What the rule asks
Regulation 28(11)(a) of the Money Laundering Regulations 2017 requires a firm to scrutinise the transactions it carries out for a client and, where necessary, to establish the source of the funds. The SRA's SRA warning notice on money laundering and terrorist financing reads "where necessary" against the risk of the matter: the higher the risk, the deeper the check and the fuller the note.
Two questions are easy to confuse. Source of funds asks where the money for this transaction came from. Source of wealth asks how the client came to have their assets at all. A property purchase funded by savings needs the first; a politically exposed person or a high-risk matter needs both.
What the SRA found
In November 2025 the SRA published a thematic review of 5,026 files that required a source of funds check, drawn from the 5,873 files it reviewed across 833 firms in 2024-25.
Of 5,026 files requiring a source of funds check
Source: SRA, thematic review of source of funds and source of wealth compliance, November 2025
The review names the habits behind these numbers: documents collected and filed without anyone reading them, no note explaining why a check was judged unnecessary, no trail showing how the conclusion was reached, and funds accepted before the check was done.
What enough looks like
The SRA's own words: a clear and documented audit trail setting out the firm's approach to source of funds on each matter. In practice the file has to answer six questions.
- What was the money for, and how much. The transaction, the amount, the date it was needed.
- Where it came from. Salary, a sale, a gift, an inheritance, a loan, a business. Named, not assumed.
- What you saw. The document for each source: payslips, a completion statement, a gift letter with the donor's own source, a grant of probate.
- Whether it matched. The documents against the client's explanation and against the ledger. A mismatch is a finding, not a formality.
- Why this depth. One sentence tying the depth of the check to the risk rating of the matter.
- Who decided, and when. The name of the person who concluded the check was sufficient, before the money was accepted.
Red flags the file must address
Funds from a third party who is not the client. A source the client cannot explain in one sentence. Money arriving earlier, later or in a different amount than agreed. Cash, or funds routed through several accounts. A request to send money on to someone else. A client who objects to being asked. None of these ends a matter; each one needs a line in the file saying what was asked and what was found.
How we do it
Diligentia opens the matter with its risk rating, sends the client one link that asks only for the documents the registers cannot supply, checks each document on receipt against what the client said, and writes the source of funds note with every document and date attached. The lawyer reads it, challenges what they disagree with, and approves it. The file the inspector asks for is the file the check produced.