Source of Wealth (SoW)
Source of Wealth refers to the origin of a client’s entire body of assets and financial resources, describing how they acquired their total funds and property over time. Proofs for Source of Wealth can include inheritance, investments, one’s salary, or business activities. Verifying one’s Source of Wealth is a key component of anti-money laundering (AML) regulations as it ensures that their wealth has been legitimately acquired.
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SoW
Examples
A high-net-worth individual (HNWI) send in an application to a private bank to open a new account. Wanting to ensure that the customer’s wealth is legitimate, the private bank requests proof of the source of wealth. The person therefore sends a letter confirming inheritance from a family estate and a recent financial statement that details the sale of their business.
The bank verifies these documents by cross-checking them with public records, credit reports, and third-party KYC databases. Having confirmed the source of wealth as legitimate and conducting the KYC process, the bank assigns them a medium risk level and approves the creation of their account.
FAQ
What is the difference between Source of Wealth and Source of Funds?
SoW describes the origin of a client's total assets, while SoF refers to the specific funds being used in a transaction.
What documents can be used to establish SoW?
SoW can be supported by tax returns, payslips, audited accounts, property deeds, inheritance documents, share transaction reports, etc.
When is SoW information required vs. nice to have?
SoW is required for high-risk clients like PEPs and should be established whenever a client's wealth doesn't match their profile.
