Source of Wealth and Funds

What is meant by ‘Source of Wealth and Source of Funds’ and why do we need it?

At some stage during your property transaction, you will be asked by the person looking after you about the ‘source’ of the funds for your transaction.  It is a legal requirement that we ask for the source of wealth and the source of funds, and this page explains why we need this, and how you can help to source the information we need.

Why is it important to know the source of wealth and funds?

Property transactions often involve large sums of money, and because of this it makes them a target for fraud and money laundering activities.  As part of our duty to protect you and your money, we need to be sure how the monies required for the transaction will be sourced and where the money you are providing has come from originally. This is a very important check to protect all parties in the transaction from fraud.

We would normally wish to have a general conversation about your personal wealth position to give us a proper picture of your financial situation. We would not normally require any evidence or corroborative proof of what you tell us.

Source of Funds enquiries are rather different. For this, we do require evidence as well.

Source of Funds - will a bank statement be enough?

Not always.  A bank statement will show that the money exists, but not necessarily where the money has come from. 

The source of funds evidence needs to show a ‘paper trail’ of how the funds were obtained – for example a statement showing that you have been regularly saving from your salary over a period of time to build up the required amount.

What can act as a source of funds depends on where the funds have come from, but some of the most common examples include:

• Savings:  We will require statements showing the build up of savings over a period of time
• Inheritance: We will require a copy of the letter from the executors confirming your entitlement and a copy of your bank account statement evidencing receipt of the funds from the solicitor or executor’s bank account.
• Pension funds: A copy of your pension statement and bank statement will be required.
• Sale of Shares:  We will need a copy of the share release schedule, and of your bank statement showing receipt of the funds.

What if the money was a ‘gift’?

Often parents help their children buy a property and this involves them gifting a sum to their children.  In these instances, it will be important to obtain proof from the parents that they are gifting the money and that it also has come from a legitimate source.  Generally speaking this ‘gift’ does not give the person giving the money any rights over the property.  If this is required, please speak to us early on in the transaction about how this could be achieved.

If you are in any way unsure about what you need to provide as proof of ‘source of funds’ please do ask one of the Roythornes team early in the process.  Sometimes it takes time to get the proof together, especially if it needs to come from another organisation, so the sooner you obtain the proof the better.