Client due diligence platform Thirdfort has analysed tens of thousands of Source of Fund (SoF) verifications completed via its app, and identified five emerging challenges it says compliance professionals should be aware of.
The company completes around 25,000 SoF verifications every month, analysing documents and Open Banking data shared by clients – including savings, mortgages, gifts, cryptocurrency and overseas funds – to identify red flags in transactions.
Thirdfort has shared the top five most common issues it deals with in its current assessments, along with advice on how to deal with them.
Verify the source of gifts from the ‘bank of mum and dad’
Over 20% of Thirdfort’s SoF reports now involve a declared gift, typically from a parent or relative. With first time buyers increasingly relying on financial support to raise the required deposit, ‘firms must not only verify the purchaser’s SoF but also conduct checks on the origin of gifted funds’, the company advises.
Dig deeper into mortgage-free transactions
More than 20% of SoF reports reviewed by Thirdfort show no declared mortgage. ‘In a mortgage-free transaction, identifying the source of funds can become more burdensome for the conveyancers involved as they have to dig deeper to uncover how the transaction is been funded’, the company warns. ‘This shift has become more apparent since the end of the stamp duty holiday’.
Cash deposits remain a persistent AML red flag
Thirdfort’s analysis found that almost 10% of checks show multiple cash deposits into account during the period analysed, with 8% revealing more than three separate cash deposits within the last six months. An additional 9% of reports showed average cash deposits of more than £500 at a time.
Analysing multi-bank clients has become the norm
Thirdfort says clients now hold at least three bank accounts, often spanning traditional and neobanks. ‘This adds layers of complexity to SoF verification, as compliance teams must obtain, analyse, and verify multiple sets of financial statements’, the company explains.
Volatile government schemes add complexity for due diligence
The number of property related schemes launched and subsequently withdrawn by the government present a challenge for firms attempting to standardise and scale SoF processes, Thirdfort says. But the company says that despite the complexities, due diligence remains essential.
‘The cornerstone of effective SoF verification is consistency’, Olly Thornton-Berry, co-founder and CEO of Thirdfort, commented.
“Manual processes and outdated policies can’t keep up with today’s risks. That’s where technology helps, combining data and evidence from multiple sources into a single view. This lets compliance teams focus on what matters: assessing risk, not chasing paperwork.”
