What is Source of Wealth and How to Document it - KYC Lookup
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What is Source of Wealth and How to Document it

What is Source of Wealth and How to Document it

What is Wealth? 

By text definition wealth is measured by the value of your assets such as your business, cash, houses, paintings, money in the bank, value of shares, bonds, etc. However, in reality wealth could be a number of different things. For most of us when we think of wealth, we think money or simply being rich but that’s not always the case.  

Picture this, a woman called Susan lives in a big house, with multiply cars in her garage and has a big luxury boat which she enjoys during the summer. Molly next door has a modest sized house, drives a car that is a few years old and has a small paddle boat which she too enjoys during the summer. Now looking at the two which would you say has more wealth? Susan right? Well let’s take a closer look, Susan took out a hefty mortgage to afford her house and pays a lot of interest on the loans for her cars and boat while at the same time has high monthly expenses to keep up her lifestyle. However, Molly saved and bought her house cash, didn’t need a loan for her car and could afford her paddle boat. All in all, even though Susan may seem like she has more wealth as she looks rich it is in fact Molly who is better off as her debt compared to her assets are zero. 

This is just a simple example of the difference between wealth and being rich. 

Now lets take a look at what is source of wealth. 

Source of wealth in its definition is where/how the customer acquired the funds. For example, activities which have generated or contributed to a customer’s accumulation of funds and assets. 

Source of wealth is generally a question that will be asked when you are applying for a mortgage, if you are applying for a loan or if you are opening a trading account with a financial institution. 

Types of source of wealth can be: 

  • Savings from salary 
  • Bonus from a well-paid job 
  • Sales of shares or other investments / liquidation of investment portfolio
  • Sale of property 
  • Inheritance 
  • Company sale 
  • A Gift from a family member or close relative 
  • Winning the Lottery 
  • Or from a divorce settlement 

Source of wealth therefore describes how a person or customer acquired their total wealth over time or in other words the sources through which the wealth was generated. 

What documents do we need to proof the Source of Wealth?

In order to gather information to identify or verify how the wealth was acquired it is normally advised to use information available in the public domain or by requesting it from the individual/customer being onboarded directly. 

Acceptable sources to confirm Source of Wealth can be: 

  • Proof of property sale 
  • Records of external investments 
  • Commercial loan agreement letter 
  • Audited Financial Statements 
  • Bank Statements
  • Written confirmation from a qualified accountant/lawyer 
  • Individuals certified biography 
  • Grant of Probate/Copy of Will 

Once you have established the source of wealth, you will then need to consider what further work is needed to verify that information. Adequate measures to verify the source of wealth of an individual client will vary according to the risks associated with that client. 

By identifying the sources of wealth, we are looking to establish that the funds are not coming from the proceeds of crime or any other illegally activity. 

Over the years Governments from around the world have looked to crack down on toxic money entering the financial system by introducing stricter Anti Money Laundering rules and regulations.  

The introduction of tougher rules has meant the days of walking into a bank with a suitcase full of cash to open an account with no explanation on how the funds were obtained is something of the past which can only be can relived in Hollywood movies. 

Well there you have it… what is wealth, the sources of wealth and the documentation used to establish it.

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