applies to all funds connected with a matter, not just those coming from our client. While the risk can often be lower, we still have obligations to check:
The key is that we must always understand the source of funds being used in the matter.
Every time you use the Client Account, and in the Isle of Man whenever a third party pays us, you must prepare a short narrative note titled "" and save it to the file. Your compliance induction provides specific training, and you must read and follow the Compliance Induction Guide procedures for all relevant money movements.
The question you are answering is not simply "where did the money come from", but "how and from where did the client (or payer) obtain the money being used in this matter." It is not enough to know the money is held in a UK bank account - you need to understand how it was accumulated and be satisfied that it is not linked to crime or terrorism.
The level of checks is always risk-based. Examples:
For funds coming into our Client Account, you must gather independent evidence showing how they were accumulated and that they are legitimate. This may include file notes, emails, copies of bank statements, wills, sale contracts, probate accounts, or other relevant documents. Refer to the evidence in your notes, and send both the notes and documents to clients@keystonelaw.co.uk with the file number. The Clients Team will store them centrally.
Always review documents carefully. If a bank statement contains unusual transactions, you must note why they do not give rise to money laundering concerns.
You must never send or receive funds unless you are satisfied they are from a legitimate source. If you are not happy with the source, stop immediately and speak to the MLRO.
If entities other than the client are paying into our Client Account, consider whether CDD checks on the sender are needed. This is risk-based: bank transfers and private equity investments usually require little investigation, while gifts or payments from individuals require more. If funds come to us from another law firm, you can assume they are legitimate unless you have reason to doubt that. If in doubt, stop and escalate.
If a third party is paying our bill, record on file why they are doing so and confirm you have no concerns about their source of funds. As fee payments usually carry lower risk, you will not normally need supporting evidence unless other risk factors are present, or if you are in the Isle of Man, where full due diligence on third-party payers is always required.
Further detailed guidance on source of funds is available in your Compliance Induction materials and in the standalone guidance note.