What’s source of wealth?

Source of wealth tells you how a client accumulated their overall assets over time. It’s not about the specific funds used in a single transaction (which is known as source of funds) but the bigger picture: how did this person or business come to have the wealth they hold today? 

The UK Money Laundering Regulations 2017 (as amended) (MLRs) require firms to take a risk‑based approach to due diligence. This means you need to understand source of funds in all relevant cases and in higher‑risk situations, such as politically exposed persons (PEPs) or high‑risk third countries, establish source of wealth. These checks need to be backed up with appropriate evidence.

Sector guidance all follows this principle, with definitions that stem from the requirements in MLRs.

What source of wealth means in each sector

Accountancy sector 

AMLGAS adopts a straightforward definition: “The origin of the subject’s total assets.”

Accountants, bookkeepers and all related businesses are expected to establish source of funds for all transactions, and source of wealth as well when:

• enhanced due diligence applies;
• the client’s financial position doesn’t match their profile;
• ownership structures are opaque; or
• transactions appear unusually large or complex.

Enhanced due diligence is likely to apply when you have a higher risk, such as PEPs, clients connected to high‑risk third countries or complex or unusual arrangements.

Legal sector 

LSAG provides the most detailed treatment of source of wealth: “The source of wealth refers to the origin of a client’s entire body of wealth. SoW describes the economic, business and/or commercial activities that generated the client’s overall net worth.”

Legal businesses must establish source of funds for the transactions or activities that occur within the business relationship or occasional transaction, and source of wealth as well in situations such as:

• all PEP relationships;
• cross-border or sanctions-linked matters;
• high-value or unusual property transactions; or
• complex trust or company structures.

This needs to be backed up with relevant documentation, with the depth of checks driven by the risk assessment for the client and the matter.

Property sector

HMRC defines source of wealth for property professionals in the ‘Estate and letting agency business guidance for money laundering supervision’ as the “origin of the customer’s overall wealth.” 

Property professionals must establish source of wealth in cases involving:

• PEPs and high-risk jurisdictions;
• high-value purchases;
• offshore buyers or corporate purchasers; or
• clients whose background doesn’t match their financial position.

In conveyancing, establishing a client’s financial background is central to ensuring that a transaction aligns with their profile.

High-Value Dealers (HVDs)

HMRC’s guidance for HVDs is to understand both the source of funds and the wider source of wealth when risk indicators appear. For HVDs, source of wealth becomes particularly important in situations such as:

• large cash purchases with no clear explanation;
• customers whose occupation or circumstances don’t align with the value of the goods;
• repeated high-value cash transactions over a short period;
• buyers linked to high-risk jurisdictions or industries; or
• customers unwilling to explain how they accumulated their wealth.

Because cash-heavy sectors are routinely exposed to money laundering risks, HMRC expects HVDs to be able to demonstrate that the client’s financial background makes sense relative to the transaction.

When source of wealth cannot be established, or when the explanation contradicts what you know about the customer, this is a clear trigger for enhanced due diligence.

What credible source of wealth information looks like

The explanation of source of wealth must be credible and proportionate to risk. Regulators give examples such as:

• Long-term employment or professional income
• Profits from a legitimate business
• Inheritance (with probate documents where appropriate)
• Sale of property or other assets
• Long-term investments
• Pension income or retirement assets

Your test is whether the explanation reasonably accounts for the client’s wealth and is consistent with what you know.

Red flags to watch for

Across AMLGAS, LSAG and HMRC guidance, the key warning signs are consistent:

• Wealth that doesn’t match the client’s known background
• Explanations relying on vague phrases such as “family money” or “various investments”
• Wealth linked to high-risk jurisdictions without evidence
• Reluctance to explain or discuss financial background

Where this occurs, enhanced due diligence may be required or you may need to consider whether the relationship can proceed safely.

Final thoughts

Understanding source of wealth helps you test whether a client’s financial story is coherent and legitimate. A clear explanation strengthens your risk assessment. A vague one, or one that doesn’t fit, is often the first indication that you need to look closer.

The guidance across AMLGAS, LSAG and HMRC is aligned: source of wealth is about the origin of the client’s total assets. A clear explanation, with proportionate evidence to support it, helps you assess risk and confirm it’s in line with what you already know about the client. Anchor your assessment around that principle and you strengthen your compliance, and protect your firm from unnecessary exposure.