Settlement and source-of-funds red flags for conveyancers

Establish the expected settlement profile early

Record the property, parties, ownership structure, price, deposit, lender or finance plan, expected source accounts, third-party contributors, intended use and settlement recipients. For an entity or trust buyer, understand beneficial ownership, control and the commercial purpose for holding the property. An expected profile gives staff something concrete against which to compare later changes.

Ask only for information proportionate to the assessed risk and required by the program. Evidence may include a loan approval, bank statement showing accumulated savings, sale agreement for another asset, probate or distribution record, business accounts or reliable evidence of a gift. Check that names, dates, amounts and narrative form a coherent chain rather than collecting documents without analysis.

Recognise customer and ownership indicators

Some indicators have innocent explanations. Family contributions, trusts and cross-border wealth are common in legitimate transactions. The control is to understand the role, authority, origin and rationale and corroborate higher-risk claims. Avoid assumptions based on nationality, language, age or profession.

• Reluctance to meet, repeated obstruction, unusual secrecy or withdrawal immediately after reasonable AML/CTF questions.
• A person apparently acting for an undisclosed third party, or instructions dominated by someone with no explained role.
• Title requested in the name of a relative, minor, nominee, company or trust without a credible legal or commercial reason.
• An entity buyer with opaque offshore layers, unexplained control changes or a business profile inconsistent with the purchase.
• Wealth or transaction size materially inconsistent with the customer's known occupation, activities or explanation.

Recognise transaction and payment indicators

Treat cyber-fraud controls and AML analysis as complementary. Independently verify changed account details using trusted contact information, separate preparation from release approval and do not rely on an email reply within the same compromised chain. A fraud attempt can also produce information relevant to AML/CTF risk or reporting.

• Rapid purchase and resale, unusual overvaluation or undervaluation, unexplained price changes, or a transaction lacking an apparent economic purpose.
• Multiple third-party payments, fragmented transfers, cash or virtual-asset proposals, overpayments followed by refund requests, or funds routed through unrelated jurisdictions.
• Last-minute changes to payer, recipient, account, ownership, nomination or settlement direction without a convincing and verified explanation.
• A customer apparently connected to both sides, unusual private lending, pressure to bypass normal controls or refusal to identify a contributor.
• Funds inconsistent with the loan, savings, sale, inheritance, gift or business-income explanation previously provided.

Apply enhanced CDD proportionately

Where the Rules, assessed risk or program triggers enhanced CDD, obtain additional information capable of resolving the concern. That may include deeper ownership verification, source-of-funds or source-of-wealth evidence, explanation and evidence for a third-party relationship, transaction-purpose documents, senior approval and closer monitoring. Test authenticity and consistency; volume is not a substitute for reliability.

If the explanation resolves the inconsistency, record why it is reasonable and update the profile. If it does not, follow the program's restrictions, refusal or exit controls. Do not keep accepting new explanations merely because settlement is imminent. A risk-based process may permit continuation in some cases, but the rationale and approval must be contemporaneous.

Escalate suspicion without tipping off

A red flag alone does not compel an SMR, and inability to prove an offence does not prevent one. Consider the indicators together with the customer's explanation and all information available to the reporting entity. If a suspicion is formed on reasonable grounds, meet the current reporting deadline: 24 hours for terrorism-financing suspicions and generally three business days for other suspicions, subject to special legal-professional-privilege rules where relevant.

Limit knowledge of the report, retain the reasoning and use approved client communications. Requests for documents can be framed as standard risk and settlement controls without revealing an SMR decision. Continue monitoring because a later destination change, new payer or contradictory explanation may require a new assessment or update.