Building a Funding Narrative

Lawyers should approach source of funds enquiries by building a coherent funding narrative.

A useful source of funds note will normally explain:

1. Whose funds are being used?
2. How were those funds accumulated?
3. Where are those funds currently held?
4. How will those funds move through the transaction?
5. Why does the explanation make sense in light of the lawyer's understanding of the client?
6. What evidence supports that conclusion?

The quality of the explanation is often more important than the volume of documents obtained.

The explanation must nevertheless be supported by evidence appropriate to the risk. Where funds are to be received into the Client Account, the responsible lawyer should ordinarily obtain and review the evidence before payment, rather than attempt to reconstruct the source of funds after the money has arrived.

Relevant evidence may include bank statements, sale contracts, completion statements, wills, probate or estate accounts, loan documentation, company accounts, investment records, tax documentation or other material demonstrating how the funds were generated and accumulated. Documents must be reviewed critically rather than merely retained. Any unusual or unexplained transaction appearing in the evidence must be considered and addressed.

A well-evidenced narrative should enable an independent reviewer to understand why Keystone was satisfied that the funds were legitimate.