What is source of wealth?
Source of wealth is how a client built up their total wealth over time: for example salary, a business, an inheritance or investments. UK firms must take adequate measures to establish it for politically exposed persons and clients linked to FATF call for action countries, and for other high-risk clients where the risk calls for it.
It is different from source of funds, which is where the money for this particular transaction comes from.
Source of wealth vs source of funds
| Source of wealth | Source of funds | |
|---|---|---|
| Question | How did the client become as wealthy as they are? | Where does the money for this deal come from? |
| Scope | The client’s whole financial position over time | One payment or transaction |
| Example | Twenty years as a dentist plus the sale of a practice | A deposit paid from a savings account, topped up by a gift |
| When required | PEPs, FATF call for action links and other EDD cases where the risk calls for it | Often as part of ongoing monitoring; always for PEPs and call for action links |
For a full comparison with evidence examples, read our guide source of funds vs source of wealth.
The UK rules
- PEPs: you must “take adequate measures to establish the source of wealth and source of funds which are involved in the proposed business relationship” (or transactions) for a PEP, family member or known close associate (MLR reg 35(5)(b)).
- FATF call for action countries: EDD must include information on the source of funds and source of wealth (MLR reg 33(3A)).
- Other high-risk cases: source of wealth is one of the measures you can use under reg 33(5), where your risk assessment calls for it.
- Ongoing monitoring: reg 28(11)(a) requires scrutiny of transactions, including source of funds where necessary. Source of wealth helps you judge whether those funds make sense.
Sources: MLR regulation 35; MLR regulation 33.
What a small firm should do
- Ask an open question: “How did you build up the money you have today?” Record the answer.
- Check it is plausible for the client’s age, job and history, using what you already know and public information.
- Get evidence in proportion to the risk: payslips or accounts, company sale documents, a grant of probate, investment statements or tax returns.
- Look for gaps: wealth that does not fit the story, or comes from a high-risk country or a cash-intensive business.
- Record your conclusion in the client risk assessment, and keep it for 5 years after the relationship ends (MLR reg 40).
The enhanced due diligence checklist sets out what to collect for each trigger.
Frequently asked questions
Do I need source of wealth for every client?
No. It is required for PEPs and their family and close associates, and for clients linked to FATF call for action countries. For other clients, collect it when your risk assessment says the case is high risk.
What counts as evidence of source of wealth?
Documents that support the client’s explanation, scaled to the risk: for example employment or business records, accounts, the sale of a property or business, an inheritance, or long-term investment statements.
Is source of wealth the same as proof of funds?
No. Proof of funds shows that money is available now, for example a bank statement. Source of wealth explains how the client came to have it.
How AML Buddy helps
AML Buddy does not collect or assess source of wealth. It gives you a verified starting point: identity, address, sanctions, PEP and adverse media checks through one secure link, so you know whether a client is a possible PEP before you start asking about their wealth. See pricing.
Go deeper: read source of funds vs source of wealth: what UK firms must check.