Source of funds
Source of funds refers to the origin of the specific money or assets used in a particular transaction or to fund a business relationship. For example, this may be the proceeds of a property sale, a business loan, or salary income. Establishing source of funds is a key EDD step where a transaction is large, unusual, or involves a higher-risk client.
asking a client to explain and evidence where the money for a transaction came from is a standard EDD request. Plausible, documented evidence is required. Verbal assurance alone is not sufficient.
Common questions about source of funds
How far back do source of funds checks go?
There is no fixed statutory period. UK firms generally look for evidence covering the accumulation of the funds being used, which commonly means three to six months of bank statements for salary or savings, and the full transaction record for a one-off event such as a property sale, inheritance, or company disposal. The test in MLR 2017 is whether the evidence makes the explanation plausible, not whether it covers a set number of months.
How long does a source of funds check take?
Where the client provides complete documents, a straightforward check is usually completed within a few working days. Delay almost always comes from incomplete evidence rather than review time: missing pages from bank statements, a gift with no donor corroboration, or funds that pass through accounts the client has not disclosed. Requesting the full document set at the outset is the single biggest time saver.
What is the difference between source of funds and source of wealth?
Source of funds is the origin of the specific money used in one transaction, such as the proceeds of a house sale. Source of wealth is the origin of the client's overall net worth, such as a career, a business, or an inheritance. Source of funds is asked routinely; source of wealth is generally assessed for PEPs and other higher-risk clients as part of enhanced due diligence.
What documents prove source of funds?
Common evidence includes bank statements showing the funds accumulating, a signed contract and completion statement for a property sale, a grant of probate and executor correspondence for an inheritance, a mortgage or loan offer letter, dividend vouchers or company accounts, and a gift letter supported by the donor's own evidence. A single document rarely suffices, since the point is to evidence the whole route the money took.
What counts as proof of funds when buying a house?
A conveyancer will generally want to see the money and where it came from: recent bank statements showing the balance and how it accumulated, a mortgage offer for the borrowed portion, a completion statement if the deposit comes from a property sale, a grant of probate for inherited money, and a signed gift letter with the donor's own evidence where a family member is contributing. Statements are usually requested for the last three to six months rather than a single closing balance.
When does a solicitor check proof of funds?
Usually at the point of instruction rather than close to exchange, because the checks can take days and an unexplained deposit is easier to resolve early. Firms often revisit the position if the funding changes, if money arrives from a source that was not disclosed, or if the transaction value moves materially.
How do you prove income when self-employed?
Typically the last two or three years of finalised accounts or SA302 tax calculations with the matching tax year overviews, supported by business and personal bank statements covering the same period. Where trading is recent, firms will look at management accounts alongside contracts or invoices. The aim is the same as for an employed client: to show that the money is consistent with the stated activity.
What if a client cannot evidence their source of funds?
A firm should not proceed on verbal assurance alone. If the explanation cannot be evidenced, the options are to request further documentation, decline or discontinue the relationship under MLR 2017 Regulation 31, and consider whether the circumstances give rise to a suspicion requiring a SAR. Declining is a commercial decision; the SAR consideration is a legal duty and is assessed separately.
How different roles use Source of funds
A good definition should change the next action for the person reading it.
Partner or director
Check whether this term affects acceptance risk, fee scope, supervision exposure, or sign-off responsibility.
ContinueMLRO or compliance lead
Map the term to evidence, escalation, monitoring, training, and inspection readiness.
ContinueClient-facing team member
Use the plain-English explanation to ask better client questions and write clearer file notes.
ContinueOther terms that go with Source of funds
Source of wealth refers to the origin of a client's total net worth or assets. For example, it may have been built through a business, inheritance, investments, or professional career. Source of wealth is a broader concept than source of funds and is typically assessed for PEPs and other higher-risk clients as part of Enhanced Due Diligence.
Enhanced Due Diligence is a more thorough level of client verification required when a relationship presents a higher risk of money laundering or terrorist financing. EDD steps typically include verifying the source of funds, establishing source of wealth, obtaining senior management approval before onboarding, and applying more frequent ongoing monitoring.
Before you treat Source of funds as handled
- Confirm which regulation, policy, or internal procedure the term maps to.
- Document the decision or evidence trail in the client file, not only in email or chat.
- Escalate where the term indicates higher risk, sanctions exposure, PEP status, suspicion, or missing evidence.
- Keep the wording consistent across onboarding, review notes, training material, and inspection packs.
Put Source of funds into practice with Certivus
Knowing the term is the first step. Certivus gives you the workflows, client intake, CDD, EDD, PEP and sanctions screening, and audit-ready records to apply it across every client.
Back to the full glossary