Source of Funds (SoF) definition and meaning | AML glossary
Source of Funds (SoF) definition: What it means in AML compliance.
Source of Funds (SoF) refers to the origin of money used in a specific transaction or business relationship. Verifying the Source of Funds is a critical part of Anti-Money Laundering (AML) compliance, ensuring that the money involved in financial activities is not derived from criminal activity. This process helps prevent money laundering, fraud, and other financial crimes.
Source of Funds (SoF) vs Source of Wealth (SoW).
While sSource of Funds looks at where money for a particular transaction comes from (e.g., salary payments, property sales, loans), Source of Wealth examines how an individual or entity accumulated their overall financial assets over time. Both checks are essential in enhanced due diligence (EDD), particularly when dealing with high-risk clients and politically exposed persons (PEPs).
Why verifying Source of Funds is important.
- Prevents illicit finance: Helps detect and block money laundering attempts.
- Ensures regulatory compliance: Required under UK Money Laundering Regulations and global AML laws.
- Protects businesses from financial crime risks: Reduces exposure to fraud, corruption, and reputational damage.
How businesses verify Source of Funds.
To confirm the legitimacy of funds, businesses may request:
- Bank statements showing the origin of deposits.
- Salary records or payslips to confirm employment income.
- Property sale agreements if funds come from real estate transactions.
- Loan agreements detailing borrowed funds.
How technology supports Source of Funds (SoF) verification.
AML compliance technology simplifies the source of funds verification process by:
- Automating document checks to validate financial records quickly.
- Screening clients against global sanctions, watchlists, and adverse media to flag high-risk individuals.
- Providing structured risk assessments that help compliance teams identify inconsistencies or suspicious transactions.
By leveraging compliance technology, businesses can enhance their due diligence processes, reduce manual workload, and ensure they meet AML regulations effectively.
We’ve worked with hundreds of regulated businesses. Let’s work together.
Book your free demo of our comprehensive ID&V, KYC, KYB and AML compliance management solution today.
Request Demo
Hi 👋 let’s schedule your demo.
Tell us a bit about yourself.
“
The system efficiently and effectively completes our KYC and KYB verification requirements during onboarding.
Robin Kear
Senior Account Executive
