Source of Funds means the money that is being used to fund the transaction in question. It is essential that you understand the nature, background and circumstances of the client, including their financial position. A Source of Funds check should consider how the client accumulated the funds for the transaction. This will need to go beyond the location of the funds and consider how the client obtained that money (for example, was it salary, or a gift?).
You must ensure that the funds are not the proceeds of crime. It is not enough to have sight of the client’s bank account statements showing that the funds are available. You need to go as far as is needed to build a clear picture of how the client accumulated their money for the transaction. For some, it may be as little as six months, for others it might require looking back several years.
You should provide details of the checks you have conducted and any documentation you may have obtained. If you do not consider it necessary to check the source of funds in a transaction, the reason should be documented in the box provided.