In an era of tighter regulation, rising fraud, and increasingly complex financial behaviour, source of funds (SOF) checks have become one of the most challenging, and misunderstood, elements of a property transaction.
For estate agents, SOF is no longer simply a conveyancer’s problem. How well buyers prepare their financial evidence can make or break a sale, derail chains, and expose agencies to regulatory scrutiny. And the landscape is only getting harder.
Why source of funds checks are becoming more difficult
The pressures on property professionals have increased significantly over the past two years. Government wants more rigorous action on money laundering, regulators want higher standards of evidence, and conveyancers are under constant pressure to prove that every pound has a legitimate and verifiable origin.
At the same time, the way buyers accumulate deposits has changed. Few now save in one straightforward account funded purely from salary. Instead, conveyancers are faced with deposit pots made up of:
- GIfts and informal loans from family and friends.
- Cryptocurrency gains.
- Saving partnerships.
- Multiple savings products.
- Funds moved between accounts to chase higher interest rates.
This web of transactions makes it harder than ever for conveyancers to build the clear, auditable narrative that regulators require. The risk of getting SOF wrong is now at its highest point, and estate agents sit close to the frontline.
Crypto: The most complex and high-risk area
Cryptocurrency withdrawals pose a particular challenge. Crypto remains a major route for laundering illicit funds, and because many trading platforms are unregulated, conveyancers cannot rely on any anti-money-laundering checks having been performed at earlier stages.
When a client sells crypto, the conveyancer has no way of knowing who bought it or where that purchaser’s money originated. That lack of traceability introduces an unacceptable level of risk. As a result, large numbers of conveyancers now refuse to accept deposit funds that originate from crypto sales, no matter how legitimate the client believes the gains to be.
Understanding polluted savings
One of the most important, and least understood, risks for buyers is ‘polluted savings’. This occurs when clean, traceable funds are mixed with untraceable or high-risk money such as crypto withdrawals or unexplained cash deposits.
Once funds are intermingled, there is no way to differentiate which pounds have satisfied SOF requirements and which have not. In the eyes of AML regulation, all of the money can not be said to have satisfied SOF requirements. This was seen in a recent case involving first-time buyers whose otherwise legitimate savings became unusable purely because they deposited Bitcoin proceeds into the same account. Despite years of genuine saving, the entire pot was rendered unacceptable.
Why cash remains a red flag
Cash deposits – whether from wedding gifts, family support or personal savings – are almost impossible to validate. Even if a family member withdrew cash from their own bank account, there is no way to prove it is the same cash handed to the buyer. Given the widespread use of cash in the grey and black economies, conveyancers treat it as inherently high-risk, and most will reject any account where cash has been intermingled.
What estate agents should advise buyers early on
Estate agents are uniquely positioned to prevent accidental contamination of savings long before conveyancers become involved. Early guidance should include:
- Prepare SOF evidence as early as possible.
- Keep different sources of funds in separate accounts.
- Avoid mixing any untraceable funds with traceable savings.
- Retain documentation that clearly shows where every contribution came from.
This simple advice can prevent a great deal of disappointment months down the line.
If savings become polluted, can the purchase be rescued? In most cases, no. Once funds are polluted, moving the money elsewhere does not undo the intermingling. Conveyancers cannot retrospectively validate contaminated deposits, and buyers may need to start again, potentially losing the property.
Matt Giles, director of RG Law
