Source of Funds (SoF) refers to the origin of the specific money being used in a particular transaction or to fund a business relationship — for example, the proceeds of a recent property sale, a salary payment, or an inheritance. Source of Wealth (SoW), by contrast, is a broader concept referring to the totality of how a customer has accumulated their overall wealth over their lifetime — for example, through a business they built, investments, or an inheritance. Both are important tools for assessing whether a customer’s financial activity makes sense in light of what is known about them (KYC).
Law requires obliged entities to obtain information on source of funds and, in higher-risk situations (particularly for PEPs and EDD cases), source of wealth. Where an obliged entity cannot obtain a satisfactory explanation, it may be required to refuse the transaction or file a SAR.
