A developer recommends your firm, the buyer wants to secure the plot and the reservation deadline is approaching. Who determines whether the AML investigation is complete?
The answer must remain with the conveyancing firm applying its professional judgement and legal obligations. Familiarity with the development, a regular stream of referrals or checks undertaken elsewhere cannot replace an appropriate assessment of the client and transaction.
New-build and off-plan purchases can involve a combination of reservation payments, early deposits, extended construction periods and changing funding arrangements. Firms need procedures that address those features throughout the instruction.
Knowing the development does not mean knowing the buyer
A firm acting on several purchases within the same development may become familiar with the title, planning documents and standard contract. That familiarity can make parts of the legal investigation more efficient.
It does not establish who ultimately owns or controls a purchasing company, how a particular buyer acquired their funds or why a transaction has been structured in a particular way.
The site documentation and the client’s AML assessment answer different questions. Reusing appropriate knowledge about the development should not lead to assumptions about unrelated buyers or their funding.
Our guide to new-build conveyancing checks and snagging explains another important distinction: the legal investigation and the physical inspection also serve different purposes.
A developer recommendation must not determine the AML decision
A developer referral arrangement does not automatically establish a conflict or misconduct. It does create a relationship the firm should understand and assess.
Consider whether commercial dependence could discourage staff from raising enquiries, seeking more evidence or explaining that the proposed timetable cannot be met.
Practical management questions include:
- Can fee earners raise concerns without seeking permission from the person managing the developer relationship?
- Who reviews a concern involving a particularly valuable source of instructions?
- Are staff supported when appropriate enquiries delay exchange?
- Are unresolved issues escalated consistently across referred and non-referred work?
The SRA Code of Conduct addresses conflicts, introductions and referrals. The firm should consider the applicable requirements rather than assume that disclosure or client consent resolves every potential issue.
For firms reviewing their written arrangements, the CQS Conflict Handling Policy available from POLICYmonitor provides a template to assess and tailor.
Map the funding across the transaction
An off-plan purchase may involve payments and decisions at different stages. A funding explanation obtained at reservation should not be assumed to describe the position at completion many months later.
A practical record should identify the relevant payments, who provides them, their purpose and the evidence supporting the explanation.
| Transaction stage | Questions to consider |
|---|---|
| Reservation | Who paid the reservation fee, to whom and on whose behalf? Is that consistent with the proposed purchaser? |
| Exchange deposit | Does the evidence explain the funds being committed? Are gifts, loans or company contributions understood? |
| Construction period | Have ownership, funding, intended use or other material circumstances changed? |
| Completion | Does the actual payer and funding arrangement match the assessed position? Have outstanding enquiries and approval conditions been addressed? |
These are suggested review prompts. They do not impose an identical evidence requirement on every purchase. The enquiries should reflect the particular risks and applicable obligations.
An illustrative purchase: the familiar buyer has a different payer
A firm receives instructions from a buyer introduced through a development’s sales team. The buyer initially says that personal savings will fund the deposit.
Before exchange, the firm is told that a company will provide part of the money. The sales team explains that the arrangement is common among buyers and asks the conveyancer to keep to the reservation timetable.
That explanation does not resolve the funding question. The firm needs to understand the company’s involvement, the nature of the contribution and the appropriate checks.
The arrangement may have a legitimate explanation. The relevant point is that familiarity, reassurance and a deadline should not replace investigation and a recorded conclusion.
This is a hypothetical example, not a description of a particular development or transaction.
Do not assume another participant has completed the necessary checks
A new-build purchase may involve a developer, sales agent, introducer, mortgage intermediary and several legal advisers. Each participant may hold different information.
Clarify what information the firm has obtained and assessed. A statement that the buyer has passed another organisation’s checks should not be treated as a substitute for satisfying the firm’s own obligations.
Formal reliance has a specific regulatory meaning. Distinguish it from receiving information, using an electronic verification service or accepting an introducer’s reassurance.
The SRA’s sectoral risk assessment identifies the visibility problems that can arise where multiple advisers or service providers are involved.
Look for connections without assuming wrongdoing
Where the firm handles several purchases in the same development, management should consider whether its oversight can identify relevant connections between matters.
Examples might include repeated use of a funding company, related purchasers, common contact details or changes involving the same intermediary.
A connection does not automatically establish suspicion. It may, however, be relevant information that individual fee earners would not see when examining their files separately.
Any sharing and analysis must respect confidentiality, data protection and the restrictions surrounding suspicious activity reporting. Management reporting should use appropriate access controls.
Overseas residence, nationality or the use of a company should not become a substitute for a properly reasoned assessment of the actual circumstances.
Reflect the business model in the FWRA and individual assessments
If developer-referred or off-plan work forms a material part of the practice, consider whether the firm-wide risk assessment addresses how that work is obtained and delivered.
Assess the relevant funding patterns, client profiles, referral relationships, transaction volumes and supervision arrangements. The assessment should explain the firm’s exposure and the controls selected to address it.
Individual client and matter risk assessments should then consider the actual instruction. Our guide to what happens after a CMRA identifies higher risk explains why the rating should lead to appropriate action.
Firms reviewing their wider assessment can explore Lexsure’s FWRA guidance and support.
Test whether independence survives timetable pressure
Internal reviews should examine more than whether the required forms exist.
Select relevant new-build matters and consider whether:
- The funding explanation was supported by evidence and scrutiny.
- Material changes prompted reassessment.
- Required approvals were obtained at the appropriate stage.
- Unresolved concerns affected the decision to proceed.
- Staff could escalate issues independently of the referral relationship.
Lexsure’s findings during independent AML audits have included missing or ineffective risk assessments and insufficient evidence of source-of-funds scrutiny. Those weaknesses illustrate why the quality of the investigation matters alongside the written procedure.
Our article on testing source of funds during internal file reviews provides practical review questions.
Keep the procedures usable
Where a review exposes unclear responsibilities or inconsistent decisions, update the relevant instructions and workflow.
Firms can browse the AML policies and procedures available from POLICYmonitor and consider Lexsure’s AML Policy Update Service for continuing drafting support.
Assess and tailor the wording, communicate relevant changes and check their implementation on subsequent matters.
For buyers, the practical consequence may be a request for further information even where a developer or agent already holds documents. Explaining likely requirements early helps clients prepare without promising that every enquiry can be anticipated.
Do your new-build AML controls work under pressure?
Lexsure’s independent AML audits examine risk assessments, procedures, client files and staff understanding to identify gaps between the firm’s controls and everyday practice.
Discuss an audit that addresses your firm’s work and risk exposure, including relevant developer referrals, off-plan purchases and funding arrangements.
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An audit supports oversight. Responsibility for AML compliance remains with your firm.