The phrases "source of funds" and "source of wealth" appear in almost every EDD checklist published by accountancy supervisors, and they are treated by most onboarding teams as interchangeable. They are not. The distinction is precise, the evidence required is different, and supervision reviewers test it specifically when sampling EDD files.
Definitions, drawn from the FATF lexicon
Source of funds (SoF) refers to the origin of the specific funds that are about to flow through, or be settled in the context of, the business relationship. If the engagement involves the firm handling a £500,000 deposit on a property purchase, SoF is "where did that £500,000 come from this week?"
Source of wealth (SoW) is broader. It refers to the origin of the client's overall net worth - how the individual or entity accumulated their wealth over time. SoW is "how did this client end up with £8 million of assets in total?" SoF is a snapshot. SoW is the life history.
Why supervisors care about the difference
A client can have a perfectly explicable source of funds (a recent property sale, a dividend from a long-held company) while their underlying source of wealth is opaque or implausible. Equally, a client with verifiable wealth from a 30-year career may still be moving funds through a current transaction that does not align with that history.
Asking only about SoF misses laundering risks where dirty money has been pre-cleaned through one or two layers; asking only about SoW misses transactional anomalies in real time. The MLR 2017 EDD provisions and the JMLSG guidance both expect firms to consider both - and to document both - on higher-risk relationships.
What good SoF evidence looks like
SoF evidence is transactional and recent. Bank statements showing the inbound funds, accompanied by the originating documentation: a sale contract and completion statement for a property sale, a dividend voucher and corresponding company accounts, a probate grant for an inheritance, a loan agreement with the lender named.
A client saying "it came from the sale of my old house" is a claim, not evidence. The completion statement from the conveyancer is evidence. Train onboarding teams to ask for the originating document, not just the bank statement showing the credit.
What good SoW evidence looks like
SoW evidence is narrative and historical. A signed and dated written explanation from the client of how their net worth was built, corroborated by independent documents: tax returns, employer letters, business sale documents, audited company accounts going back several years, inherited estate accounts, public sources such as press coverage or Companies House filings for long-held shareholdings.
For a PEP, SoW should reach back across the period in which their wealth was accumulated, including any period in which they held public office. A two-line statement that says "wealth derived from my law firm" is inadequate for a high-risk client.
When you need both, and when one is enough
Standard CDD does not require formal SoF or SoW documentation as a default. The obligation kicks in under EDD - for PEPs, for high-risk third-country relationships, for complex or unusually large transactions, and where the firm has otherwise rated the relationship high risk.
Where EDD applies and the engagement involves the firm in a specific transaction, both should be evidenced. Where the engagement is purely advisory and there is no transaction flowing through the firm, SoW may be sufficient on its own. Document the decision either way.
Recording it without drowning in PDFs
One of the practical reasons SoF and SoW evidence ends up incomplete is filing chaos. The completion statement lives in an email attachment, the bank statement is in the shared drive, the narrative is in a Word document on a partner's laptop. At supervision time, nobody can assemble the file in a single view.
Holding SoF and SoW evidence against the client profile in the practice management system, with date-stamped uploads and review notes, dramatically reduces this risk. Accupe's client profile lets the MLRO see the full EDD evidence stack alongside the risk rating, document expiry tracking, and ongoing monitoring history.
The tipping-off trap
When asking probing SoF or SoW questions, staff must stay on the right side of the tipping-off offence under section 333A of the Proceeds of Crime Act 2002. You can ask reasonable due diligence questions; you cannot tell a client that an internal report has been made or that they are under suspicion. Train staff to frame requests as standard regulatory due diligence, not as accusations.
Closing
The SoF/SoW distinction is small enough to fit on an index card and important enough that fee-earners should know it cold. The next time a supervisor samples an EDD file at your firm, the question they will ask is some variant of "show me the evidence of source of funds and, separately, source of wealth." Make sure your team can produce both, on every high-risk file, without scrambling.