Source of funds checks are a core part of AML due diligence, yet they remain one of the areas where conveyancing firms most commonly fall short.

Here is what the obligation actually requires, what good evidencing looks like, and the red flags that should prompt further questions.

Why Source of Funds Trips Firms Up

Of all the AML checks a conveyancing firm carries out, source of funds is the one most likely to feel like it has been done when it has not. A bank statement has been received, a box has been ticked, and the matter moves on. But receiving a document is not the same as scrutinising it, and scrutiny is what the obligation requires.

The SRA’s supervisory findings consistently identify source of funds as an area of weakness. The most common failures are not firms ignoring the check entirely; they are firms accepting documents at face value, failing to follow up on inconsistencies, or not asking for evidence in the first place when the client’s profile and transaction give good reason to.

What the Obligation Actually Is

The requirement to understand source of funds sits within the broader customer due diligence obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Firms must take reasonable steps to understand where the money used in a transaction originates and whether it is consistent with what they know about the client.

“Reasonable steps” is not a fixed standard. It scales with risk. For a straightforward residential purchase funded by a mortgage and a modest deposit from a current account, a bank statement showing the funds may be sufficient. For a cash purchase, a high-value transaction, an overseas client, or any situation where the source of funds is unclear or unexpected, considerably more is required.

Source of funds is distinct from source of wealth, though the two are related. Source of funds focuses on the specific money being used in the transaction. Source of wealth is broader and considers how the client accumulated their assets overall. In higher-risk matters, both may need to be established.

What Good Evidencing Looks Like

Good source of funds evidence answers a simple question: can the money be traced to a legitimate, plausible origin?

For most residential transactions, this means bank statements showing the deposit funds building up over time, or a clear single event such as a property sale, an inheritance, or a gift that explains their arrival. The statement should be recent, unredacted in the relevant sections, and consistent with what the client has told you.

Where funds come from a property sale, the completion statement from that transaction is the natural supporting document. Where funds are a gift, a signed letter confirming the amount, the relationship, and that it is not a loan is standard. This should be supported by evidence that the donor actually holds the funds.

Where funds originate overseas, the bar is higher. Exchange rate movements, international transfer records, and the regulatory environment of the originating country all become relevant. A foreign bank statement should not be accepted without considering whether additional verification is appropriate.

Red Flags in Bank Statements

Receiving a bank statement is the beginning of the process, not the end. When reviewing statements, certain patterns should prompt further questions.

Large, unexplained deposits can indicate layering, where illicit funds are introduced into an account to appear legitimate. Multiple smaller deposits from different sources may suggest structuring, where funds are broken up to avoid detection thresholds.

Inconsistencies with the client’s profile should also be treated carefully. Funds that appear disproportionate to what is known about the client’s occupation, income, or circumstances warrant further enquiry rather than acceptance.

Any indication that documents have been altered, cropped, or are incomplete should be treated as a serious concern. Original documents, or verified electronic statements from the bank, are preferable where there is any doubt.

When to Ask More Questions

A useful test is whether the explanation of funds feels plausible when set against everything else known about the client. If it does not, that instinct is worth acting on.

The obligation is not to prove that funds are clean, but to take reasonable steps to be satisfied that they are. Where something does not add up, further questions are required. If a satisfactory explanation cannot be obtained, the matter may need to be referred to the MLRO.

Proceeding without adequate source of funds evidence exposes the firm to regulatory risk and, in some cases, criminal liability.

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Ultimately, source of funds checks are not about collecting documents, but about forming a clear and defensible understanding of where money has come from. The standard applied should reflect the level of risk, increasing where transactions are higher value, more complex, or less predictable. Where firms fall short is not usually in starting the process, but in stopping too early. The SRA’s expectation is clear: scrutiny matters, and if something does not make sense, it is not enough to record it and move on.

In 2023, a solicitor was convicted for the first time ever for tipping off, alerting a client that they were under investigation for money laundering. It was a landmark moment. Here is what tipping off means in practice, where the line is, and how to stay well clear of it.

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Risk assessments are the foundation of AML compliance and, according to the SRA, the area where law firms most commonly get it wrong.

Here’s what a good one actually looks like, and why the tick-box approach keeps getting firms into trouble. All of that, in a five minute blog.

Why Risk Assessments Keep Coming Up

Every year, the SRA publishes its findings from AML supervisory visits across the legal sector. And every year, risk assessments sit at the top of the failure list.

In the most recent reporting period, the SRA carried out 935 proactive AML engagements across 833 firms. Around one in three were found to be non-compliant. The most common reasons were gaps in firm-wide and client risk assessments, weaknesses in AML controls, and limited internal monitoring. Risk assessments appear in almost every category of failure.

This isn’t a new problem, but the SRA’s tone has sharpened. Firms are increasingly expected to demonstrate that their risk assessments are active, documented, and driving real decisions, not sitting in a folder as evidence of compliance.

Two Separate Assessments, Two Separate Obligations

There’s a distinction worth being clear on, because conflating the two is itself a common failure.

The firm-wide risk assessment is required under Regulation 18 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. It must be a written document, approved by senior management, that identifies the money laundering and terrorist financing risks the practice is exposed to, based on its client base, geographic exposure, services offered, and transaction types. It should be reviewed regularly and updated when the firm’s circumstances change.

The client and matter risk assessment is required under Regulations 28(12) and (13) and must be completed for every single instruction. It needs to reflect both the specific characteristics of that matter, including the client, the transaction, the source of funds, and any risk indicators, and the broader context set by the firm-wide assessment. One informs the other.

The SRA has been clear that the firm-wide assessment is not a substitute for individual matter-level assessments. Both are required. Both must be documented.

What the SRA Keeps Finding

Across its 2024–25 supervisory activity, the most persistent risk assessment failures cluster around a few consistent themes.

Assessments are not always completed consistently or in full. Client and matter risk assessments are sometimes skipped entirely, partially completed, or completed after the matter has already progressed, which defeats the purpose.

Tick-box approaches are still common. Forms are filled in, but the answers do not reflect genuine consideration of the matter. Risk ratings are applied without reasoning, despite the SRA making clear it expects to see evidence that the assessment informed a decision, not just that it was done.

Firm-wide risks are not always carried through to client level. If a firm’s firm-wide assessment identifies elevated risk areas, that should be visible in how individual matters are assessed. Where there is no connection between the two, it is a clear red flag.

High-risk matters do not always receive appropriate oversight. Situations involving PEPs, complex ownership structures, or source of funds concerns should trigger escalation, but the SRA has found cases where this has not happened.

Assessments are often completed once and never revisited. Risk does not stop at onboarding, and where circumstances change, the assessment should change with them.

What a Good Risk Assessment Actually Looks Like

The SRA’s guidance, along with practical experience across the sector, points to a consistent set of characteristics.

Effective risk assessments are completed before the matter progresses, not retrospectively. They contain clear reasoning rather than just a risk rating, explaining what factors were considered and what that means in practice.

They are connected to the firm-wide picture, reflecting the risks identified at firm level in individual matters. They are also treated as live documents, revisited when circumstances change rather than filed away and forgotten.

Finally, they create a clear audit trail. It should be obvious when the assessment was completed, who carried it out, and what actions followed as a result.

The Difference Technology Makes

Manual risk assessments inevitably introduce inconsistency. Some fee-earners apply them rigorously, others less so. Digital AML workflows help address this by embedding risk assessment into the process itself.

They can make completion mandatory at the point of matter creation, prompt the right questions based on the specific context, automatically flag higher-risk scenarios, and create a clear, auditable record of decisions made.

This does not replace professional judgement. It supports it, ensuring that risk assessment is applied consistently and at the right time, rather than retrospectively or unevenly.

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Taken together, the SRA’s message is consistent. Firms need both a firm-wide risk assessment and a matter-level assessment for every instruction, and both must be properly documented, actively used, and kept up to date. Completing them after the fact, or treating them as a formality, misses the point entirely. The real test is whether the assessment has shaped how the matter is handled, particularly where higher-risk scenarios require escalation or further scrutiny.

We are delighted with the response to OneSearch AML since we unveiled the product two years ago; we hope you’ve had the opportunity to explore yourselves into the solutions it can provide your firm when it comes to managing risk and protecting your firm.

We understand the world of Anti Money Laundering can seem overwhelming at times: new regulations, confusing jargon and acronyms… and that’s not forgetting keeping on top of ever-evolving fraud strategies. On top of all that, you may often find yourself explaining this to your clients as well.

To help you conquer compliance, and master your firms AML checks, we’re offering a downloadable guide packed with practical advice and best practices for conveyancers.

In our guide, you’ll learn about:

• Understanding your KYC/AML Obligations in 2026 
• A comparison of Manual vs Digital AML Checks 
• A detailed explanation about the Safe Harbour Standard
• A guide to the most common AML phrases and what they actually mean 
  
  And also:
  
• A full breakdown on the features and benefits of OneSearch AML, the most comprehensive anti-money laundering solution on the market. 

There’s a particular kind of stress that comes with being responsible for something you can’t control.

You’ve done the work. You’ve filed everything correctly. But the transaction is slow, the client is anxious, and every time your phone rings you already know why. You handle it. You move on. You do the same thing on the next file.

That accumulates. And because it’s so consistent, because it’s just how the job is, it’s easy to stop noticing.

It’s worth naming what that actually is. You’re being asked to absorb anxiety you didn’t create, on a timeline you can’t influence, while remaining the calm, professional point of contact for everyone involved. That’s not just difficult, it’s a specific kind of difficult. The kind that doesn’t always get acknowledged because it looks, from the outside, like you’re just doing your job.

Mental Health Awareness Week feels like a reasonable moment to say: yes, but at what cost.

The things that genuinely help

None of these will be news to you. But they’re worth saying plainly.

• Set boundaries where you can: You don’t have to be reachable by every client at all hours. Most clients, given clear expectations early in the relationship, will work within them. The ones who won’t are a different problem, but they’re the exception, not the rule.
• Get your caseload visible: The ambient pressure of not quite knowing where everything stands is draining in a way that’s easy to underestimate. A clear picture of what’s actually in progress, even a basic one – reduces that background noise.
• Talk to someone: Conveyancing can be oddly solitary for a team-based job. If something is weighing on you, speak to a colleague, a supervisor, or someone outside work. It helps more than you realise.
• Know that support exists: LawCare provides free, confidential help to anyone working in the legal sector. It’s not just for crisis situations. lawcare.org.uk

The connection between the two

Everything in the guide we published this week applies to you as much as to your clients. Every proactive update you send is one fewer anxious call to deal with. Every clear expectation you set is one fewer difficult conversation. The habits that reduce client anxiety also, quietly, reduce yours.

That’s not a coincidence. It’s the point.

The full guide: Managing Client Anxiety Through a Transaction is available here:

If you’re finding the pressures of legal practice difficult, LawCare provides free, confidential support to legal professionals. Visit lawcare.org.uk or call 0800 279 6888.

Conveyancing is built on process. For your clients, it’s built on emotion.

By the time a transaction starts to slow, most people have already spent weeks worrying; about timings, about money, about whether everything will fall apart at the last hurdle.

That anxiety doesn’t disappear. It builds, and sooner or later, it comes to you.

According to Landmark Information Group’s 2026 market research, the average transaction takes 123 days from instruction to completion. Conveyancers spend 41% of their working day chasing or being chased for updates. And 42% cite slow transaction times as their number one professional frustration.

Behind every one of those delays is a client who doesn’t fully understand what’s happening, why it’s taking so long, or whether it’s still going to complete at all. That uncertainty is where anxiety takes hold.

Mental Health Awareness Week feels like the right moment to address this directly; not with platitudes, but with something practical.

What the guide covers

We’ve put together a free guide: Managing Client Anxiety Through a Transaction. It’s written for conveyancers who want to manage the human side of a transaction as competently as the legal side, without it consuming more of your day than it already does.

The guide covers five areas:

• Why delays hit clients so hard: and why the anxiety response is rational, not irrational
• What anxious clients actually need: which is often not what they say they need
• Communication habits that reduce anxiety without adding to your workload
• Looking after yourself: because practitioner wellbeing matters too, and it’s under-discussed in this industry
• A quick-reference checklist: a clean pull-out you can keep to hand or share with your team

This isn’t a therapy guide, and it isn’t a sales presentation. It’s the kind of thing you might work through with a colleague over coffee – practical, direct, and grounded in how conveyancing actually works.

Why we wrote it

Delays aren’t always avoidable. But the anxiety they create often is… or at least, it can be reduced significantly with the right communication habits and a clear head about what clients actually need from you.

That’s a conversation worth having, and Mental Health Awareness Week is a good prompt to have it.

Managing Client Anxiety Through a Transaction is free to access: no form to fill in, no follow-up sequence.