Source of funds on conveyancing files: a practical checklist

The SRA's sectoral risk assessment puts conveyancing, especially residential conveyancing, among the legal services with the highest inherent risk of money laundering, and source of funds is a recurring weak point on purchase files. In its November 2025 thematic review, the SRA reported 648 files containing no source of funds checks, out of 5,026 files it reviewed in 2024/25 that needed source of funds or source of wealth checks. Its 2025/26 AML report says breaches are still rising where firms fail to carry out, evidence or properly interrogate where the money came from.

Source of funds and source of wealth are different questions

Source of funds is about the money used in this transaction: the deposit, the balance and anything else coming through your client account. Source of wealth is about how the client built their overall wealth. Regulation 35(5) of the Money Laundering Regulations 2017 requires adequate measures to establish both where the client is a politically exposed person, or a PEP's family member or known close associate. For a domestic PEP, regulation 35(3A) makes lower risk the starting point, so less enhanced due diligence applies where no other enhanced risk factors are present. Source of wealth enquiries can also be appropriate in other higher-risk cases.

Geography needs the same care. Regulation 33 requires enhanced due diligence for any business relationship with a person established in a country on the FATF list of High-Risk Jurisdictions subject to a Call for Action, or any relevant transaction where either party is established in such a country. Since 30 June 2026 that list has replaced the UK's own high-risk third country list as the automatic trigger. Other geographical risk is still for you to assess under your risk-based approach. On an ordinary domestic purchase the question is usually source of funds, but the two can overlap.

The legal hook is regulation 28. Your due diligence must reflect your firm-wide risk assessment and the risk on the particular matter (regulation 28(12)), ongoing monitoring includes scrutiny of transactions, "including, where necessary, the source of funds" (regulation 28(11)), and you must be able to show the SRA that what you did was appropriate to the risk (regulation 28(16)).

What the SRA keeps finding

The thematic review lists the poor practice it sees most often. In summary:

• collecting documents as a tick-box exercise without reading or understanding them
• a statement showing the money is there, with no enquiry into how it got there
• assuming funds are legitimate because they came from a UK bank account
• taking money into client account before understanding its origin
• not checking long-standing clients, or people known personally, to avoid offending them
• evidence on file that does not match the client's own account of where the money came from
• doing the checks late, after substantial work is already done

The SRA is clear that the regulations contain no exemption for long-standing clients or for money held in a UK bank.

A checklist for every purchase

• Ask early. Get the client's account of where every pound is coming from at instruction, before substantial work starts.
• Map the money. List each source (savings, sale proceeds, mortgage, gift, inheritance, business funds) against the amount you expect from each.
• Get evidence for each source, not just the account it sits in. Payslips, a completion statement on a related sale, a probate account or a company's accounts tell you how the money arose. A statement on its own usually does not.
• Read the statements. Look for large or unexplained credits, round-sum transfers and money that arrived just before it was needed, and ask about them.
• Treat gifted deposits as a source of funds of their own. Confirm the gift in writing with the giftor, identify the giftor, and understand where the giftor's money came from. The SRA expects third-party funds to be traced in the same way as the client's.
• Check the money that actually arrives. When funds hit client account, compare the sending account and amount with what you were told. Money from an unexpected person or bank is a reason to stop and ask.
• Watch for red flags: last-minute changes in funding, new third parties, cash, money from abroad, and a client reluctant to explain.
• Record your reasoning. Note what you saw, when, what you concluded and why. If you decided a check was unnecessary, record why.
• Update the matter risk assessment if anything changes.
• Escalate what you cannot resolve. Unresolved concerns go to your MLRO, and decisions about whether to proceed, whether to report and what to tell the client follow your firm's procedures.

That last pair matters more than it looks. Regulation 40 requires records sufficient to reconstruct the transaction. A file holding three bank statements and no note of what anyone made of them shows the documents were collected. It does not show they were understood.

Our separate pieces on preparing for an SRA AML inspection and keeping your firm-wide risk assessment live cover how source of funds fits into the wider picture.

Putting it on the file

In CaseMinder, the matter-opening workflow brings together conflict checks, onboarding, identity and AML checks, risk assessment and the client care letter. ID is checked through Thirdfort, and the source of funds questionnaire sits alongside evidence checks, so the file shows what was asked, what came back and what the reviewer concluded. Connected to ComplianceMinder, that matter-level information feeds the firm's compliance oversight.

Book a walkthrough to see it on a real file.