After the excitement of securing your perfect property with your sales consultant, the investor is met with some not so fun anti-money laundering, or commonly known as AML, checks. To a new investor this can seem daunting and slightly intrusive, so this guide is aimed at ensuring you are ready and prepared for those checks, so the next steps in your property investment purchase journey remains exciting and smooth.

Intrusive

Due to their intrusive nature, some clients feel put off by the process, however this is just the UK Laws surrounding the money laundering act and sadly, something all parties just must comply with. That being said, it does not actually take that long to complete, and your agent and solicitor will assist you all the way, so do not hesitate to ask them for any help!

The steps of the procedure are all broken down below, giving you more of an insight into the full picture of AML and what documents you will need along the process.

KYC

Know your customer (KYC): KYC is a process that involves verifying the identity of a customer. This starts with your estate agent, as they are bound by the same HMRC regulations as your solicitor and lender. When buying property you will need to provide proof of your identity and address to your agent and solicitor. This could include a passport, driving license, utility bill and bank statement.

Source of Funds

You will need to provide evidence of the source of your funds that you intend to purchase the property with. This is to ensure that the funds being used to purchase the property are not the proceeds of crime, this is not saying that they are from crime though! You may be asked to provide bank statements, payslips, or tax returns. If you are using a mortgage to purchase the property, your lender will also carry out AML checks. The checks can sometimes make people uncomfortable or feel intrusive, but please remember, solicitors and agents are only following the rules set for them, nothing is ever personal and no one is accusing anyone, only following protocol.

Suspicious Activity

If you notice any suspicious activity during the purchase process, such as unusual requests for payment via email or phone from your solicitor or agent, please ensure to speak with your contact first to confirm that it is them and the request is correct. This could be a sign of money laundering or other criminal activity, as sadly solicitors can be hacked, so never send money without checking first.

Overseas Buyers

If you are an overseas buyer, you may need to provide additional documentation, such as proof of residency or a tax identification number. This is to ensure that you are not using the property purchase to launder money or evade taxes. Again, this is nothing personal, just protocol, but UK law must be followed, and all checks carried out. The source of funds is thoroughly checked, including how the money or where the money entered your account from and supporting evidence to display this. A good tip to remember through life with your finance transactions, especially those over £1,000 entering or leaving your account, keep your paper trail records, save them all on a folder on your computer, so you always have everything to hand for this scenario. This will help to make the process feel so much easier for you.

AML Checks

Your solicitor or conveyancer will carry out AML checks on all parties involved in the transaction, including all directors in a company if you are buying in a company name and all members of a trust, if purchasing in a trust. The AML check is all the above items rolled into one, agents and solicitors will use systems where they upload the information and all databases are checked, this checks things such as PEP’s (politically exposed persons) sanctions registers, electoral roles, death registers, royal mail and so forth. On the green light at the end, you are all done!

Ongoing Monitoring

AML regulations require ongoing monitoring of transactions, so you may be asked to provide additional information or documentation during the purchase process. Your solicitor or conveyancer may also carry out additional checks if they become aware of any suspicious activity. Most occasions this is when you may have a stage payment to pay or at completion if you have purchased an off-plan property, due to the time elapsed, documents are required to be refreshed for the records.

Frequently asked questions about anti-money laundering or AML for investors

AML stands for Anti-Money Laundering. It is a set of regulations and procedures designed to prevent the use of illegally obtained funds for financial transactions, including investments.
Investors need to be aware of a range of AML regulations, including KYC (Know Your Customer), source of funds checks, and ongoing monitoring of transactions. Investors may also need to comply with specific regulations in their jurisdiction, such as the UK's Money Laundering Regulations.
KYC stands for Know Your Customer. It is a process that involves verifying the identity of a customer. Investors need to comply with KYC regulations to ensure that they are not investing in illegal activities or organizations. KYC checks may involve verifying the identity of the investor, the source of their funds, and any intermediaries involved in the transaction.
Intermediaries, such as brokers, agents, or financial advisors, play a significant role in AML compliance. They are responsible for carrying out KYC checks on their clients and ensuring that their clients comply with AML regulations. Intermediaries may also be required to report any suspicious activity to the relevant authorities.
Non-compliance with AML regulations can result in fines, legal action, and damage to an investor's reputation. It can also result in the loss of investment opportunities, as many legitimate businesses and organizations will not work with investors who do not comply with AML regulations.
Investors can ensure that they comply with AML regulations by working with reputable intermediaries, carrying out due diligence on potential investments, and complying with KYC and source of funds checks. Investors should also stay up-to-date with AML regulations in their jurisdiction and seek professional advice if they are unsure about their obligations.

If you would like further information on the anti-money laundering checks, or indeed, any aspect of purchasing a property, please feel free to contact our advisory team using the form below:

Easy Guide to AML (Anti-Money Laundering) for Property Investors