![]() ![]() ![]() It is not just about collecting documents you should consider what you have been given e.g.Source of Funds should be evidenced in line with risk grading (and may have an effect on your risk grading!).Where risks are assessed as higher, actions might also include more investigation to confirm the source of any gifted funds and/or evidence of employment, though there may also be reasons particular to any transaction (low, medium or high risk) where further investigation or evidence should be sought. what account they are coming from and is that in the name of the client. You may already be obtaining bank statements to show the client’s possession of the funds in question, and you should continue to do this on the understanding that these statements are also intended to evidence possession and transit of the funds i.e. This includes the remitting account details, but also an understanding of the activity that generated those specific funds, for example savings from employment or inheritance. Thus, Source of Funds means establishing the provenance of the particular funds for use in a transaction. The question you are seeking to answer should not simply be, “where did the money for the transaction come from,” but also “how and from where did the client get the money for this transaction or business relationship. It is not enough to know the money came from a UK bank account." "Source of Funds refers to the funds that are being used to fund the specific transaction in hand – i.e., the origin of the funds used for the transactions or activities that occur within the business relationship or occasional transaction. should also apply a source of wealth check in other applications of EDD on a risk-based approach.should also consider doing so as a part of ongoing monitoring of any business relationship (whether high risk or otherwise). ![]() must take adequate measures to check SoF and SoW, as a part of Enhanced Due Diligence (EDD) when applied to Politically Exposed Persons (PEPs).The financial circumstances of a client can broadly be categorised into Source of Funds (SoF), and Source of Wealth (SoW). This includes their financial position and making an assessment as to whether the legal services provided to the client are in keeping with your understanding of that background and circumstances. Why are Source of Wealth and Source of Funds considerations so important?Ī fundamental element of client due diligence is understanding the nature, background and circumstances of the client. I have summarised the key points below and these can also be found, along with examples and summary tables, in the AML FAQ section on our website. In my experience, the legal profession often finds Source of Funds/Source of Wealth checking challenging, complex and difficult to apply in practice. It was on this knowledge that the Legal Sector Affinity Group (LSAG) sought to significantly expand guidance in this crucial area, giving both definitions, the circumstances when such checking must or should apply, and what evidence should be documented. In the third and final blog of our series examining the new anti-money laundering (AML) guidance from the Legal Sector Affinity Group, our Head of AML Graham MacKenzie explores an issue at the heart of effective anti-money laundering control – Source of Funds and Source of Wealth. ![]()
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