By Claire Miller, Partner, Penman Sedgwick LLP
When you instruct a lawyer to handle a property transaction for you, you should expect them to require certain information and documentation from you at the outset for the purposes of compliance with the Anti-Money Laundering (AML) legislation. This legislation applies to work carried out in ‘the regulated sector’, which includes property transactions, and compliance is mandatory – the strict rules imposed are designed to stop criminals using professional services to launder money or finance terrorism, and to maintain professional standards.
Client Due Diligence (CDD)
All firms operating in the regulated sector are required to undertake CDD on their clients and matters. This is one of the key controls to protect a firm against money laundering and terrorism financing risks. CDD should be undertaken ‘as early as possible’, so you should expect this to be a primary focus at the outset of a new matter as your transaction may otherwise be delayed.
What is required for CDD will differ depending on the circumstances, but fundamentally will include:
- Identifying and verifying the identity of the client(s) on the basis of documents which meet the required criteria – this may include using a digital verification system
- Identification of the client’s ownership and control structures where the client is not a private individual, and verifying the identities of the ultimate beneficial owners
- Establishing whether any of the clients is a Politically Exposed Person (PEP), or subject to sanctions
- Ensuring that CDD documentation is kept up to date, given that the AML regulations require firms to conduct ‘ongoing monitoring’
Source of funds and wealth (SOF & SOW)
Your lawyer will need a clear understanding of both SOF for the transaction and your SOW, to comply with the AML regulations. What is required will depend on the circumstances – your lawyer must adopt a risk-based approach. Again, timing is important, and note that if the SOF changes at a late stage you should understand that this may cause a delay in progressing your transaction due to the additional checks that your lawyer will then need to undertake.
Evidence of SOF and SOW will depend on the facts but might include:
- Copies of payslips, annual accounts or tax returns
- Bank statements
- Loan documents
- Details of inheritance
- Copies of related sale documents, if funds are derived from a sale of property, shares or other assets
It is important to understand that compliance with these AML requirements protects both firms and their clients, and is a fundamental part of preventing economic crime. It is also mandatory, so it is in the interests of all involved that AML compliance is dealt with promptly and thoroughly to ensure that your property transaction can proceed safely and without delay.
If you need legal advice, we can help. Please email cmiller@pennmansedgwick.com or call 01923 225212