AML Compliance in UAE: Source of Funds & Source of Wealth

As part of your KYC process, you need to understand from where your customers have obtained the money they use for transactions or investments. Understanding the Source of Funds and Source of Wealth is critical for your to ensure compliance with Anti-Money Laundering and Combatting Financing of Terrorism (AML-CFT). However, money launderers use advanced methodologies to conceal their source of funds and wealth, which means businesses have to implement a wide range of KYC measures, controls and customer due diligence (CDD) and transaction monitoring measures.

AML consultants in Dubai can help you comply with the AML-CFT requirements. In this blog, we will provide you with a glimpse of the Source of Funds and Source of Wealth that is an integral part of the KYC process. Read ahead to know further:

What is the Source of Funds?

Source of Funds refers to the origins of money that an individual or organisation uses to fund its operations. Businesses trying to establish the Source of Funds of a customer must try to understand not only where the funds originate from (the bank account from which the money was transferred) but also the activity that was involved in generating those funds (a source of employment, the sale of a house, or an inheritance). The following are some common examples of Sources of Funds:

  • Personal savings
  • Pension releases
  • Share sales and dividends
  • Property sales
  • Gambling winnings
  • Inheritances and gifts
  • Compensation from legal rulings

What is the Source of Wealth?

Source of Wealth is an AML/CFT term used to describe the origins of a customer’s entire body of wealth and assets. The source of Wealth is not restricted to what is involved in a transaction or business relationship. It refers to the economic, business, or commercial activities that generated, or significantly contributed to, the customer’s overall net worth. The following are some examples of sources of wealth:

  • Inheritances
  • Investments
  • Business ownership interests
  • Employment income

Questions to consider for the KYC Process

Understanding the source of funds and source of wealth is critical to your firm’s fight against money laundering and terrorism financing (ML-FT). Both the source of funds and source of wealth can effectively indicate whether the customers are involved in criminal activity. If the source of fund or source of wealth do not match the customer’s risk profile or transaction activity, you need to use that information to inform their AML/CFT compliance response, and when submitting suspicious activity reports (SAR) to relevant authorities. You can use the following guiding questions to establish the source of funds and source of wealth:

  • Is it easy to explain the customer’s or beneficial owner’s source of wealth or source of funds?
  • Is the customer’s or their beneficial owner’s background consistent with their previous, current or planned business activity, their business’ turnover, the source of funds and the customer’s (or beneficial owner’s) source of wealth?
  • Can you confirm that the information and documentation obtained as part of the source of funds/source of wealth checks make sense against the information you know about the customer from your due diligence?
  • Do your high-risk customers require the same level of verification to establish the source of funds/source of wealth?
  • Do you determine a higher threshold when a customer or the beneficial owner of the customer is a Politically Exposed Person (PEP)?

 Source of Funds/Source of Wealth Compliance Response

 If you are concerned about a customer’s source of funds, you must take necessary compliance actions to address the risk. You can initiate the following actions:

  • A decision to halt the transaction of the customer
  • A decision not to start a business relationship with a customer
  • Terminate an existing business relationship
  • Initiate enhanced monitoring of a customer’s transactions
  • Oversight from senior management employees

Source of Funds/Source of Wealth AML Compliance

To effectively establish the source of wealth or source of funds, the firms must develop and implement suitable KYC measures. Such measures will help them understand who their customers are, and what type of business they are engaged in. AML consultants in Dubai can help you to comply with the compliance process. The KYC process should feature the following measures and controls:

  • Customer due diligence
  • Transaction monitoring
  • Sanctions screening
  • Screening for PEPs
  • Check for adverse media reporting

Consult with the Best AML Consultants in Dubai, UAE

The source of funds and source of wealth is key to a company’s AML compliance process. AML consultants in Dubai such as Jitendra Chartered Accountants (JCA) can advise you on how to effectively apply the compliance measures related to the source of funds and source of wealth.

JCA provides robust AML consulting services in Dubai with a focus on customer onboarding and KYC process, and risk profiling of customers. We also offer AML training for companies on customer due diligence procedures and help comply with UAE AML laws and regulations.