Source of Funds (SoF)
In contrast to source of wealth, source of funds refers specifically to the origin of the money or assets used in a particular transaction or business relationship.
-
-
SoF
Examples
A person wants to buy a new house and wires €50,000 for the deposit. This triggers the bank’s transaction monitoring system and the person is prompted to provide the Source of Funds. This is done to ensure that these €50,000 weren’t laundered or otherwise obtained illegally.
As the Source of Funds, the person sends a copy of a sale agreement for a property they recently sold. Said property was valued at more than €50,000, therefore, the bank can assume that the funds are legitimate.
FAQ
In what situations is SoF information required?
SoF should be documented for large, complex or unusual transactions, as well as for high-risk clients.
What documents can be used to verify SoF?
SoF can be evidenced through bank statements, sale agreements, loan documents, payslips, invoices, or receipts.
How does SoF tie into AML transaction monitoring?
Understanding expected SoF helps banks spot deviations in transaction monitoring that could indicate money laundering.
