Hi

If your business is supervised for Anti-Money Laundering (AML) purposes - whether as an adviser, accountant, or bookkeeper - you already know how closely regulators are watching compliance with Anti-Money Laundering (AML) regulations. 

But one area that still causes confusion and uncertainty is over exactly what checks firms should undertake to verify the source of funds and the difference between proof of funds and source of funds.

Confirming that money sits in a client’s bank account is not enough. That merely proves the funds exist. It does not show where the money came from or whether it genuinely belongs to the client.

Too often, I see practices ask for the standard three to six months of bank statements. Sometimes, this is perfectly reasonable - particularly if the statements clearly show a build-up of savings from regular salary income, dividends, or other credible sources.

But if those statements don’t actually demonstrate money flowing in from the sources your client claims—or if they simply show the money sitting there without any visible accumulation over time—you need to do more.

Consider this scenario: A client says they saved £75,000 over the last five years for a deposit on a property. You request six months of bank statements. All you see is £75,000 sitting in an account, with no credits coming in. There’s no link between the claimed savings and the actual movement of money.

In this case, you haven’t established the source of funds. You’ve only confirmed that funds exist. That’s not enough to satisfy your AML obligations.

So what does ‘doing more’ look like in practice? Here’s a practical approach I’d recommend to any firm:

1. Ask Specific, Probing Questions
   Build a set of questions into your initial onboarding or purchase questionnaire, such as:
   • How was the money saved?
   • Over what period was it saved?
   • From which account(s) did it originate?

This forces the client to provide a clear narrative upfront, so you can see whether their explanation aligns with their documents.

1. Request Additional Evidence
   If the bank statements don’t show accumulation, consider:
   • Asking for statements covering a longer period—sometimes several years if the client claims long-term saving.
   • Obtaining payslips or tax returns to cross-reference income levels and confirm whether the savings are plausible.
   • Checking whether any lump-sum credits are consistent with the client’s income or other legitimate receipts.
2. Cross-Reference the Economic Profile
   Regulators expect you to consider whether the client’s claimed savings fit their circumstances. For example, if someone on a modest salary presents with a large deposit, you’ll need evidence of inheritances, gifts, or investments to show how the funds were generated.
3. Document Your Rationale Thoroughly
   Keep a clear record of why you did (or didn’t) request further evidence. This paper trail is your safeguard if your judgement is ever questioned.

Is there a better way to approach this?
Absolutely. Rather than relying on generic timeframes (like always asking for six months’ statements), adapt evidence requests to the client’s actual story. A standard policy is a good starting point, but AML compliance is never a tick-box exercise.

Practical Tips to Take Away:

• Don’t rely on ‘proof of funds’ alone.
• Treat each client’s circumstances individually.
• Cross-check the story against actual documentation.
• Record your decisions and rationale as you go.
• Consider using a structured questionnaire to collect consistent information.

Be proactive, be thorough, and always ask: “Does this evidence truly show where the money came from?”

If you’re uncertain whether your policies are robust enough—or want a second opinion on how to improve them—I’d be glad to have a conversation. The risks of getting this wrong are too great to rely on assumptions.

Noel Guilford