Source of Funds in Conveyancing: What You Need to Provide

If your solicitor has asked you to prove where your money comes from, you are not being singled out. Source of funds checks are a routine part of every property transaction in England and Wales, required by law under the UK's anti-money laundering regime. But the process can feel intrusive if you do not understand why it is happening or what you need to provide.

This guide explains what a source of funds check involves, why your solicitor is obliged to carry one out, what evidence you will need depending on where your money comes from, and how to avoid the most common delays. If you are still choosing a solicitor, our guide on how to instruct a solicitor for selling covers what to expect during the instruction process.

Why solicitors check source of funds

The UK property market has long been identified as a high-risk sector for money laundering. The National Crime Agency (NCA) estimates that hundreds of billions of pounds are laundered through the UK each year, and property is one of the primary channels used to disguise the proceeds of crime. Criminals purchase property with illegally obtained funds, then sell it to produce apparently legitimate proceeds.

To combat this, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 require all regulated professionals, including solicitors and licensed conveyancers, to carry out customer due diligence on every client. This includes verifying both the client's identity and the source of funds involved in the transaction.

The Solicitors Regulation Authority (SRA) supervises compliance for solicitors in England and Wales. Firms that fail to carry out adequate checks face enforcement action, unlimited fines, and potential criminal prosecution. Your solicitor is not being nosy \u2014 they are following the law, and their professional licence depends on getting it right.

Source of funds vs identity checks: what is the difference?

It is common to confuse source of funds checks with the standard anti-money laundering (AML) identity check. They are related but serve different purposes:

The identity check is the quickest part, usually handled electronically in minutes. The source of funds check requires documentary evidence and takes longer. For more on identity verification specifically, see our guide on solicitor identity checks explained.

Do sellers need source of funds checks too?

Yes. While buyers face the most detailed scrutiny because they are bringing money into the transaction, sellers are not exempt. Your solicitor may ask you to explain:

• How you originally purchased the property \u2014 particularly if you bought it recently or for significantly less than the current sale price
• Where any additional funds are coming from \u2014 for example, if you are contributing money from savings toward a new purchase in a chain
• The source of your equity \u2014 especially if the property was gifted to you, inherited, or acquired through unusual circumstances

If you are selling a property you have owned for many years with a straightforward mortgage, the checks will typically be light. But if your circumstances are more complex, expect to provide more detailed evidence. Our guide to what to expect from your solicitor covers the broader picture of what your conveyancer handles during a sale.

Common sources of funds and the evidence required

The documentation your solicitor needs depends entirely on where your money comes from. Here are the most common sources and what you will be asked to provide for each:

Savings

If your funds come from personal savings, your solicitor will want to see bank statements showing the gradual build-up of savings over time. Typically, three to six months of statements are required, but if a large lump sum appears, they will ask you to trace where it came from. Consistent deposits from a salary are straightforward; irregular large deposits will require further explanation.

Mortgage

A mortgage offer letter from a UK-regulated lender is usually sufficient evidence for the portion of funds coming from a mortgage. Your solicitor will verify that the offer is genuine and relates to the property being purchased. They will also check that the lender is regulated by the Financial Conduct Authority (FCA).

Sale of an existing property

If your funds come from selling another property, the completion statement from that sale is the key document. This shows the sale price, any mortgage redemption, solicitor fees, and the net proceeds paid to you. Your solicitor may also ask for the bank statement showing the funds arriving in your account.

Gift from family

Gifts are one of the most heavily scrutinised sources of funds. If a family member is giving you money toward a property, your solicitor will require:

• A signed gift letter confirming the amount, that it is a genuine gift with no expectation of repayment, and that the donor will have no legal or beneficial interest in the property
• Bank statements from the donor showing they have the funds available and showing the money leaving their account
• Evidence of the donor's source of funds \u2014 your solicitor may need to verify where the donor obtained the money, particularly for large gifts
• ID verification for the donor \u2014 some firms also carry out identity checks on the person providing the gift

Most mortgage lenders also require a gift letter in a prescribed format and may restrict who can give you a gift. Some lenders only accept gifts from immediate family members (parents, grandparents, siblings), not from friends or more distant relatives.

Inheritance

If you are using inherited money, you will typically need to provide the grant of probate (or letters of administration if there was no will), the estate accounts showing the distribution of assets, and bank statements showing the inherited funds arriving in your account. If the inheritance was received some time ago and has been held in savings since, your solicitor may also ask for statements covering the intervening period.

Divorce settlement

For funds arising from a divorce, the court order or financial consent order is the primary evidence. Your solicitor may also ask for bank statements showing the settlement being paid and, in some cases, the completion statement from the sale of the former matrimonial home.

Investment returns or pension

If your funds come from investments, pension drawdowns, or the maturity of an ISA or bond, your solicitor will want statements from the investment provider or pension administrator showing the withdrawal. They may also ask for evidence of how the original investment was funded if the amount is large.

Overseas funds

Money transferred from overseas is subject to particularly careful scrutiny. Your solicitor will need bank statements from the overseas account, evidence of the exchange rate applied, proof that the funds are legitimate (such as payslips or business accounts from the country of origin), and confirmation that the transfer complied with any local regulations on moving money out of the country. Expect this process to take longer than for domestic funds.

What happens if you cannot prove your source of funds

If your solicitor is not satisfied with the evidence you have provided, they have several options, none of which are good for your transaction timeline:

1. Request additional documentation. Your solicitor will explain what further evidence they need and give you time to provide it. This is the most common outcome and usually resolves the issue.
2. Decline to act. Under the Money Laundering Regulations, if a solicitor cannot complete satisfactory customer due diligence, they must not proceed with the transaction. This means they will cease acting for you, and you will need to instruct a new solicitor \u2014 who will carry out their own checks from scratch.
3. File a Suspicious Activity Report (SAR). If your solicitor has reasonable grounds to suspect money laundering, they are legally required to file a SAR with the National Crime Agency. They are prohibited from telling you they have done so. The NCA then has seven working days to decide whether to consent to the transaction proceeding. During this period, the transaction is effectively frozen.

None of this means you are accused of a crime. SARs are filed as a precautionary measure and the vast majority of reported transactions are ultimately cleared. But the delays can be significant, which is why it is so important to provide thorough documentation upfront.

How long source of funds verification takes

The timeline depends on the complexity of your circumstances and how quickly you provide the requested documents:

The single biggest cause of delay is clients not providing all the documents their solicitor has asked for. If your solicitor requests six months of bank statements and you provide three, they will come back asking for more \u2014 adding days or weeks to the process. For tips on keeping things moving, see our guide on how to speed up conveyancing as a seller.

How to prepare for a source of funds check

The best way to avoid delays is to gather your evidence before your solicitor asks for it. Here is a practical checklist:

1. Identify where your funds come from. Before you instruct a solicitor, work out exactly where every pound of your deposit or equity originates. Write it down so you can explain it clearly.
2. Download bank statements early. Get at least six months of statements from every account involved. If you use online banking, download PDF statements rather than screenshots, as solicitors generally prefer official documents.
3. Obtain a gift letter if needed. If any part of your funds is a gift, have the donor sign a letter before the process begins. Your solicitor can provide a template, but you can also prepare a draft in advance.
4. Locate inheritance documents. If using inherited funds, find the grant of probate, estate accounts, and any correspondence from the executor showing the distribution of assets.
5. Keep records of large transfers. If you have moved money between accounts, be ready to show the trail. Your solicitor needs to see funds moving from origin to the account that will be used for the transaction.
6. Respond to requests immediately. When your solicitor asks for additional documents, provide them the same day if possible. Every day of delay at this stage pushes your entire transaction timeline back.

Having your documents ready from day one can shave weeks off your conveyancing timeline. Our conveyancing checklist for sellers covers everything you should prepare before instructing a solicitor.

Suspicious Activity Reports: what sellers should know

A Suspicious Activity Report (SAR) is a confidential notification that your solicitor files with the National Crime Agency when they have grounds to suspect that a transaction may involve the proceeds of crime or terrorist financing. SARs are governed by the Proceeds of Crime Act 2002 and the Terrorism Act 2000.

Key points for sellers:

• Your solicitor cannot tell you that a SAR has been filed. Doing so is a criminal offence known as "tipping off."
• The NCA has seven working days to decide whether to grant consent for the transaction to proceed. If they do not respond within this period, consent is granted by default.
• If the NCA refuses consent, they have a further 31 calendar days to obtain a court order restraining the funds. If no order is obtained, the transaction can proceed.
• A SAR being filed does not mean you are suspected of a crime. Solicitors file SARs as a precaution whenever something does not fit the expected pattern. The vast majority of reported transactions are cleared.

If your transaction appears to stall for no obvious reason and your solicitor is unable to explain why, it is possible that a SAR has been filed and they are waiting for NCA consent. There is nothing you can do to speed this up, but being transparent and providing comprehensive documentation from the outset reduces the likelihood of a SAR being necessary.

The legal framework

Source of funds checks exist within a broader legal framework designed to prevent money laundering through UK property. The key pieces of legislation are:

• The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended in 2019 and 2022) \u2014 these set out the requirements for customer due diligence, including source of funds verification, and apply to all regulated professionals
• The Proceeds of Crime Act 2002 (POCA) \u2014 creates criminal offences relating to money laundering and requires regulated professionals to report suspicious activity
• The Terrorism Act 2000 \u2014 imposes similar reporting obligations where terrorist financing is suspected
• The SRA Anti-Money Laundering guidance \u2014 provides detailed practical guidance on how solicitors should implement their obligations, including what constitutes adequate source of funds evidence

The Law Society also publishes practice notes and guidance for solicitors on anti-money laundering compliance, including specific advice on assessing source of funds in property transactions. These resources set the industry standard for what evidence is considered adequate.

Sources and further reading

• The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (legislation.gov.uk)
• Anti-Money Laundering Guidance for Solicitors (Solicitors Regulation Authority)
• Anti-Money Laundering Resources (Law Society)
• Money Laundering and Illicit Finance (National Crime Agency)
• Proceeds of Crime Act 2002 (legislation.gov.uk)
• Money Laundering Regulations: Your Responsibilities (HMRC / GOV.UK)

Frequently asked questions