The bank of Mum and Dad is low-risk, or is it?


Harriet Holmes

AML Services Manager


When considering the source of funds, we should address every aspect of what the client is contributing and leave nothing unexplained. The same can be said for other third parties who may be contributing.

£17 billion is gifted or loaned informally each year, almost all from parents to their adult children. This mostly helps with buying a house or is gifted at the point of marriage… Half the value of gifts received is reported as used for property purchase or improvement. Those using transfers for this purpose received over £20,000, on average, according to the Institute for Fiscal Studies (IFS).

We must go beyond proof of funds: Money in a UK bank account is insufficient in itself. It addresses where the money is (proof of funds) but not where it ultimately comes from (source of funds). 

We should not solely rely on self-declaration from either clients or donors. Where possible, independent evidence should be obtained. Giftors, including “the Bank of Mum and Dad”, should be subject to the same level of scrutiny as any other client.

Our AML Services Manager, Harriet Holmes (HH) recently discussed with and Compliance Consultancy Director, Jonathon Bray (JB) to say why.

Is it right to assume the bank of Mum and Dad is low-risk? 

HH: That is not a guarantee. Until we understand more about “Mum and Dad”, who knows where their money is derived from? Essentially the Mum and Dad could hold dirty money and it may not be legitimate. As such, we need to gain and understand more information about the funds in the same way we ask direct clients. 

We should start by asking the question, how have they accumulated the funds in order to be in a position to gift them?

When the monies are gifts how far do you need to look into the gifter's finances?

JB: As with all source of funds enquiries, you are required to take sufficient steps to enable you to ‘get comfortable’ that the money is legitimate. 

You may receive some push-back from your client and their family, but they are necessary. Making blind assumptions about the provenance of the loan or gift puts you in a very precarious position.

How far you go back is like asking ‘How long is a piece of string?’. You go as far as your assessment of the risk requires. In a relatively ‘normal’ looking transaction, where there are no other red flags or heightened risk, you are likely to be satisfied by seeing evidence that corroborates the giftor’s story. 

If the money was simply from savings, you would want to see the savings account statement. Regular deposits from the giftor’s personal account would usually suffice. This should be accompanied by an understanding of the activity that generated those specific funds, for example, savings from employment or inheritance.

Deposits from other sources would warrant further enquiries. 

A lump sum coming from inheritance or asset sale would need some sort of documentary evidence, such as a copy of solicitor letters.  

Gambling winnings and crypto gains would likely require a higher standard applied. Can you evidence money in/money out?

How would you address gifts transferred several years ago?

JB: Not to say that financial criminals cannot be patient, but logic suggests that anyone looking to launder illegitimate funds would want their ill-gotten gains processed through the system quickly. Old gifts are not necessarily ‘safe’ but the risk attached is certainly likely to be lower. 

Most solicitors would still want some evidence of where the gift derived from – even if that is just old bank statements.

As with all these enquiries, if there is an inconsistency between the paperwork and the story, it would prompt you to push for more information until satisfied.

What if the money is from another jurisdiction?

JB: Then all the more reason to conduct thorough source of funds checks. Overseas funds should play a key part in your matter-level risk assessment.

You need to satisfy yourself that there is a good reason for the gift to have come from overseas. Does it fit with what you know about the client and their circumstances?

If so, you will need to look at the jurisdiction itself. What is the AML risk profile of that country? Even if it is not one of the High-Risk Third Countries identified in Schedule 3ZA of the Money Laundering Regulations 2017, that does not mean it should be classed as safe. Tools such as and the Transparency International Corruption Perceptions Index are useful for gauging the level of risk.

How should you approach a situation where funds are gifts, or related to a significant life event?

JB: First and foremost, the story needs to stack up. If it sounds implausible, is inconsistent with your knowledge of the client, or for some other reason just makes your “Spidey Sense” tingle, then the situation needs full enquiry before proceeding. That is called exercising professional judgment and the anti-money laundering framework relies on people close to transactions listening to those signals and acting on their concerns. 

Based on your understanding of the circumstances behind the gift or life event, along with your overall assessment of the client and transaction risk, take appropriate steps to evidence the story. 

There of course will come a point after which it would be unreasonable to ask further questions. At that point, only you can decide whether you are satisfied or suspicious. 


Whilst it is sometimes difficult to conclude whether you’ve gone far enough into the giftor’s source of funds, if you are uncertain that what you have is enough, the chances are it’s not. Ultimately, despite perceptions of some funds such as gifts being more low-risk than others, they are still not exempt. It is still necessary to carry out a thorough level of diligence, whereby you feel comfortable about where a client’s funds have come from, and if this matches what they are telling you. Clients may not like it, but it’s all part of protecting society against fraud and money laundering that no matter the circumstances, should ever be overlooked.

Thanks Jonathon Bray for sharing your advice and knowledge.

To learn more about Jonathon Bray Consultancy and how it can help your law firm overcome regulatory burdens, saving valuable time and resources visit:

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