Source of Funds vs Source of Wealth: How to Verify Both
SoF and SoW are where most EDD files fall apart at exam. Here's how to verify them properly and package the result.
Source of Funds (SoF) and Source of Wealth (SoW) are central to Enhanced Due Diligence. They are also the two areas examiners scrutinize hardest — because they are the easiest to mishandle.
This guide explains how to verify both, what evidence to collect, the red flags to look for and how to package a file that survives exam without follow-up.
Definitions and Why They Are Different
Source of Funds is about the specific money in this transaction or account. Source of Wealth is about how the customer became wealthy overall. Both are required for high-risk relationships; documenting only one is a common exam finding.
Evidence Matrix by Source
Salary → recent payslips, employment contract, bank deposits. Business sale → SPA, accountant letter, bank receipt. Inheritance → grant of probate, will extract, executor statement. Investment gains → broker statements, tax returns. Property sale → deed, escrow closing statement, bank receipt. Each source has a documentary trail that should reconcile to the claimed amount.
Red Flags
Round-number cash deposits, unexplained jumps in wealth, documents from sanctioned jurisdictions, refusal to provide supporting evidence, reluctance to identify counterparties. Any of these escalate the file.
Writing the SoF/SoW Narrative
The narrative is a structured explanation that ties claimed sources to documentary evidence with amounts, dates and reconciliations. It should let an external examiner follow the money without contacting your team. Use plain language; cite each exhibit.
When to Decline
Decline when evidence is contradictory, when the customer refuses reasonable requests, when sources cannot be reconciled to the claimed wealth, or when the source involves sanctioned or criminal activity. Document the decision.
Packaging the File
Cover memo, SoF narrative, SoW narrative, evidence index, exhibits, senior-officer approval, ongoing-monitoring plan. A file that follows this structure passes most exams without follow-up.
Key Takeaways
- SoF and SoW are different — document both for EDD relationships.
- Every claimed source needs a documentary trail that reconciles.
- Write a narrative an external examiner can follow unaided.
- Decline when evidence is contradictory — document the reason.
Related Verification Services
Investigate and document wealth origin.
Document legitimate income sources.
In-depth investigation for high-risk customers.
Identify domestic and foreign PEPs.
Frequently Asked Questions
Do I need SoF for every customer?
No — only for relationships triggered into EDD. Standard customers do not require SoF or SoW documentation.
How much evidence is enough?
Enough to reconcile claimed amounts to documented sources. Examiners want to follow the money, not collect paper for its own sake.
Can the customer write their own narrative?
They can provide a statement, but the analyst must independently assess and document the conclusion.
Need SoF/SoW that survives exam?
Our analysts build full evidence-backed SoF and SoW packages with senior-officer-ready narratives in 24 hours.