Most property transactions are legitimate, and most source-of-funds reviews are routine. Enhanced due diligence is the deliberate, documented step up when the risk assessment or the statutory triggers say the matter needs it: a complex structure, a high-risk jurisdiction, a politically exposed person, or funds whose origin cannot be explained. This guide explains when ECDD applies in conveyancing, how to verify source of funds and wealth proportionately, and the evidence a settlement file should retain.
When ECDD applies
Enhanced customer due diligence is not a menu item. It applies where the law or the practice's documented risk assessment requires it, and the response should be proportionate to the risk identified. A vendor with a complex corporate structure may need ownership and source-of-funds review even when the purchaser is straightforward.
- The statutory triggers in the Act and Rules, including high-risk situations and specified customer types
- A risk assessment that rates the matter high
- Unusual transaction patterns that cannot be explained
- A confirmed sanctions or PEP context where the rules require enhanced measures
Source of funds vs source of wealth
Source of funds asks where the money for this transaction came from: the account, the sale, the loan, the gift. Source of wealth asks how the customer accumulated their overall wealth. AUSTRAC's guidance distinguishes the two because they answer different questions and carry different evidence burdens.
For most conveyancing matters, source of funds is the relevant review: trace the deposit and settlement funds to their origin. Source of wealth becomes relevant where the risk assessment or enhanced measures require it, such as a high-risk matter where the funds' provenance is unclear.
Collecting the evidence
AUSTRAC's source-of-funds guidance emphasises evidence that forms a coherent chain: names, dates, amounts and narrative. A single bank statement without context may prove little. The conveyancer should record the assessment of each document, not just the document itself.
- Bank statements covering the funding period, with names and balances consistent
- Loan approvals and lender correspondence
- Sale contracts for assets sold to fund the purchase
- Trust distribution records, probate or gift documentation
- Business accounts where the purchaser is a company
Documenting the decision
An ECDD file should read like an investigation note: what was asked, what was received, what it showed and who decided. Where the funds cannot be explained, the conveyancer must not simply proceed; the program's refusal, exit and reporting path applies.
- The trigger that required ECDD
- The documents obtained and the analysis of each
- The decision: cleared, further review, refusal or report
- The approver and the date
- The link to the settlement records
Official sources
Confirm the current rules against these primary sources.
Questions
Is source of funds required for every property matter?
No. Apply source-of-funds review proportionately to risk. High-risk matters and enhanced due diligence triggers should always include it; routine low-risk matters may not need it.
What is the difference between source of funds and wealth?
Source of funds is where the money for this transaction came from. Source of wealth is how the customer accumulated their overall wealth. AUSTRAC treats them as separate concepts.
What evidence proves a source of funds?
A coherent chain of documents: bank statements, loan approvals, sale contracts, trust or probate records, and business accounts, with names, dates and amounts that match.
What if the purchaser cannot explain the funds?
Do not proceed on an unexplained basis. Follow the program's path: request more evidence, escalate, refuse or exit, and assess whether a suspicious matter report is required.
General information for Australian professionals, not legal advice. It does not replace the AML/CTF Act, the Rules or AUSTRAC guidance. See our editorial standards.
Keep reading
- Settlement funds red flags5 min
A practical Australian conveyancing guide to funding changes, third-party payments, entity buyers, source-of-funds checks, enhanced CDD and SMR escalation.
- Funds versus wealth6 min
How to distinguish, collect and verify source-of-funds and source-of-wealth information using a risk-based Australian AML/CTF approach.
- Conveyancer checklist3 min
A matter-file AML/CTF checklist for conveyancers: designated service start, vendor and purchaser CDD, settlement deadlines, reporting and records.