One fifth (22%) of red flags in completed Source of Funds (SoF) verification are raised for because the buyer has no mortgage, followed by buyers receiving a gift, new data from client due diligence platform Thirdfort has revealed.
Having completed around 20,000 SoF verifications via the Thirdfort app every month, the firm can see the most common sources of red flags when completing SoF verification.
The data gathered by Thirdfort’s SoF tool shows the top five types of red flags:
| Type of red flag | % flag by type in completed SoF checks |
| No mortgage | 22% |
| Gift | 20% |
| Overseas funds | 12% |
| High cash deposit | 10% |
| Frequent cash deposits | 9% |
No mortgage means the buyer is not using a mortgage to buy the property. Anytime a client is funding their purchase partially or fully using a gift this flag is raised. Both of these are considered red flags as they indicate a higher risk of money laundering as the buyer may be using illicit funds outside of what’s in a bank account to buy the property.
Olly Thornton-Berry, co-founder and managing director at Thirdfort, said: “Our data shows that one fifth of red flags on completed Source of Funds verification are because the buyer doesn’t have a mortgage. This is followed by gifts at 20% of completed checks. While such red flags do not necessarily indicate money laundering or fraud, property professionals may need to undertake enhanced due diligence and request additional evidence to support the transactions and ensure they meet their regulatory requirements.”