If you have bought or sold a property in the UK in recent years, you may have felt the “due diligence” checks were intrusive and maybe went further than strictly necessary. However, consider the recent case of a conveyancing firm that cut corners and unwittingly allowed a fraudster to sell a house they did not own!
What is Due Diligence?
The European Parliament passed their latest Money Laundering Directive in April 2018, to tighten up identity and income checks for individuals involved in property transactions. The measures are primarily intended to prevent criminals or terrorist organisations from laundering large amounts of money as buyers, but it is equally important to verify the identity of the seller and to make sure that they have valid title to the property in question. These checks are known as due diligence.
What Went Wrong?
In 2018 a conveyancing firm sold a property on behalf of their client, who claimed to be the legitimate owner. However, they skipped a step in the ID verification process when they failed to verify the identity of the client, having never met them in person. Although the client did provide identity documents verified by a third party to be genuine copies of the original, there was no proof that the documents actually belonged to the client. This meant that the client’s identity was never at any point verified.
The Solicitors Regulation Authority rebuked the conveyancing firm for their part in the mistake.
Checks at Ardens Solicitors
At Ardens Solicitors, we have always taken the security of our clients seriously. We understand the importance of adhering to correct procedures to protect our clients’ interests every step of the way
When conveyancing a property purchase, we require verifiable forms of identification from each party, along with verifiable proof of funds.
Eligible documents for Proof of Identity
- Current passport
- Residency permit
- Current UK/EU photo driving license
- HMRC (Inland Revenue) Tax Notification
- State Pension or Benefits Book/Notification letter
Identity may also be verified electronically, via eIDAS approved means, i.e. Gov.uk Verify.
Eligible documents for Proof of Address:
- Current Council Tax bill
- Local Authority Tenancy Agreement or Rent Card
- Recent Mortgage or Bank Statement
- Utilities Bill (power, water or home phone or broadband)
Proof of Legitimate Funds
In addition, we are legally obliged to check that you have sufficient funds for the purchase or can afford mortgage repayments but we must also verify provenance to ensure that the money comes a legitimate source.
Therefore, satisfactory proof of available legitimate funds can be:
- A mortgage agreement in principle from a lender
- A recent bank statement showing sufficient funds for your mortgage deposit amount or your cash amount if cash buyer.
- Bank statements showing how your funds have built up over time
- Evidence of funds from sale of a property
- Documentation of release of a pension
- Receipts from sale of shares
- Evidence of funds from a legacy in a will
- For gifted funds, a letter from the gifter
- Evidence of gambling/lottery win
Play Safe, Be Sure
Ardens Solicitors takes every precaution and follows every necessary legal step in the procedure to safeguard our clients. We will ensure that your property transaction is completely safe and not subject to any legal appeal regarding the legitimacy of funds.
For advice on any aspect of commercial and residential real estate contact our Property Law expert and Licensed Conveyancer, Scott Morris, on sm@ardenslaw.com or (+44) (0) 207 100 7098.
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