Glossary > Finance > Regulatory And Compliance > Know Your Customer (KYC)

Source Of Wealth

Source of Wealth is where a person's money or assets come from, often used in financial institutions for compliance purposes to understand the origin of funds to prevent money laundering and illicit activities.

Example #1

For an individual, their Source of Wealth might include salary from employment, real estate investments, inheritance, and stock dividends.

Example #2

For a business owner, their Source of Wealth could be profits from their company, sale of assets, investments, or loans.

Misuse

Misusing Source of Wealth information could involve providing false or misleading sources to conceal illegal activities, such as using funds obtained through criminal means like drug trafficking or corruption. It's crucial to prevent this misuse to maintain financial integrity, protect consumers from unknowingly participating in illegal activities, and uphold regulatory standards.

Benefits

Understanding a person's Source of Wealth helps financial institutions comply with regulations, prevent money laundering, and assess potential risks associated with certain funds. By verifying the legitimacy of funds, institutions can maintain a trustworthy financial system and protect consumers from being involved in illicit activities.

Conclusion

Source of Wealth plays a critical role in safeguarding the financial system against illegal activities by ensuring that the money flowing through it has legitimate origins. By focusing on transparency and accountability in identifying the Source of Wealth, consumers, businesses, and employees can contribute to a fair and secure marketplace.

Last Modified: 4/29/2024