Source of Wealth

Definition

Source of Wealth (SoW) describes how an individual or entity acquired their total wealth, not just the funds for a specific transaction. It may include income from employment or business, investment gains, inheritance, or the sale of assets.
SoW is distinct from Source of Funds, which focuses only on the origin of money used in a specific transaction.

Why it matters

SoW checks allow regulated firms to assess whether a client’s wealth is commensurate with their known profile and to identify potential financial crime risks.

Under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, SoW is often required for high-risk clients, including politically exposed persons (PEPs), or for large and complex transactions.

How Source of Wealth checks work

1. Information gathering – Ask the client to explain how they acquired their wealth.
2. Evidence provision – Request supporting documents, such as tax returns, payslips, business sale agreements, or investment portfolio statements.
3. Verification – Cross-check details against independent and reliable sources.
4. Risk assessment – Determine if the wealth origin is plausible and consistent with the client’s profile.
5. Ongoing review – For ongoing relationships, update SoW information periodically, especially if risk factors change.

Examples and use cases

• Inheritance – Documenting probate records and asset transfers.
• Business ownership – Evidence of shareholdings, dividends, or sale proceeds.
• Investments – Demonstrating capital gains or long-term portfolio growth.
• Employment income – Verifying senior roles and remuneration history.

Mini-FAQ

Q: How is Source of Wealth different from Source of Funds?
A: SoW is about the origin of a person’s overall wealth, while SoF relates to the money used in a specific transaction.

Q: Is SoW always required?
A: It is generally mandatory for regulated entities, high-risk clients or large transactions, but many firms choose to collect it as part of enhanced due diligence.