In July 2025, the Monetary Authority of Singapore (MAS) sent a shockwave through the financial sector by taking enforcement action against six banks. The charge? Significant AML compliance breaches, specifically regarding lapses in verifying Source of Wealth (SOW).
“Several institutions failed to follow up on discrepancies in client information, which should have raised doubts about where the money came from,” MAS noted in their report.
This case proves that “having a policy” is no longer a defense. Regulators now demand a dynamic, risk-based approach that spans the entire client lifecycle—not just the onboarding phase. This guide provides a defensible framework for establishing SOW and Source of Funds (SOF) to protect your organization from reputational and operational fallout.
Understanding the Core Difference
Before diving into the process, it is critical to distinguish between the two pillars of verification:
- Source of Wealth (SOW): The origin of the subject’s entire body of wealth (e.g., 20 years of inheritance, investments, and business ownership).
- Source of Funds (SOF): The origin of the specific money used for a particular transaction (e.g., a specific bank transfer or sale of shares).
When to Trigger SOW/SOF Due Diligence
In the APAC region, verification is not a “one-and-done” task. It must be triggered when risk exposure shifts.
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Risk Trigger |
Why SOW/SOF Verification is Mandatory |
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Credit Risk |
To ensure the client has the genuine financial capacity to meet obligations without relying on undisclosed or illicit “off-book” funds. |
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Liquidity Risk |
Sudden asset liquidation (e.g., property or business sales) may indicate financial stress or an attempt to “clean” capital. |
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Operational Risk |
Weak internal controls lead to reliance on falsified data. Structured SOW checks act as a final firewall against fraud. |
The 4-Step Framework for Defensible Verification
- Identify Undisclosed Financial Risks
Stop treating client declarations as facts. Use risk intelligence and transaction monitoring to identify gaps between reported income and actual behavior.
Watch for:
- Unexplained deposits or circular transaction patterns.
- Frequent related-party transfers without clear commercial logic.
- Assets that are inconsistent with the client’s declared risk profile.
2. Validate Economic Legitimacy
Trace all income back to a verifiable, lawful economic activity. In APAC, this requires a deep dive into:
- Business Operations: Confirming the company actually exists and generates the profit claimed.
- Real Estate: Verifying historical titles and sale prices.
- Inheritance/Gifts: Moving beyond “family money” to find the original source of that wealth.
- Note: Exercise extreme caution with high-risk jurisdictions, shell companies, or crypto-linked wealth lacking a clear audit trail.
3. Assess Lifestyle–Wealth Proportionality
Does the “on-paper” wealth match the “on-the-ground” reality? High-impact due diligence includes assessing:
- Global property footprints and luxury asset ownership.
- Frequency of high-value travel and philanthropic activity.
- The Red Flag: A massive gap between reported income and a lavish lifestyle suggests unreported income or illicit wealth accumulation.
4. Authenticate and Corroborate
The MAS enforcement action specifically cited “failure to follow up on discrepancies.” To avoid this, move beyond client-provided PDFs:
- Cross-Reference: Check bank statements against tax filings and shareholding disclosures.
- Verify the Issuer: Ensure that employment contracts or dividend records come from verifiable, legitimate entities.
- Use OSINT: Utilize open-source intelligence and regional document validation tools to ensure documents haven’t been tampered with or issued by “shell” authorities.
The Bottom Line: Assumptions are Liabilities
Many firms in Asia still rely on “surface checks” or uncorroborated client statements. This creates blind spots for Politically Exposed Persons (PEPs), undeclared beneficial ownership, and circular financing schemes.
With rising regulatory pressure, a “good faith” effort is no longer enough. You need a documented, defensible, and audited trail of diligence.
