Source of wealth vs source of funds

Source of wealth and source of funds are two checks used in financial due diligence, and they answer different questions. Source of wealth looks at the full origin of a person's or business's overall net worth: how the wealth was generated in the first place, for example through business ownership, employment income, investments, inheritance or the sale of assets. Source of funds is narrower: it is the origin of the specific money being used in a given transaction or being placed into an account or relationship.

A simple way to see the difference: source of wealth explains how someone became wealthy, while source of funds explains where this particular money came from. A business could have a clear source of wealth from years of trading, while the source of funds for one payment is a specific client invoice.

These checks come up during onboarding and ongoing due diligence, as part of know your customer (KYC) and know your business (KYB) processes that regulated providers carry out. A regulated provider will typically ask about both when a business opens an account or relationship, to understand who it is dealing with and where value is coming from. The documentation usually requested can include company financial statements, audited accounts, account statements, contracts or invoices evidencing a payment, proof of the sale of an asset, or records of investment or dividend income. The exact documents depend on the business, the activity and the provider's own process.

For a business going through onboarding with a regulated provider, having this information ready, clear records of how the business generates its money and where the specific funds originate, tends to make the process faster and smoother. When choosing a provider, due diligence of this kind is one of the things to expect, as covered in our guide on what a MiCA-authorised partner actually does.