Evolving Source of Funds Expectations — and the Role of Legal Tech
Armalytix Executive Chairman Mike Ward explains how conveyancers can meet rising regulatory expectations around source of funds checks by moving beyond document gathering to building clear evidence-backed financial narratives, using technology to reduce admin, improve risk visibility and strengthen AML compliance.
This article was originally published by Modern Law Magazine, Issue 85, page 59. Read the full article here.
Regulators are shifting toward more narrative-led, risk-based assessments of source of funds. How is Armalytix adapting its technology to help conveyancers move beyond document collection to evidencing the “story” behind funds?
As regulators shift toward more narrative-led, risk-based source of funds (SoF) assessments, the primary objective remains robust Anti-Money Laundering (AML) compliance. Meeting this standard requires a clear, evidence-backed story, not a tick-box exercise. Armalytix supports this evolution beyond simple document collection by structuring data and analysis into easy-to-review reports that show the origin, timeline, and risks behind a client’s funds, enabling firms to build a coherent understanding without specialist financial training.
By automating manual tasks like evidence collation and initial analysis, Armalytix helps firms:
- Build a genuine story of funds using reliable evidence rather than fragmented documents or repeated back-and-forth emails.
- Analyse data consistently to help teams identify key risks and gaps more efficiently.
- Present auditable researched narratives that demonstrate the firm’s understanding of the client’s financial position.
This saves time, freeing conveyancers to focus their expertise on complex, high-risk cases where human insight is critical, and ensures that technology and professional judgment work together to support effective AML compliance.
What are the biggest challenges your clients are facing in meeting these evolving expectations, and how is legal tech helping to bridge the gap between compliance and practical workflow?
Three of the biggest challenges faced by conveyancing firms when meeting evolving SoF expectations are: the sheer operational burden, increasingly complex finances, and client friction. Modern property purchases often involve multiple funding sources, with around 30% of purchases now involving gifted funds, making checks more detailed and time-intensive.
Firms are being asked to build a clearer picture of where funds have come from, but without having any extra hours in the day. Conveyancers already have significant caseloads, and historically, this has meant highly skilled fee-earners spending valuable time chasing clients for missing documents, manually reviewing bank statements, gathering the right level of detail from all relevant parties, and effectively analysing fragmented evidence to build a defensible SoF narrative.
This was the challenge faced by Leading Property Lawyers Limited (LPL), where fee-earners were tied up dealing with repetitive admin rather than focusing on legal work that required professional judgement. As Head of Operations, Louise Stephens-Panoja put it, they were performing tasks that “didn’t need to be done by somebody at that level of expertise.”
Introducing Armalytix replaced fragmented paper-based checks with automated data analysis through Open Banking connectivity and bank statement scanning, creating a more robust audit trail that sped up the client journey. Louise said it “..took away the whole admin burden, and allowed [the] team to utilise their skills. As a business, [they] got better value for money out of [their] people.”
Client friction is another major issue. SoF requests can feel intrusive or overly burdensome, particularly when clients are asked to share sensitive financial data or involve giftors. This can create delays, repeated follow-ups, and trust barriers, especially when information is being shared digitally. Armalytix helps reduce this friction by streamlining the process and providing added reassurance through our FCA-registered status. Full SoF verification can take several weeks to complete; at PSR Solicitors, Armalytix helped reduce SoF checks from weeks to as little as one day, with 98% of clients completing the process without issue.
How does Armalytix balance automation with the need for human judgment in assessing complex or higher-risk source of funds cases?
Armalytix uses automation to do the heavy lifting, not to replace the lawyer’s professional judgement. As Karl Lewis, Solicitor and Head of Conveyancing at PSR Solicitors, summarised: “There’s no green light to say source of funds is fully complied with, but it’s a great tool to put us in the right direction and delve deeper into any gaps in the evidence we’ve received. Armalytix is not taking away from your decision-making ability to assess the risk, it’s just presenting all this information in such a way that it makes decision-making easier.”
Armalytix helps lawyers focus their judgment where it matters most, rather than chasing information and crunching numbers. The platform structures evidence, highlights gaps, risks, and reduces manual admin, providing everything they need to make faster, better-informed decisions.
Looking ahead, how do you see source of funds checks evolving over the next few years, and what role will technology providers like Armalytix play in shaping best practice?
The future of SoF checks will likely be defined by speed, connectivity, and effectiveness. Pilots like the UK’s first fully digital homebuying service with Lloyds Banking Group, where Armalytix is involved in conducting SoF checks earlier in the transaction, demonstrate the direction of travel. Instead of a manual, fragmented process where homebuyers repeatedly supply the same information, SoF checks are looking to shift from a standalone compliance task to a shared process reviewed earlier in the transaction. The Conveyancer remains the last line, but shouldn’t be the only line of defence.
Over the next few years, the central question will move from “Did you follow the process?” to “Is your process effective?” Regulators like the FCA are increasingly focused on “effective organisation and control,” expecting firms to genuinely understand and manage risk. This heightened scrutiny will likely bring far greater consequences for weak SoF controls, including individual accountability for senior leaders and collective firm accountability. So firms need to be prepared. While Conveyancers already lead the way in AML compliance, the bar is rising. Best practice now means collecting and properly analysing the right evidence, ensuring every decision and narrative is traceable.
Governance and accountability will become critical, driving potential restructures within the industry towards more centralised onboarding and tighter oversight. Firms will need people doing checks who aren’t conflicted by financial incentives, clear escalation for higher-risk cases, and leaders who are demonstrably accountable for the effectiveness of their controls.
Technology providers like Armalytix will shape this by providing the data structure and insight firms need to do their job confidently, whilst remaining compliant. Our role is to ensure property professionals can work more effectively, focusing their judgment on risk where it is most needed, rather than wasting time chasing details and stitching together a paper trail.
To learn more, book a demo with one of our team.
