Financial crime is becoming critical. Entrepreneurs have to protect themselves and their businesses, which are not falling into the crime. Then we have to implement an array of Know Your Customer (KYC) measures. Hence, 2 questions must be asked, which are source of funds and source of wealth.
What is Source of Funds (SoF)?
SoF refers to the origin of the money being used in a particular transaction or series of transactions. This is an important consideration in the context of business relationships and one-time transactions, as it helps to ensure that the funds being used are legally obtained and not the result of illegal activity. Understanding the source of funds is also important for compliance purposes, as it helps to ensure that a company or individual is not handling or facilitating the movement of illicit funds.
What is Source of Wealth (SoW)?
SoW refers to the origin of a client’s entire financial assets. This includes the economic, business, and/or commercial activities that significantly contributed to the client’s overall net worth or total assets. In order to understand the source of wealth, it is important to consider how and why an individual has acquired their overall assets, as well as how they were generated or accumulated. This information can be obtained by reviewing relevant documentation and evaluating the client’s financial history. By understanding the source of wealth, it is possible to get a clearer picture of a client’s financial situation and make informed decisions about potential business relationships or transactions.
What is the difference between SoF and SoW?
SoF focuses on understanding how and where the client obtained the money for a particular transaction. While SoW examines the client’s overall financial position and how they have accrued their total wealth. Thus, both are separate from one another and should be treated as such. In higher risk circumstances, it is crucial to gather evidence for both Source of Funds and Source of Wealth. This helps to ensure that the evidence collected for one transaction is not reused to fund another, and that all transactions are thoroughly investigated and well-documented.
Why Bank approach you regularly?
As bank is one of the financial institutions, it is the obligation to take all the reasonable measures for example updating your information. So, the bank requires implementing KYC to understand you and your business activities. In order to ensure that proper safeguards exist to mitigate the risks of money laundry and terrorist funding.
For further information, please contact us.
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