What is conveyancing AML?
If you work in any industry subject to regulatory work, you’ve highly likely seen the term “AML” thrown around. This stands for Anti-Money Laundering, and in the context of conveyancing, it is essentially a set of checks a solicitor has to carry out to ensure the money being used in the property transaction is legitimate.
Why do Solicitors care so much about where your deposit is coming from?
No, we’re not being nosey. Your deposit is one of the biggest focus points for AML checks. We are not just interested in the amount – we need to know its orign. Savings? Gift from family? Inheritance? Sale of assets? All of these have a relatively straightforward paper trial (even if it is tedious!).
Crypto-backed loans – the basics
A crypto-backed loan is exactly what it sounds like: you use your crypto- currency as collateral to borrow cash. Instead of selling your crypto, you temporarily ‘lock it up’ with a lender, and in return they give you a loan in pounds.
People tend to prefer this option because they don’t have to sell their Bitcoin – which may be important for an attentive investor who believes the value will increase.
From a buyer’s perspective, it can feel like a clever workaround. From a solicitor’s perspective, it introduces a few extra layers of complexity which require enhanced due diligence.
Why checks get trickier
The main issue with crypto generally is traceability. While blockchain transactions are technically transparent, they are not always easy to link to a real-world identity without additional documentation.
So when a deposit comes from a bitcoin-backed loan, solicitors will want to see:
1) Evidence of how the crypto was originally acquired;
2) Details of the loan agreement;
3) Proof that the funds released are from a regulated or reputable
lender; and
4) A clear trail showing how the loan funds ended up in your account.
It is less about distrust and more about filling in the gaps that traditional banking systems would cover automatically.
The lender
Another factor to take into consideration is who you’re borrowing from. If the loan is coming from a well-known, regulated platform, the process is likely to be smoother. If it is coming from a less established or offshore provider, expect more questions.
Solicitors have to assess risk, and unfamiliar financial arrangements will trigger more due diligence.
The due diligence will add hours on to your conveyancer’s time, so also expect an increase in the fee estimate for your transaction.
Common Misconceptions
The biggest myth about using crypto as part of a property transaction? That it is a red flag and a deal-breaker for whether a firm of solicitors can continue acting for your purchase. This is not true. It is perfectly possible to use funds derived from crypto, as long as you can document the journey clearly. That being said, some firms may be restricted due to their insurance policy.
Another misconception is that solicitors are “anti-crypto”. We aren’t – we’re just bound by LOADS of regulations.
How to make the process smoother
Preparation is everything. Start gathering documentation early. Keep records of your crypto purchases, wallet history and loan agreements. Even a short summary of how the initial sums accrued can be helpful for your conveyancer.
So… is it actually a big deal?
Honestly, not really. It can feel daunting due to the volume of paperwork that will be requested and the extra questions, but that’s about it. Give your conveyancer some slack at the outset whilst they filter through the documents. They aren’t being difficult; they are just undertaking the required due diligence. The system is designed to filter out suspicious activity, not block legitimate buyers.
Final thoughts
Conveyancing AML checks have a notorious reputation for being stressful, especially when crypto is involved. But once you understand what the solicitors are looking for, it becomes much more manageable.
Yes – there is an extra layer of scrutiny. Yes – you will have to provide more documents and answer more questions. But that doesn’t mean it is not doable.
Ultimately, it’s not nearly as scary as everyone thinks – both from the buyer and solicitor side – just a bit more paperwork and a need to stay organised.
Tia Lim Watts is a highly experienced and respected residential property conveyancing lawyer , who has developed a particular interest and expertise in dealing with crypto – related property transactions. .Crypto is now entrenched in the financial system and increasingly regulated.
Please contact us on our enquiries page or by telephone 020 7387 2032.