Source of Funds
How and where the customer obtained funds for a specific transaction.
Verification
Source of Funds & Wealth. Verification Requirements
AUSTRAC guidance on source of funds and source of wealth verification. Learn how to collect and verify customer fund origins.
Understanding source of funds
According to AUSTRAC, understanding where your customers obtain their funds and wealth is an essential component of your know your customer (KYC) and enhanced customer due diligence requirements.
You must identify the source of funds and source of wealth for certain high-risk customers and higher-risk transactions, or when the customer or their beneficial owner is a foreign PEP.
Key concepts
Source of Wealth
Where the customer's entire body of wealth and assets came from.
Risk-Based Approach
Higher-risk customers require more verification.
Ongoing Updates
Source of wealth may change and should be monitored.
When to Verify Source of Funds
Mandatory Verification
- • Foreign politically exposed persons (PEPs)
- • Beneficial owners who are foreign PEPs
- • Customers assessed as high ML/TF risk
Risk-Based Verification
- • High-risk jurisdictions with corruption
- • Shell companies or complex structures
- • Unusually large cash transactions
- • High-net-worth with unclear income
Information Sources
✓
Information collected during initial or ongoing CDD
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Asking the customer or requesting a formal declaration
✓
Secondary sources like internet searches and media reporting
✓
Published lists and commercial databases
Frequently asked questions
What is source of funds?
According to AUSTRAC, source of funds refers to how and where the customer obtained the funds for a specific transaction — not where they transferred from, but the underlying source like salary, business income, or investments.
What is source of wealth?
Source of wealth refers to where the customer's entire body of wealth came from — the economic, business, or commercial activities that generated their overall net worth.
When must I verify source of funds?
You must establish source of funds and wealth for foreign PEPs, high-risk customers, unusual large cash transactions, and when customer activity is inconsistent with their profile.
What are examples of source of funds?
Examples include salary and wages, business income, sale of property, inheritance, gifts, investment returns, loan proceeds, and government benefits.
Related resources
Verify source of funds
ARCaml helps you collect and verify customer source of funds efficiently.