Your estate agent or conveyancer may have asked you to provide evidence for anti-money laundering (AML) checks. This is now a normal and necessary part of the process of buying a house.
But what exactly is the danger of money laundering, and what checks must conveyancers and estate agents perform to help them meet their obligations and keep you safe?
What is money laundering?
Money laundering is how criminals turn dirty money into clean money. The UK property market is a prime target for money laundering, as it allows criminals to turn large cash sums into an asset, and then into legitimate funds through rental income or a property sale.
The sheer scale of the problem is clear. According to statistics compiled by Transparency International UK in 2022, the amount of dodgy money invested in UK property may have exceeded £6.7 billion.
High-value property transactions are at particularly risk of exploitation. Many launderers will also use complex corporate arrangements to disguise their source of funds, making it difficult to detect wrongdoing.
That’s why mortgage brokers, estate agents, and conveyancers are all required to conduct anti-money laundering checks for property transactions to ensure they’re not being used to disguise dirty money.
Why are AML checks important?
AML checks are conducted across the entire real estate lifecycle to detect red flags and potential wrongdoing. Estate agents and conveyancers will continually ask buyers and sellers to produce documentation demonstrating proof of funds, source of funds, and for identity and address verification.
This helps them:
Identify potential signs of money laundering, financing of terrorism, and other criminal activities
Ensure property transactions and complex corporate structures aren’t being used to disguise an illegitimate source of funds
Protect buyers and sellers from criminal risk and ensure they’re not unwittingly becoming involved in criminal activity
Meet AML regulations to avoid financial and reputational damage
What AML checks are required when buying a house?
Estate agents and conveyancers will require you to complete as standard a number of AML checks when buying a house. These are designed to confirm your identity, address, and that you have the funds required to make the purchase.
Most importantly, they will ensure those funds come from legitimate sources, looking out for any inconsistencies or red flags in your records.
Identity verification
Verify your identity using valid ID documents such as a UK passport or driving licence. This is sometimes combined with biometrics such as facial recognition to add additional layers of security.Address verification
Confirm your current address using utility bills, bank statements, or council tax bills for the current year.Proof of funds
Prove you have the means to pay for the property deposit by providing bank statements or proof of a gifted deposit for the required amount.Source of funds
Demonstrate the legitimacy of your funds by providing evidence of its source, whether from gifts, inheritance, gambling, investments, or savings. You’ll sometimes be asked to provide payslips.
Additional or more thorough checks may be required if you’re a cash buyer, if you’re an overseas citizen, or if there are inconsistencies or errors in your documentation. Delays in providing your evidence may also raise red flags.
How technology makes AML checks faster
Your estate agent or conveyancer may invite you to use a third-party app to help complete these checks.
One of the apps you might use is Checkboard, which is designed to help buyers complete their house purchase by making it easy to upload all the necessary identity, address, and source of funds documents.
It also uses open banking to connect your bank accounts, so estate agents and conveyancers can quickly conduct credit checks to make sure you have the means to pay back your mortgage.
Checkboard is safe, secure, and fast. It helps you finish all the admin, so you can get your hands on the keys to your new house sooner rather than later.