# Source of funds checks for solicitors: when they are required, the evidence to ask for and the file note to keep

> When a source of funds check is required under the Money Laundering Regulations, what evidence the SRA lists, a client questionnaire and a file note to copy.

- Page to cite: https://aeolookup.com/solicitors/source-of-funds-checks-solicitors-evidence-file-note/
- Publisher: AEO Lookup (https://aeolookup.com/)
- Section: Solicitors, SRA, AML and transparency
- Published 1 October 2026
- Key fact: In 2024 to 2025 the SRA read 5,873 files at 833 firms; 5,026 needed a source of funds check and 648 of those (11%) had none, on 18% of files the evidence had not been adequately scrutinised, and on 8% the money on the ledger did not match the evidence. Regulation 28(11)(a) of the Money Laundering Regulations 2017 requires scrutiny of the source of funds "where necessary", and the SRA expects a written reason on the file when a firm decides a check is not needed.
- Sources: SRA, "Thematic review of source of funds and wealth compliance" (5 November 2025); SRA anti-money laundering questions and answers, source of funds and wealth section (updated 28 January 2026); Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 regs 28(11), 28(16), 31, 33, 35(5) and 40 on legislation.gov.uk; all read 2026-10-01.

A source of funds check asks where the money for this transaction came from, which is a different question from whether the client has it. The SRA read 5,873 files in 2024 to 2025 and found no check at all on 11% of those that needed one, evidence that nobody had properly read on 18%, and on 8% a ledger that did not match what the file said.

**Free tool on the page:** Source of funds questions letter maker. It runs in the browser at https://aeolookup.com/solicitors/source-of-funds-checks-solicitors-evidence-file-note/#tool and asks for no sign-up.

## When the check is required

| Situation | Rule | What it requires |
|---|---|---|
| Any matter under the regulations | reg 28(11)(a) | Scrutiny of transactions, "including, where necessary, the source of funds" |
| Client is a politically exposed person, or a family member or known close associate of one | reg 35(5) | Adequate measures to establish source of wealth and source of funds, senior management approval, enhanced monitoring |
| Client, or a party to the transaction, is established in a high-risk third country | reg 33 | Enhanced due diligence, which the SRA says includes source of funds and source of wealth |

"Where necessary" is not defined. The SRA reads it as a risk-based test, and the Treasury confirmed on 1 July 2025 that the wording would stay. Two points in the SRA's review settle most small-firm cases. It treats conveyancing as high risk and expects checks on such matters: 73% of the suspicious activity reports it sent to the National Crime Agency between 5 April 2023 and 5 April 2025 concerned conveyancing. And where a firm decides a check is not needed, the file must say why.

The duty can apply with no money passing through client account, for example a transfer of property for nil consideration.

## Funds and wealth

Source of funds is the money used in this transaction. Source of wealth is how the person came to have their assets overall. The SRA's example: savings built from rental income only make sense once the firm knows the client owns let property. Wealth checks are required for politically exposed persons and high-risk third countries.

## What evidence to ask for

Shortened from the SRA's questions and answers page.

| Where the money came from | Evidence the SRA lists |
|---|---|
| Savings from income | Payslips or a P60; bank statements showing regular saving and the balance building, a statement a year for a few years if it took years |
| Sale of an asset | Completion statement, or a letter from the regulated firm that acted; bank statement showing the proceeds arriving |
| Inheritance | Will with grant of probate, or a letter from the estate's solicitors; bank statement showing receipt |
| Gift from a third party | Signed letter or deed of gift from the donor; the donor's own source of funds, checked as the client's would be |
| Loan | Loan documents; if the lender is not a regulated institution, why they are lending and where their money came from |

No rule sets a number of months of statements. The SRA's answer is "as far back as is necessary" to see how the money was built up. It also says a statement proving the money exists is not enough, and that coming from a UK bank account does not make funds legitimate.

## Questions to send the client

Send this at file opening, with the [client care letter](https://aeolookup.com/solicitors/client-care-letter-checklist-new-matter/). The SRA publishes a four-page form; this is shorter.

> We are required by law to understand where the money for your transaction comes from. Please answer for every amount that will be used, including the deposit.
>
> 1. How much will you pay in total, and from which accounts? Give the bank and the account holder's name for each.
> 2. For each amount, how did you come to have it: savings from income, sale of a property or other asset, inheritance, gift, loan, or something else?
> 3. Is anyone else contributing? If so, who are they, what is their relationship to you, how much are they giving, and is it a gift or a loan?
> 4. Will any money come from outside the United Kingdom?
> 5. Please send the documents listed below for each source. We may ask further questions.
> 6. Tell us straight away if the funding changes before completion.

## The file note

One note for each matter, written by the person who read the evidence.

| Field | What to record |
|---|---|
| Matter risk rating, and why | From the client and matter risk assessment |
| Check required? | Yes, or no with the reason |
| Each source, with the amount | The amounts should add up to the money needed |
| Evidence received, and the date | Document by document |
| What it shows | For example "savings balance rises from £18,000 to £52,000 over four years of salary credits" |
| Does it match the client's account? | Yes or no, and any questions put back |
| Funds received: payer, amount, date | Compared with the sources above |
| Any change in funding | What changed, the explanation, and whether the risk rating changed |
| Conclusion and name | Satisfied or not, referred to the MLRO or not, date |

Three rows answer the SRA's three figures. "Check required" means no file is silent on whether a check was done. "What it shows" is proof that someone read the evidence. "Funds received" is the ledger comparison.

## Order of work

1. Ask at file opening. The SRA lists checks done "on the day funds are expected" as poor practice.
2. Read the evidence and write the note before money is accepted into client account.
3. When funds arrive, compare payer and amount with the note.
4. If the check cannot be completed, regulation 31 applies: no transaction, end the relationship, and consider a report through the MLRO.

## Records and cost

Regulation 40 requires the documents and supporting records to be kept for five years from the end of the matter or relationship. Regulation 28(16) requires the firm to be able to show the SRA that what it did suited the risk, which is the note's job. The cost of the checks can be passed to the client if the firm's terms say so in advance.

These files are what the SRA samples in a [desk-based review](https://aeolookup.com/solicitors/sra-aml-desk-based-review-10-day-checklist/), where it reads 10 to 12 of them.

Overlyft ![](https://aeolookup.com/img/d/ours-badge.png) can set up an AI File Opener that records whether source of funds and wealth evidence is on a purchase file and flags what is missing; the MLRO decides every due diligence question. A supervising solicitor reviews and signs anything a tool drafts. This page is general information, not legal advice.

## Short answers from this page

**When does a solicitor have to carry out a source of funds check?** Always for a politically exposed person and where a party is established in a high-risk third country, and otherwise "where necessary" under regulation 28(11)(a) of the Money Laundering Regulations 2017. The SRA treats that as a risk-based test, expects checks on conveyancing, and expects a written reason on the file where a firm decides no check is needed.

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General information for UK small firms, not legal, tax or financial advice.