Source of Wealth SoW

Source of wealth means the activities that produced everything a person owns. It is a history, not a single payment. A client's wealth might come from thirty years of salary, from founding a company that was later sold, from property bought long ago, or from a family estate.

The Anti-Money Laundering Regulation (AMLR) uses the term twice in its due diligence rules without defining it. In anti-money laundering practice it is understood as the origin of a person's total assets.

It is often confused with source of funds, which is the origin of the money in one transaction. A firm can know exactly which bank account a purchase price was paid from. It may still not know how the client came to be rich enough to pay it.

Only where the risk is higher. The standard measures that apply to every client do not name source of wealth. Article 25 asks for the source of funds where necessary, and stops there.

Source of wealth enters with enhanced due diligence. Article 34(4) lists the measures a firm may apply in a higher-risk case, in proportion to the risk. One of them is obtaining additional information on the source of funds and source of wealth of the client and of its beneficial owners. The word is "may". The firm chooses the measures that answer the risk it has found.

In some situations the choice is removed. Where the Commission identifies a third country as high-risk under Article 29, the firm must apply the measures in Article 34(4) to clients from that country, source of wealth included (Article 29(4)). For a country identified under Article 30 or 31, the Commission's delegated act can make the same measures binding.

For a politically exposed person, the firm must take adequate measures to establish the source of wealth and source of funds involved (Article 42(1)). Article 46 applies the same rule to family members and known close associates. For a client from outside the EU who is applying for residence rights in return for an investment, Article 41 makes the Article 34(4) measure on source of funds and wealth a minimum. After a person leaves a prominent public function, Article 45 keeps one or more of the Article 34(4) measures in place for at least 12 months.

The AMLR applies from 10 July 2027 (Article 90). Until then, national anti-money laundering law sets the equivalent duties.

A coherent account of how the wealth was built, supported by documents for its main parts. The AMLR does not list the documents. Article 28 required the EU's Anti-Money Laundering Authority to submit to the Commission, by 10 July 2026, draft technical standards on the information firms collect for enhanced due diligence. Such standards bind firms only once the Commission adopts them.

In practice the work starts with the client's own explanation: what they did, when, roughly how much it produced. The firm then looks for evidence that fits each significant part. Employment income can be supported by tax returns or an employer's confirmation. The sale of a business can be supported by the sale agreement. Ownership of a company can be supported by its filed accounts with the dividends it declared. An inheritance can be supported by the estate papers. Public records such as company registers help to test what the client says.

The two provisions use different words. Article 34(4) speaks of obtaining additional information. Article 42(1) speaks of adequate measures to establish. The second is worded as a duty to reach a result, not only to collect information. How much evidence that takes depends on the risk of the individual client (Article 20(2)).

The AMLR sets no period. The measure of enough is whether the firm understands the main sources of the client's wealth well enough for the risk involved.

Wealth from a salary that is still being paid can be explained with recent documents. Wealth from a company sold twenty years ago needs older ones. The firm is asked for a reasoned view, with more effort where the risk is higher.

Where documents are missing, the record matters more. Article 21(3) requires a firm to keep a record of the actions it took to apply due diligence, with its decisions, the supporting documents and the justifications. The file should show what was asked, what the client could provide, what was checked against public sources, and why the firm was satisfied or was not. Under Article 20(4) the firm must be able to demonstrate to its supervisor that its measures were appropriate to the risk.

The AMLR gives no single answer, so the firm has to decide and record its reasons. The rule that forces a firm to refuse or end a relationship, Article 21(1), is tied to the measures in Article 20(1), which do not name source of wealth.

The gap still has consequences. A relationship with a politically exposed person needs senior management approval to start or continue (Article 42(1)), which is hard to give where the wealth is unexplained. A firm that goes ahead cannot easily show its supervisor that the Article 42 duty was met. Wealth that does not fit the client's known history is also a circumstance the firm must weigh when it assesses whether a transaction is suspicious (Article 69(2)).