As governments around the world begin to clamp down more aggressively on global money laundering activities, as well as closing off channels used to fund international terrorism, regulatory compliance is of vital importance.

The onus to ensure that every check and procedure is completed is on individual financial institutions, e-payment service providers, online gaming sites, and other types of enterprise where some form of financial transaction occurs during the course of their day to day operations. KYC (Know Your Customer) and client onboarding processes are just two examples of the steps necessary to ensure compliance.

However, in order for businesses and financial institutions to be seen to be going the extra mile, there are two additional checks that can be undertaken. These are known as Source of Wealth (SOW) and Source of Funds (SOF) checks and, while the two are often mistakenly confused as one and the same, they are in fact separate checks, each with its own definition.

Source of Wealth checks specifically deal with how a client under scrutiny, actually acquired their funds to begin with. For example, did they acquire their wealth through an inheritance of sorts? Through investments or the sale of real estate? SOW checks can play a vital role when it comes to going the extra mile to ensure that your client and their funds are from a legitimate source, thereby reducing the risk of indirect money laundering complicity.

Source of Funds checks specifically deal with where a client’s funds are drawn from. For example, does the client have a bank account held in the United Kingdom (or other countries)?

The advent of the internet has helped to create the world’s first truly global market place, where businesses and clients, literally from opposite ends of the earth, are able to connect and do business together, in the blink of an eye.

However, with great technology comes great responsibility. In an effort to clamp down on fraud and international crime, governments around the world have put a range of stringent checks and balances in place. These include international Anti-Money Laundering (AML) regulations, Combating the Financing of Terrorism (CFT) and others. A key component of these regulations is known as KYC or Know Your Customer.

Compliance as a process is a topic often in the shadow of major news. However, identity checks are a critical part of doing business securely and reducing risk. For most businesses, when considering compliance, top of mind are painful implementations, time-consuming submissions, and costly administrative tasks.