Couple purchasing local business

I act for a young couple in the purchase of a small local business. Part of the funding is coming from their respective parents with the remainder provided by a high-street lender. What anti-money laundering considerations would I need to consider in compliance with the Money Laundering Regulations 2007 ('the regulations')?

In addition to undertaking the usual Customer Due Diligence ('CDD') on the couple, you should consider undertaking checks in relation to the source of funds coming from the parents.

The first question you should ask your clients is why are the parents providing such funding? It is important to document the answer given on your file.

You should also ask on what basis the parents are providing such funding; is it a loan or a gift? Consider writing to the parents to advise them of the need to take independent financial advice and seek any documentation regarding the source of their proposed funding.

In addition, if you are also acting for the lender, check that the funding arrangement has been communicated to the lender.

In terms of compliance with the regulations, consider Regulation 8 which imposes the obligation to scrutinise transactions where necessary including source of funds. Therefore, depending on the level of risk involved, you may deem it necessary to seek evidence of source of funds from the parents starting with CDD material and/or bank statements.

Ultimately, the onus is on you to demonstrate on your file that you have taken steps to understand the nature of the instructions and the profile of the funders in order to determine whether or not such funding is consistent with the particular retainer.

If you undertake these initial steps at the outset, it should enable you to be alert to any warning signs that may arise during the retainer such as changing instructions. It will also enable the clients to begin collating relevant information regarding the funding to assist in expediting their transaction.

For further guidance, please refer to the Law Society's Practice Note on anti-money laundering.