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Understanding Source of Wealth: Navigating KYC, AML, and EDD in Financial Transactions

Contents

Businesses often need to verify where your funds are coming from before proceeding with a
transaction, whether it involves inheritance, property sale, or startup investment. It’s crucial to provide
evidence of your Source of Wealth (SoW).

What is Source of Wealth? Proof of Source of Wealth (SoW) explains the origins of your wealth and how
you acquired it. Examples of Source of Wealth may include:

  • Employment
  • Inheritance
  • Investments
  • Ownership of a business.
    Demanding proof of SoW is part of Know Your Customer (KYC) measures, addressing money laundering
    risks, and providing a comprehensive picture of your background.
    Difference Between Source of Wealth and Source of Funds Source of Funds (SoF) is the origin of funds
    or assets used in a specific business transaction between you and a financial institution, while Source of
    Wealth (S0W) looks at the total assets of parties participating in the transaction.
    While SoF checks are easier, they still require obtaining substantive, relevant information to establish
    the origin of your funds and the circumstances in which they were acquired. Examples of SoF can include
    complete tax returns, audited financial statements, or proof of investment/securities accounts.
    Source of Wealth in KYC and AML SoW checks are essential procedures in Enhanced Due Diligence
    (EDD) under AML regulations. Companies follow a risk-based approach when establishing requirements
    for proof of Source of Wealth, applying reasonable measures based on your money laundering and
    terrorist financing risks.
    Three Steps to Establishing Proof of SoW:
  1. Obtain information on net worth: Indicate your net worth through relevant documents, and it’s
    not necessary to provide the exact amount—an approximation may be sufficient.
  2. Obtain information on where the net worth came from: Determine your Source of Wealth,
    whether it’s inheritance, employment, business, investment, or profits generated from
    legitimate business and commercial activities. The level of detail should align with your risk
    profile.
  3. Verify the information on a risk-sensitive basis: Companies must obtain proof of wealth
    documents from reliable, independent sources confirming how your wealth was generated.
    SoW can be established through a combination of sources like publicly-available property
    registers, past transactions, internet searches, and more.
    If you’re a Politically Exposed Person (PEP), please kindly indicate it in the questionnaire form.
    Source of Wealth Examples: SoW can be established through a combination of sources you provide,
    such as:
  • Inheritance of a family fortune: Details of the deceased, relationship with you, date of death,
    received amount, and relevant documents.
  • Employment: Nature of your employer’s business, employer’s name and address, annual salary
    and bonuses, recent payslip, confirmation from the employer of annual salary, and latest
    accounts or tax declaration if self-employed.
  • Business gain from a company sale: Copy of the contract of sale, internet research of Company
    Registry, company’s name and address, total sales price, your share participation, nature of the
    business, sale date, and receipt of funds, along with media coverage.