Gifted deposit from overseas, a possible PEP, and a partner's enquiry
Elena, 38, a UK-based pharmacist, is buying a £365,000 flat with a £240,000 mortgage and a £125,000 deposit. She says £70,000 of the deposit is a gift from her father, Raymond, a retired permanent secretary at a West African finance ministry who lives overseas. He sold a property, and the funds arrived in three transfers over eight weeks, routed through a UK solicitors' client account on the advice of 'friends in the ministry'. The conveyancer has asked the firm to confirm the source of the gifted deposit. The estate agent says the seller will withdraw unless exchange happens within ten days. Elena's partner, Sam, telephones the firm asking for an update on 'our application' and whether the mortgage has been approved. Elena has already been told twice that the firm cannot discuss the case with her partner.
1. What customer due diligence is required on Elena and on the gift, and does Raymond's role change the approach?
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Standard measures first. Verify Elena's identity and address from an independent source, and establish both source of funds (where the £125,000 came from) and source of wealth (how she has accumulated her assets). Her own savings need evidencing too, not just the gift.
PEP screening. A permanent secretary at a finance ministry is a senior public function, so Raymond is very likely a politically exposed person under the money laundering regulations. Family members of a PEP - including children - are within the regime, so Elena must be treated as a family member of a PEP, at least while the risk exists. Being retired does not automatically end the classification; the risk is assessed, and a role in a finance ministry that involved control over public funds is higher risk. The reference to 'friends in the ministry' helping move money raises the risk further.
Enhanced due diligence. Obtain senior management approval before establishing the relationship; establish source of wealth for the gift by seeing the property sale contract, the conveyancer's completion statement and the donor's bank statements showing the funds leaving; obtain the UK solicitor's written confirmation that the client account transfers relate to that sale and that checks were done on Raymond. Three transfers over eight weeks routed through a third party's client account is layered and should be questioned rather than accepted at face value.
Decision. The ten-day deadline from the agent is a commercial pressure, not a legal justification for shortcutting checks. If the firm cannot verify the funds, it must not proceed.
2. If the firm becomes suspicious, what must it do and what must it not say?
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Report internally and to the NCA. Suspicion, or reasonable grounds to suspect money laundering, requires a suspicious activity report to the firm's nominated officer (MLRO), who will decide whether to submit it to the National Crime Agency. The adviser has a personal duty to disclose and can commit an offence by failing to do so.
Consent. If the firm wants to continue with the application while the report is considered, it should seek consent under the appropriate part of the legislation and wait out the moratorium periods before proceeding. In practice, most firms pause the case.
Tipping off. No one may tell Elena or Raymond that a report has been made or is being considered, where that would prejudice an investigation. That means the adviser cannot explain any delay by reference to a report. The estate agent and seller must not be told either; a bland statement that additional verification is required is appropriate.
Records. Keep full records of the checks, the reasoning and the report for at least five years after the relationship ends. Do not destroy the file and do not 'un-suspect' the case because the client is upset or the deadline is pressing - the deadline is irrelevant to the legal obligation.
3. How should the firm handle Sam's telephone call?
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Do not confirm or deny. Mortgage application data is personal data and confidential. The firm should neither confirm that Elena is a client nor discuss the application, the amount, the lender's decision or the timescale. Confirming that an application exists is itself a disclosure.
Consent is the route. If Elena wants Sam involved, obtain specific written consent naming him and the information he may receive, and record it. A general instruction given months earlier, or a joint intention to buy, is not enough.
Handling the call. Take a message and pass it to Elena, log the call and the reason it was refused, and keep the tone neutral so nothing is implied by hesitation. Do not discuss the case where other clients can overhear.
Subject access requests. If Sam makes a formal request, respond within one month (extendable by two months for complex requests), but a request from a third party does not entitle him to Elena's data: her information would be redacted and any reference to her would be withheld unless she consents. Similarly, if Elena later makes a request, Sam's data and any suspicious activity reporting material would be restricted.
Data quality. Keep client data accurate and secure, retain only what is needed for the regulatory retention period, and ensure all staff know that the AML duties and the data protection duties operate together, not in conflict.