Source of funds and source of wealth are easy to treat as one question, with the same documents filed under both. The FATF does not. Its guidance on politically exposed persons says "'Wealth' and 'funds' are two different concepts" (June 2013, para 86). Both checks usually follow a confirmed match in PEP screening, and the rules in Table 2 ask for them in some other higher risk files too.
Which part of a £900,000 flat purchase is source of funds, and which is source of wealth?
Picture a private banking client, an illustrative one, who sold her stake in a software company last year and now wires £900,000 from the sale to buy a flat in London. The share sale is her source of funds, the event that produced this money. Her source of wealth is the 20 years she spent building the company, which explains how she came to own the shares and the rest of what she has.
The FATF's PEP guidance gives both definitions. Source of wealth "refers to the origin of the PEP's entire body of wealth (i.e., total assets)" (para 87). Source of funds "refers to the origin of the particular funds or other assets which are the subject of the business relationship", such as money invested, deposited or wired (para 88). Source of money is the everyday phrase for the second. On an account application, the "primary source of funds" field asks the same question about the money the account will usually receive, such as a salary or a pension, and the bank reads the answer against the employment status given on the form.
A bank statement showing the transfer only proves where the money sat last. The FATF says source of funds information "should not simply be limited to knowing from which financial institution it may have been transferred", so the file needs the event that produced the money (para 88). Both checks usually sit inside enhanced due diligence, the deeper checks for higher risk customers.
How do source of funds and source of wealth differ, and how do they relate?
Table 1. Source of funds and source of wealth compared (FATF PEP guidance, June 2013).
| Source of funds (SOF) | Source of wealth (SOW) | |
|---|---|---|
| Question | Where did this money come from? | How did the customer build everything they own? |
| Scope, in the FATF's words | "the particular funds or other assets" in the relationship (para 88) | "the PEP's entire body of wealth" (para 87) |
| Time frame | One event: a sale, a salary credit, a payout | Years: a career, a business, an inheritance |
| In the example | The £900,000 from the share sale | 20 years building the company |
| Typical evidence | Sale contract, completion statement, payslips | Company records, tax returns, estate papers |
| Rules that name it | FATF, UK, EU and the US private banking rule | FATF, UK and EU, not the US rule |
The relationship between SOF and SOW is a test of fit, and wealth sets the ceiling. The FATF asks firms to keep the level and type of transactions consistent with what they know of both (para 89). A payment the customer's history cannot explain needs another look, judged by "what can be reasonably explained, rather than on what might be expected" (para 94).
The same test runs after onboarding. Ongoing monitoring compares later payments with the recorded sources, so a client whose wealth came from a salaried career and who starts receiving large transfers from companies abroad can go back for review.
When do compliance rules require source of funds and source of wealth checks?
Table 2. Rules that name source of funds and source of wealth, as of October 2026.
| Rule | What it asks | When it applies | Date |
|---|---|---|---|
| FATF Recommendation 12(c); note to Recommendation 10, para 20 | "reasonable measures to establish the source of wealth and source of funds"; either one among the EDD examples | Foreign PEPs; domestic and international organization PEPs in higher risk relationships; other higher risk customers | Text updated June 2026 |
| UK MLR 2017 reg 35(5)(b) | "adequate measures to establish the source of wealth and source of funds" | PEPs, family members and known close associates; reg 35(3A) starts a domestic PEP at lower risk | 35(3A) since 10 January 2024 |
| UK MLR 2017 reg 33(3A)(c) | Information on both, for the customer and its beneficial owner | A party established in a FATF call for action country | Country wording since 30 June 2026 |
| FCA FG25/3 | Lighter steps for lower risk PEPs, but source of wealth information still sought; more intrusive steps for higher risk | PEPs at firms the FCA supervises | 7 July 2025, revised 15 July 2025 |
| EU AML Regulation Art 42(1)(b), 34(4)(c) | Establish both for PEPs; EDD may include more on both, for customer and beneficial owners | PEPs; higher risk cases | Applies from 10 July 2027 |
| EU AML Regulation Art 34(5)(b) | Additional information on source of funds | Higher risk relationships handling at least EUR 5 million through personalized services for a customer with EUR 50 million or more in assets, private residence excluded | Applies from 10 July 2027 |
| US 31 CFR 1010.620(b)(3) | "Ascertain the source(s) of funds deposited into a private banking account" | Private banking accounts for non US persons with a minimum deposit of $1,000,000 | In force since July 2006 |
The FATF writes standards for countries. The national rules in Table 2 bind financial institutions and other firms, and a supervisor such as the FCA adds guidance on how it expects them applied, so the regulatory considerations differ by country. Recommendation 22 extends the PEP measures to DNFBPs such as real estate agents, lawyers and accountants in set situations.
PEPs trigger both checks because, in the FATF's words, many hold positions that "potentially can be abused" for money laundering and offenses such as corruption. The US rule's enhanced scrutiny for senior foreign political figures is built to detect "proceeds of foreign corruption", yet it asks about funds only. Under the EU regulation, source of funds also belongs to ordinary KYC "where necessary" (Art 25).
What changed in 2025 and 2026.
- 7 July 2025: the FCA published FG25/3, updating its 2017 PEP guidance (FG17/6) after a review published on 18 July 2024; a revised version followed on 15 July 2025.
- 30 June 2026: S.I. 2026/621 changed the country trigger in reg 33(1)(b) to a "FATF call for action country".
- Next, 10 July 2027: the EU AML Regulation applies, and AMLA's guidelines on the EUR 50 million test are due by that date.
What evidence shows source of funds and source of wealth?
For source of funds, the FATF wants information that is "substantive" and that establishes "a provenance or reason for having been acquired" (para 88). The documents below are sorted by the question they answer.
Source of funds:
- Sale contract and completion statement. They show the asset sold, the date and the net sum.
- Payslips matched to salary credits. The employer's name on both ties the money to the job.
- Probate or estate papers. They name the estate and the share paid out.
- A gift letter with the giver's own source of funds. A gift moves the question to the giver.
Source of wealth:
- Company registry records and the sale agreement. They show who owned the business and its price.
- Tax returns over several years. Declared income has to add up to the wealth claimed.
- Inheritance records. A will or estate account dates wealth that came from family.
- Public registers. Property, land, asset disclosure and company registers, plus past transactions for existing customers, are the FATF's own list for checking a declaration (para 93).
A statement from the sending bank is left off for the reason paragraph 88 gives. The FATF also calls it best practice to ask how much wealth a PEP has or controls, and says a failure to disclose it voluntarily could be considered a red flag (para 92).
Each answer then has to count in the customer's rating. In complead, formerly Sanction Scanner, customer risk assessment can take source of funds as a scored factor, with the factors, weights and thresholds the firm sets, and stamps each rating with the model version that produced it.
What if the customer cannot document it?
The common challenge is an old fortune with thin paper. The FATF notes that "there is often an absence of information to help determine the source of wealth". Firms often "must primarily rely on a declaration", and the "inability to verify the information should be taken into account" in weighing it (para 91). The US rule asks for procedures for when due diligence cannot be done, including when to refuse the account, suspend activity, file a suspicious activity report or close it (1010.620(d)). The file records what was declared, what was checked and what stayed open.
To test your own files this week, pull three recent PEP or private banking files. Each should name the event that produced the money, say how the wealth was built and which parts rest on the customer's declaration, and end with a written conclusion.
Related terms
- Enhanced due diligence. Extra checks on a customer who carries higher risk; the two source questions are part of it.
- Ongoing monitoring. Reviewing a customer's activity after onboarding against what the file says.
- Corruption. The abuse of public or entrusted power for private gain, the risk behind PEP checks.
- DNFBP. Lawyers, accountants, real estate agents and other designated non-financial businesses and professions with PEP duties of their own.
- Money laundering. Making the proceeds of crime look lawful.
- Kleptocracy. Government by officials who use their office to steal from the state.
How this entry was checked. Its author is Burçak Aydın, complead's Finance Manager, and Ufuk Gürdaş, Compliance Specialist, reviews it (last reviewed: 28 October 2026). Each rule here was reread on 28 October 2026 in FATF Recommendations 10, 12 and 22 (June 2026 text), the FATF guidance on politically exposed persons (June 2013), regulations 33 and 35 of the UK Money Laundering Regulations 2017 as in force that day, the FCA's FG25/3 (July 2025), Regulation (EU) 2024/1624 and 31 CFR 1010.620 and 1010.605. Both definitions come from paragraphs 87 and 88 of the PEP guidance.
