For many estate agents, compliance is something they genuinely care about and invest time in. Checks are completed, documents are collected, and third-party tools are often in place. Yet one area continues to expose agencies to real regulatory risk: failing to properly assess and evidence Source of Funds and Source of Wealth.
This is not a grey area or a question of best practice. Under the Money Laundering Regulations, it is a clear requirement and one that HMRC is increasingly focused on during audits.
At its core, anti-money laundering compliance is about understanding risk. Verifying a client’s identity is only part of that picture. Agents must also be able to explain where the money involved in a transaction is coming from and how it has been accumulated over time. Source of Funds and Source of Wealth are therefore fundamental to compliance, not optional add-ons or secondary checks.
A common issue in the property market is the assumption that digital ID checks or the collection of a bank statement are enough. In reality, neither provides the full answer. A bank statement may show where money is held, but it does not explain how it was earned or whether it is proportionate to the client’s circumstances. Digital ID confirms identity, not financial legitimacy. Without assessment, challenge and a clear audit trail, these checks do not meet regulatory expectations.
HMRC’s position has become increasingly clear. Regulators are not simply looking for documents on file; they are looking for evidence that agents have applied a proper, risk-based approach. That means demonstrating how information was reviewed, whether it made sense in context, and how decisions were reached. It also means showing that this approach is applied consistently, not only in cases that appear higher risk at first glance.
When Source of Funds and Source of Wealth are not properly covered, the impact goes far beyond a single missing check. It often results in multiple compliance failures, including inadequate customer due diligence, gaps in record-keeping and failure to follow documented policies and procedures. This is why these issues so often sit at the heart of enforcement action.
For estate agents, the risk is real. HMRC audits can lead to fines, remedial action, increased scrutiny and reputational damage. Importantly, agencies are frequently penalised not because criminal activity has taken place, but because they cannot demonstrate that appropriate steps were taken to prevent it. In compliance terms, if you cannot evidence your decisions, it is treated as though they were never made.
The regulatory landscape is continuing to evolve, and expectations are rising. Compliance is no longer about collecting information or relying on disconnected tools. It is about being able to show, clearly and confidently, how risk has been identified, assessed and managed on every transaction.
At Coadjute, we cannot recommend strongly enough the importance of ensuring that all compliance risks, including Source of Funds and Source of Wealth, are properly identified, assessed and evidenced on every transaction. These checks should not sit in isolation. They must be clearly reflected in your day-to-day Policies, Controls and Procedures (PCPs) and embedded within your Business-Wide Risk Assessment (BWRA), so that compliance is consistent, defensible and aligned to current regulatory expectations.
If your current processes, tools or providers do not fully cover these areas — or if evidence and reporting are difficult to produce with confidence, it may be time to review whether they are truly fit for purpose. In a rapidly evolving regulatory environment, having a solution that properly manages and evidences risk is no longer optional. It is essential to protecting your business, your clients and your reputation.
