Understanding Source of Funds and Source of Wealth

Source of Funds is the origin of the money used in a specific transaction or investment, such as salary, the proceeds of a property sale, dividends or a loan. Source of Wealth is the history of how a customer built their overall wealth, through business ownership, savings, investments, property or inheritance.

The paper uses a simple example. A client who built a successful business over many years has that business as their Source of Wealth. When they later sell a property and invest the proceeds, the sale proceeds are the Source of Funds for that investment.

It goes on to cover the triggers that usually lead an institution to ask for more evidence, including large deposits outside a customer’s normal pattern, third-party funding, unclear ownership structures, and a mismatch between apparent wealth and known income. It sets out the documents institutions typically request to verify each, and makes the point that the level of review should stay proportionate to the risk and the legal requirements that apply.

Written by Raymond Cheong and Hubert W. E. Knapp. Published in cooperation with AML & Digital Finance Review.