Purchasing property in the UK is a common method used byorganised criminals to launder the proceeds of criminal activity. The sheer size of the property market in the UK and the high value of property assets means that extremely large amounts of criminal funds can be ‘cleaned’ in a single transaction, giving it the appearancethat it has been acquired legitimately.
In April 2018, the European Parliament passed the Fifth Money Laundering Directive on the prevention of money laundering and terrorist financing. For this reason,estate agents must do these checkson everyone buying a propertyto make sure themoney is coming from a legitimatesource—theycan be fined or imprisoned if they don't.
Proof of funds
An estate agent may ask for proof of funds at two different stages andfor two different reasons.If an estate agent asks forproof of fundsbefore you put an offer in, it may be because they want to make sure you have a genuine interestin the property to avoid anydisappointment for theseller. However, youdon’t have to provide proof of fundsbefore putting an offer in.
If the estate agent asks forproof of fundsonce you've put an offer in, they are not only checking you have the money to purchasethe propertybut also that you haven’tacquired itthrough criminal means. It is at this stage that youmust provide proof of fundsif asked.
How can I provide proof of funds?
When it comes to providing proof of funds, you can do so via the following means:
- anagreement in principle/mortgage in principle
- bank statements of yourdeposit amount(for mortgage buyers)
- bank statements of your cash amount (for cash buyers)
- further bank statements from past months/years to show how your money has built up over time
- evidence of youselling a property(if using the funds to buy the new property)
- if you've been gifted the money, aletter from whoever gifted themoney
- evidence of money being left to you in a will
- receipts of shares being sold
In more unique circ*mstances, ifyou've been lucky enough to win the lottery, you may be asked to prove so. Likewise for gambling winnings where you could be asked for receipts/evidence of winnings. It's best practicetoretain evidence of where all the funds going towards your purchase have come from,thisway you can be prepared shouldyour estate agentaskfor it.
Proof of ID
As it is their legal duty to make sure that you are who you say you are, estate agents will ask you forproof of your current address and your identity. Thisprocess is called‘Due Diligence’which forms part of theirchecks. You will be asked for some of the following forms of proof of identification.
Proof of name:
- current passport
- residence permit
- current UK/EU photo driving license
- HMRC (Inland Revenue) Tax Notification
- state pension or benefits book/notification letter
Proof of address:
- a current tax bill from your local authority
- rent card ortenancy agreementfrom your local authority
- recent mortgage statement
- bank statement
- utility bill (not mobile)
Who else requires proof of funds?
Your mortgage lender, solicitor/conveyancer will also ask for proof of where your money has come from. Do not be put off if you get asked for proof more than once—it is a legal requirement for everyone to check where your money has come from.
Like estate agents,lenders andsolicitors canbe fined or imprisonedif they don’t undertake these checks. Your agent, lender and solicitor are all separate; just because you’ve shown proof to one, doesn’t mean the others will have seen it.
Choosing a conveyancer or solicitor
A solicitor or conveyancer will handle the legal transfer of your property. They are a vital part of the process so it’s important to pick one that’s right for you.
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