What is source of funds?
Source of funds is the specific origin of the money being used in a transaction — the actual account and the activity that generated it. It differs from source of wealth, which explains how the client's overall assets were accumulated. For property purchases, source of funds must be evidenced, not merely stated by the client.
Written by Andréas Hobbelin · Last updated
Source of funds vs source of wealth
Source of funds answers: where is this specific payment coming from? Source of wealth answers: how did this person become wealthy in the first place? A client may have a clear source of funds (a bank transfer from their own account) while their source of wealth remains unexplained — which is precisely the gap that higher-risk cases require you to close.
Acceptable evidence
Evidence should be independent, recent, and consistent with the client's declared profile:
- Bank statements showing the accumulation and the account from which funds will be sent.
- Sale of another property — deed of sale and the corresponding bank credit.
- Employment income — payslips, employment contract, tax returns.
- Business income — audited accounts, dividend records, corporate resolutions.
- Inheritance — grant of probate, notarial deed, executor correspondence.
- Gift — a signed gift letter plus evidence of the donor's own source of funds.
- Investments — broker or custodian statements showing disposal and settlement.
Proportionality
Standard-risk cases do not require a forensic reconstruction. What is required is a coherent, evidenced explanation that matches the amount and the client's profile. Enhanced cases require deeper corroboration, and any inconsistency between the declared story and the documents must be explored and the resolution recorded.
Common failures
The most frequent findings are: accepting a client's verbal explanation with no supporting document; collecting a statement that shows a balance but not its origin; and failing to explain a third-party payer — money arriving from an account that is not the client's is one of the strongest single risk indicators in property transactions.
Frequently asked questions
Is source of funds always required?
Due diligence on the origin of funds is expected in property transactions; the depth of evidence scales with the assessed risk.
What if funds come from a third party?
You must identify the third party, understand the relationship and the reason, and obtain evidence of their source of funds as well. Unexplained third-party payments should not be accepted.
Sources and further reading
Put this into practice
PropComply structures KYC/CDD once per client and shares it securely with the parties in the transaction — each keeping their own independent decision.
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