How To Guide: Money Laundering Checks When Buying A House

Accountant Counting Money

Buying a house in the UK can seem like the simplest thing in the world; find a property to buy that appeals to your needs and your budget, make an offer, sign on the dotted lines, take the keys, and enjoy your home. Well… There’s more to it. From AML checks to solicitor checks to providing proof of funds and protecting yourself from a fake HMRC tax notification letter, there is a significant amount of legalities and technicalities involved.

What do you need to know about buying a house in the UK?

Buying a House Process UK

If you want to buy a house in the UK, it is important to equip yourself with information about the process so you can make the right choices and protect yourself. Given the prevalence of search queries such as “buying a house near me,” “uk buy house,” “buy house for cash,” “help for property buyers uk,” “what does putting a house in trust mean UK” and the like, it is clear that house hunters are looking for education, guidance and… answers.

We will start with anti-money laundering checks.

How Money Laundering Impacts Your Transaction

What does money laundering mean? It is when money obtained by criminal activities, such as illicit gambling, embezzlement, corruption, drug trafficking, organised crime, etc., is “cleaned.” That is, the origin of these funds is effectively concealed by converting them into a legitimate source.

Beyond the money laundering meaning, however, is the impact that it has on your transaction. Hard to believe, right? You’ve worked, you’ve saved… Why would this matter affect you as you are going through the stages of buying a house in the UK?

Buying property in the UK (and elsewhere, for that matter) is a common tactic used by criminals to “clean” money generated through illicit activities. This can include drug trafficking, gambling, extortion and so on. Because the market is so large, buying assets with high value (i.e. property) gives criminals the ability to launder vast amounts of money in just a single transaction. The ill-gotten money now has the appearance of legitimacy.

To combat money laundering and prevent terrorist financing, the European Parliament passed the Fifth Money Laundering Directive. If you buy a house in the UK, you must be prepared to provide proof of funds. Estate agents are legally required to conduct checks in every property buy situation. These checks are designed to make sure the source of funds is legal and legitimate.

Money Laundering Cash Limit 2021 UK

Transactions of 10,000 euros or more are considered high-value and send a flag up. This is not to say cash is bad. Far from (in fact, a new law on cash deposits in the UK protects consumers’ ability to access their funds). But you will need to be able to provide proof of where these monies have come from.

Proof House Buyers Must Provide

When buying a house in the UK, the estate agent will likely ask for proof of funds at two different stages of the process:

  1. Before you put in an offer. In this case, they want to make sure that you have the financial ability to buy houses for cash or with financing from a lender. From their perspective, this keeps them from wasting time on a buyer who cannot buy. Remember, though, that you do not have to provide proof at this stage. They can ask – you don’t need to comply (though this may weaken your position as a buyer. Property is valuable and it is a competitive market). So if you were wondering how to buy a house with no money UK, you’re barking up the wrong tree. You do need funds – and evidence as to their source.
  2. After you put in an offer. At this point, you are legally required to provide proof of funds when asked. The estate agent must check that the money hasn’t been generated through criminal means. If they fail to do this, they may face serious fines or even imprisonment.

When you buy a house in the UK, you will also have to provide proof of funds to your lender (unless you are a cash buyer for house properties). This is done at the initial stages of the process, and upon furnishing proof and gaining approval, you will have a mortgage agreement in principle that strengthens your position as a buyer. You will also need to provide proof once again, to your solicitor and, usually through them, to the seller’s solicitor. When does the solicitor check proof of funds? This is typically done after you make an offer that is accepted.

What constitutes proof of funds?

  • Your mortgage agreement in principle
  • Bank statements showing you have the required deposit amount (if you will have a mortgage)
  • Bank statements showing you have the required cash amount (if you use cash to buy houses)
  • Statements that show your money growing over time
  • Evidence that you have sold a property
  • Evidence that money has been gifted to you or left to you in a will
  • Receipts of shares or other assets sold
  • Receipts/evidence of lottery and/or gambling winnings

You will also need to provide proof of your identification. If you’ve had a Credas ID check for work, for example, you know it’s part of your employer’s due diligence. The same is true in the house buy process. You may have to supply:

  • Proof of name (passport, residence permit, driving license, HMRC tax notification, state pension, etc.)
  • Proof of address (current tax bill, tenancy agreement, recent mortgage statement, bank statement, utility bill, etc.)

If you find yourself on both sides of the process (i.e. you are both buying and selling), you may be asking, “What paperwork do I need to sell my house UK?” Prepare to present the same documentation we have discussed, as well as EPC, FENSA or CERTASS certificates, and other evidence of your home’s efficiency and safety.

Buying a House UK: Cash

Recently, the adage ‘Cash is King’ has taken on a whole new meaning! Buy houses cash has emerged as the dominating force in this market.

Cash Buyers Only Meaning

More house buyers in the UK have turned to cash. So what does cash buyers only mean? This term refers to those who have the financial ability – the money – to purchase properties without having to wait for financial approval or another sale. They have the money now. This greatly accelerates the process of house buying in the UK and it can be highly beneficial to sellers. Especially when time and money are issues for the seller. For the right cash buyer property is always valuable, even when in a distressed state.

For cash buyers, houses in less-than-ideal condition can be seen as great investments. Whereas a typical consumer, or their lender, would not accept a property with major issues (e.g. subsidence, dampness, electrical issues, roof damage, etc.), these can be suitable for the right party.

Some people ask, ‘How can I release money from my house so I can make repairs, updates, etc.?’ You can try to obtain home equity loans and other lines of credit. If you do not have a strong financial track record, this can be difficult. You may want to consider a cash buyer in this case.

When looking for a house to buy in the UK, a cash buyer house hunter is looking for potential and possibility – not perfection. Upon completion, you will receive your money. How long does a bank transfer from a solicitor take? You should be able to access your funds that day.

Buying House UK

Whether you are buying or selling, make sure you have all the information you need to make the right decisions for yourself, your family, your budget, and your future.

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