New data from client due diligence platform, Thirdfort, has revealed five emerging Source of Funds (SoF) challenges that compliance professionals need to remain aware of to stay ahead.

Verifying the source of the client’s funds is about limiting opportunities for criminals to launder money or use ill-gotten gains and with gifts from the ‘bank of mum and dad’ accounting for over 20% of SoF reports, firms must also be conducting checks on the origin of gifted funds.

Having completed around 25,000 SoF verifications via the Thirdfort app every month, the platform has identified how source of funds is evolving.

Mortgage-free

More than 20% of SoF reports show no declared mortgage. In a mortgage-free transaction, identifying the source of funds can become more burdensome for the conveyancers involved as they have to dig deeper to uncover how the transaction is been funded. This shift has become more apparent since the end of the Stamp Duty holiday.

Thirdfort’s analysis also found that almost 10% of checks show multiple cash deposits into the account(s) during the period analysed.

Some 8% of checks include more than three separate cash deposits within the last six months. In addition, 9% of reports showed average cash deposits of more than £500 at a time.

Multi-bank

On average, clients now hold at least three bank accounts, often spanning traditional and neobanks. This adds layers of complexity to Source of Funds verification, as compliance teams must obtain, analyse, and verify multiple sets of financial statements.

Over the past few years, the UK government has also launched and then withdrawn a wide range of property-related schemes that present a challenge for firms attempting to standardise and scale SoF processes.

Olly Thornton-Berry, co-founder and CEO of Thirdfort, said: “The cornerstone of effective Source of Funds verification is consistency. Manual processes and outdated policies can’t keep up with today’s risks. That’s where technology helps, combining data and evidence from multiple sources into a single view. This lets compliance teams focus on what matters: assessing risk, not chasing paperwork.”