Source of Wealth and Source of Funds

Source of wealth (SoW) and source of funds (SoF) answer different questions. They should not be treated as interchangeable labels or as a request for a random financial document.

• Source of wealth explains how a person accumulated their overall wealth.
• Source of funds explains where the specific money or assets used in a relationship, transaction or investment came from.

A strong review defines the question first, collects proportionate evidence, tests whether the explanation is plausible and records what remains uncertain.

1. SoW and SoF are related but different#

A customer may have a credible source of wealth but still be unable to explain a particular source of funds. The reverse is also possible: a single payment may be traceable even though the wider wealth picture remains incomplete.

2. When the review may be triggered#

Triggers should be defined by local requirements and internal policy. Common risk-based triggers include:

• PEP or other higher-risk relationship;
• unusually large or complex transaction;
• wealth, income or activity inconsistent with the known profile;
• funding from an unexpected person, entity, account, wallet or jurisdiction;
• material change in ownership, control, occupation or expected activity;
• high-value property, investment, luxury-asset or private-wealth transaction;
• use of trusts, nominees, layered companies or unexplained intermediaries;
• adverse information relating to corruption, fraud, tax crime or other predicate offences;
• unresolved discrepancies during CDD, EDD or ongoing monitoring.

A trigger is not a conclusion of wrongdoing. It means that the existing explanation is insufficient for the level of risk.

3. Define the evidence question before requesting documents#

Poor requests ask for “proof of funds” without defining what must be proved. A better review records:

1. the amount or wealth component being assessed;
2. the claimed origin;
3. the relevant period;
4. the persons, entities, accounts or wallets involved;
5. the expected evidence chain;
6. the material risk or discrepancy that caused the request.

Example:

Question:
Explain and evidence the origin of USD 450,000 used for the property purchase.

Claimed source:
Proceeds from the sale of shares in a privately held company.

Expected evidence chain:
Ownership of shares → sale agreement → completion/payment record
→ receipt into an account controlled by the customer
→ transfer used for the purchase.

4. Evidence hierarchy#

Evidence strength depends on authenticity, independence, relevance, currency and continuity. No single document is automatically decisive.

A high account balance proves possession, not origin. A sale agreement may show a contractual explanation but not receipt of the proceeds. A tax return may support income but not necessarily the funding route for a specific transaction.

5. Evidence by common source type#

Employment and professional income#

Possible evidence:

• employment contract and role history;
• payroll records or bank credits;
• tax filings where lawfully available;
• bonus, partnership or carried-interest documentation.

Review whether the period, remuneration and accumulated savings reasonably support the claimed wealth or funds.

Business ownership and dividends#

Possible evidence:

• corporate registry and beneficial ownership records;
• audited or reliable financial statements;
• shareholding history;
• dividend resolutions and payment records;
• sale or exit documentation.

Distinguish company revenue from the customer's personal wealth. Control of a company does not by itself prove personal entitlement to its assets.

Investments#

Possible evidence:

• regulated broker or custodian statements;
• purchase and disposal history;
• dividend or interest records;
• redemption and bank receipt records.

Review whether the investment history predates the current transaction and whether the realised amount is consistent with the claimed proceeds.

Property sale#

Possible evidence:

• ownership record;
• sale and purchase agreement;
• completion statement;
• tax or registration record;
• receipt of proceeds and onward transfer.

A valuation is not evidence that a sale occurred or that funds were received.

Inheritance or gift#

Possible evidence:

• probate, will, estate or succession documentation;
• donor identity and relationship;
• donor SoW where proportionate;
• gift agreement and transfer record;
• tax or legal records where relevant.

A gift moves the SoF question upstream: the donor's ability to make the gift may need to be understood.

Loan#

Possible evidence:

• executed loan agreement;
• lender identity and authority;
• commercial purpose and repayment terms;
• disbursement record;
• lender SoF where risk requires it.

A document labelled “loan” should not end the review if the lender, economics or repayment logic is unclear.

Crypto-related wealth or funds#

Possible evidence may include:

• records from regulated exchanges or custodians;
• acquisition and disposal history;
• wallet addresses and transaction references;
• fiat funding and withdrawal records;
• tax or accounting records where available.

Blockchain visibility does not automatically identify the beneficial owner or establish a lawful origin. Attribution confidence and gaps should be recorded.

6. Plausibility assessment#

The analyst should test the whole explanation rather than merely confirm that documents exist.

The conclusion should be proportionate. “Plausible but partially evidenced” is different from “verified”, and both are different from “contradicted”.

7. Contradictions and warning signs#

Examples requiring clarification or escalation include:

• declared occupation or business history cannot support the claimed scale of wealth;
• transaction proceeds appear before the claimed sale or event;
• the customer did not own the asset said to have generated the funds;
• material gaps exist between receipt and onward payment;
• funds come from an unrelated third party without a credible explanation;
• documents use inconsistent names, dates, amounts or counterparties;
• the explanation changes after evidence is requested;
• complex structures or intermediaries have no clear role;
• evidence is repeatedly partial, altered or unverifiable;
• the source appears connected to sanctioned, criminal or materially adverse exposure.

These are review signals, not automatic findings of money laundering.

8. Decision matrix#

9. SoW/SoF review note#

Customer / subject:
Review trigger:
SoW question:
SoF question:
Customer explanation:
Amount and relevant period:
Evidence reviewed:
Verified facts:
Corroborated but limited facts:
Unsupported statements:
Contradictions:
Plausibility assessment:
Residual risk:
Recommended control or escalation:
Reviewer / decision owner:

The note should separate evidence from inference and should not claim that funds are “clean”. It records whether the explanation and evidence meet the applicable review standard.

10. Canonical use in AML Bible#

This is the canonical SoW/SoF methodology page. Other pages should use short context-specific references rather than repeat the full evidence framework.

• Enhanced Due Diligence explains when deeper review may be required.
• PEP explains the PEP risk context.
• Evidence Pack Templates provides file and output structures.
• Crypto / VASP AML covers virtual-asset evidence limitations.
• Real Estate, Luxury Assets & Art Risk applies the method to high-value assets.

Source basis#

• FATF Recommendations and risk-based guidance for CDD, EDD, beneficial ownership, recordkeeping and higher-risk relationships.
• Wolfsberg guidance and practitioner materials on SoW/SoF review.
• Applicable jurisdiction overlays and institution policy for mandatory triggers and approval authority.