Assessing the Customer’s Source of Asset/Wealth (AML KYC CDD)

When performing customer due diligence (CDD) on a customer, the customer’s source of wealth and assets need to be assessed as part of conducting the customer risk rating.

Financial firms normally assess the source of a customer’s wealth to better ensure that a customer is not funding an account with assets, wealth or funds received via illicit means.

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In a situation where a customer’s source of assets is unknown or cannot be adequately verified, financial institutions might rate the customer as a high risk client and, in most cases, will not open an account.

Sources of Wealth/Assets for Individuals for AML KYC Purposes

Sources of wealth for an individual include:

  • Inheritance
  • High income
  • Savings
  • Business revenue
  • Sales of business or assets

Sources of Wealth/Assets for Businesses or Entities

Sources of wealth or assets for a business or entity include:

  • Proceeds from an IPO (initial public offering)
  • Funding and investments
  • Equity from the business or entity owner(s)

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High Risk Rating – AML KYC CDD

In the event that the source of wealth or assets is unknown or cannot be determined, or in the event that the customer refuses to provide such information, the account needs to be rated with a high money laundering risk.

In the above scenario, the customer’s case needs to be escalated to the AML compliance officer for a careful determination on whether the firm should continue the relationship.

Any decision needs to be documented.

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