders who refuse your application based on this.We explain more about what can show up on your statements when you're applying for a mortgage in our article - Applying for a mortgage? 3 things you can't have on your bank statement.
- 8
If your money has been generated through other means please call our conveyancing specialists on 0333 344 3234 or speak to your solicitor (if you have already instructed them).
Why are source of funds checks so stringent when buying a home?
Proving your source of funds for the purchase or your target property is the most important task in the conveyancing process, without which your purchase cannot proceed. There are large sums of money changing hands in the conveyancing sector, making this an area of law heavily attacked by fraudsters. Of the whole range of legal services, conveyancing is at the top of the pay out list for compensatory claims relating to fraud.According to a 2023 SRA Annual report by the Money Laundering Reporting Officer, conveyancing fraud remains a high risk area. More than half of the suspicious activity reports submitted involve property transactions.
A solicitor cannot, by law, proceed with your purchase without knowing the source of your funds. This is done to limit the potential for fraud, protecting the solicitor, the legal sector and most importantly, the buyer.
For sellers who unknowingly receive the proceeds of crime, the risk is also high, given that those funds could be seized at any time, leaving them without property and proceeds thereof.
The challenge for you as the buyer, is that solicitors have varying protocols in respect of Anti-Money Laundering Checks regarding proving the source of your funds. Understand that the solicitor has to do these checks, in order to receive the money, and work with them, providing as much information as possible.
Are you trying to buy a house?
Why is cash not allowed?
Most solicitors do not accept cash, as it is almost impossible to prove the source of the funds. For those solicitors that do accept cash, they will limit the amount they will accept to a few hundred pounds.You should never rely on paying cash and only transfer money from your English bank account to your solicitor. If you have a large sum of cash and pay it into your bank account to pay to your solicitor, then you will still struggle to prove the source of those funds.
If the source of the cash isn't any of the examples above, then you should speak to your solicitor and take their advice on what to do.
Which countries are classed as 'High Risk'?
Part of the new Money Laundering Regulations require solicitors to assess which country the source of funds originates from.There are a number of countries where some solicitors decline instructions from clients or a beneficial owner because they are resident in, or have a substantial connection to, a high-risk country or relevant assets are in a high-risk country.
The Money Laundering Regulations define all countries as high risk EXCEPT the following: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Japan, Republic of Ireland, Italy, Luxembourg, Malta, The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, UK or the USA.
If the source of funds originates from overseas, read our guide on how to prove funds from overseas.
Guilty until proven innocent
When looking to prove the source of your funds, it may feel like you are guilty until proven innocent. Sadly, this is the case and it is your responsibility to prove this money didn't come from the proceeds of crime.You may feel aggrieved that after all of the years spent saving, that this is unfair and question why should you have to provide all this information.
The answer to this is that with so much fraud within conveyancing, it is essential solicitors become even more vigilant, however to do so, they should provide you with clear guidance on what information they'll need in order to satisfy themselves of the source of your funds.
It is important to note that under the Proceeds of Crime Act 2002 (POCA), if the solicitor suspects that you have criminal property, they are required to make a report that they suspect you are engaging in money laundering. If they do not, they are themselves liable for prosecution for failure to report under the POCA.
Andrew Boast FMAAT is a qualified accountant, conveyancing specialist and author with over 25 years of experience in the UK property sector. Since beginning his career in 2000 within established SRA and CLC-regulated conveyancing solicitor firms, Andrew has overseen the legal journeys of more than 75,000 clients.
He is the author of the property guide 'How to Buy a House Without Killing Anyone' and a frequent contributor to mainstream UK media on legislative updates, property law, first-time buyer guides, conveyancing best practices, and stamp duty changes. Andrew specialises in resolving complex title issues, property conflict disputes, and property tax options, streamlining the enquiry process to reduce transaction times and maintaining a client-friendly focus.
Caragh Bailey is a Lead Property Content Specialist at SAM Conveyancing, having joined the firm in 2020. With a portfolio of over 150 technical conveyancing, house survey and mortgage guides, she has become a primary authority on the end-to-end sale and purchase process.
Caragh specialises in complex legal workflows, including Help to Buy redemptions, equity transfers, shared ownership structures, trust deeds for tax planning, and joint ownership disputes. Her expertise extends to leasehold reform and RICS home surveys, where she provides clear, factual guidance on independent legal advice for specialist mortgage products and intricate ownership structures.
