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Source of Funds vs Source of Wealth (2025 Guide) – Simple & Clear Explanation
Source of Funds (SoF) and Source of Wealth (SoW) are two of the most important concepts in KYC, EDD, and AML. Many professionals confuse these terms — but they are completely different and used for different risk checks.
This simple 2025 guide explains the difference, examples, documentation, red flags, and how banks, fintechs, and crypto firms verify SoF and SoW.
In one line:
Source of Funds = Where the money for a specific transaction came from.
Source of Wealth = How the customer built their overall financial wealth over time.
What Is Source of Funds (SoF)?
Source of Funds explains the origin of the money used in a specific transaction, activity, or account funding.
Examples of Source of Funds:
- Salary credited into the bank
- Invoice payment for a business
- Sale of a car or property
- Loan disbursement
- Tax refund
- Transfer from another personal account
- Investment withdrawal
What Is Source of Wealth (SoW)?
Source of Wealth explains how the customer built their total wealth over their life — not just one transaction.
Examples of Source of Wealth:
- Lifetime employment income
- Long-term profitable business ownership
- Real estate portfolio
- Inheritance or family wealth
- Investment growth over years
- Sale of long-term assets
- Founders/entrepreneurs earning through company exits
Key Differences Between Source of Funds and Source of Wealth
| Criteria | Source of Funds (SoF) | Source of Wealth (SoW) |
|---|---|---|
| Meaning | Where this specific money came from | How the customer built total wealth |
| Time focus | Recent or current transaction | Many years/entire life |
| Use case | KYC/CDD checks for transactions | EDD, wealth reviews, high-risk clients |
| Document proof | Pay slips, invoices, bank statements | Tax returns, asset records, financial history |
What Documentation Is Needed for SoF?
- Bank statements showing incoming funds
- Salary slips
- Business invoices & receipts
- Sale/purchase agreements
- Loan approval & disbursement letters
What Documentation Is Needed for SoW?
- Tax returns over multiple years
- Employment history
- Business ownership documents
- Investment portfolio statements
- Real estate ownership papers
- Inheritance documents (if applicable)
Red Flags in SoF and SoW (2025)
- Large unexplained deposits
- Mismatch between declared income and actual wealth
- Use of shell companies
- Cash-intensive businesses with no documents
- Political exposure (PEP)
- Links to adverse media
- Offshore accounts used without justification
Frequently Asked Questions (FAQ)
Is Source of Funds needed for every customer?
Yes — SoF is checked whenever money enters the account or a major transaction occurs.
Is Source of Wealth only for high-risk clients?
Mostly yes — SoW is required for EDD cases, PEPs, high-value accounts, and wealth management clients.
What if documents don’t match the customer’s story?
Escalate to AML team — mismatch is a major red flag in 2025.
Want Real-World Training in SoF & SoW Analysis?
Learn practical SoF/SoW assessment, EDD, risk review, and documentation techniques inside the GO-AKS KYC Certification and G-CAMO / G-CAMI AML programs.
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