AML and counter-terrorist financing—source of funds and source of wealth
AML and counter-terrorist financing—source of funds and source of wealth

The following Practice Compliance practice note provides comprehensive and up to date legal information covering:

  • AML and counter-terrorist financing—source of funds and source of wealth
  • Source of funds v source of wealth
  • Obligations
  • Requirements under MLR 2017
  • Sector guidance
  • Summary
  • How to establish and evaluate source of funds/wealth
  • Establishing source of funds
  • Establishing source of wealth
  • Assessing client/matter risk
  • More...

Source of funds and wealth was a key focus of the SRA’s Preventing Money Laundering and Financing of Terrorism thematic review, published in March 2018. Its findings included that:

  1. most firms understood the distinction between funds and wealth and it was pleased to see the depth of the fee earner’s investigations

  2. 10% of firms had difficulties separating the concepts of source of funds and source of wealth, and did not distinguish them

  3. 70% of firms use a client declaration as evidence of source of funds, while 28% obtained bank statements and a fifth had no real procedure at all

The thematic review called on firms to consider:

  1. what is the difference between source of funds and source of wealth?

  2. does each file record in writing where/who funds are from and how they were originally created?

  3. do fee earners understand the client, the transaction and the funds—if not, how do they continue to monitor and assess this information during the lifetime of the transaction?

In more recent SRA visits it found in relation to source of funds:

  1. 21% of files reviewed did not evidence the client’s source of funds properly or at all

  2. some firms said that they would not always obtain information on the source of funds until comparatively late on in the transaction

  3. in corporate transactions, some fee earners felt that the firm’s published accounts,

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