Source of wealth
SoWAlso called origin of wealth
Source of wealth is how a customer built up their total net worth over time. It covers activities such as employment income, selling a business, inheritance or investment returns. Firms establish it to judge whether a customer's overall assets are plausible and legitimate, which is wider than checking a single payment.
How it works
The firm asks the customer for a narrative of how their wealth was created, then corroborates the key parts. Evidence can include tax returns, company sale documents, probate records, audited accounts or public sources such as company registries. The analyst checks that the claimed history explains the size of the assets.
Source of wealth is central to enhanced due diligence, especially for politically exposed persons and private banking clients. It helps a firm spot wealth that may come from corruption, fraud or tax evasion. Supervisors expect the depth of evidence to match the risk, and reviews often find files where the narrative was recorded but never tested.
The rules
Requires adequate measures to establish source of wealth and source of funds for PEPs, their family members and known close associates.
Banks, payment firms, cryptoasset firms and other relevant personsArticles 34(4) and 42 list source of wealth checks among enhanced due diligence measures and require them for politically exposed persons.
Credit and financial institutions and other obliged entities in the EUSets the international standard on politically exposed persons, which UK and EU rules on source of wealth and source of funds put into effect.
Countries, which apply them to regulated firms through national lawCommon questions
Why is source of wealth important for PEPs?
Politically exposed persons have more opportunity to receive bribes or misuse public funds. Establishing how a PEP built their assets helps a firm judge whether those assets fit their known income and career, which is why AML rules require it.
Do firms need documents for every part of a customer's wealth?
No. Firms apply a risk-based approach. They usually corroborate the main sources and the largest components, and use public information where it is reliable. Higher-risk customers face deeper checks and more independent evidence.
How does source of wealth differ from net worth?
Net worth is the total value of a customer's assets less debts. Source of wealth explains how that total was created. A firm can know a client's net worth and still need to understand the activities that produced it.
