Source of wealth refers to the origin of an individual’s or entity’s overall financial resources, outlining how they accumulated their assets over time. The source of wealth can be derived from various channels, such as but not limited to: inheritance, salary, investments, business ownership, real estate or other legitimate income streams.

Within Know Your Customer (KYC) processes, understanding the source of wealth is critical for assessing the legitimacy of a customer's financial background and ensuring that their assets were acquired legally. Financial institutions are required to verify their customers' source of wealth to ensure transparency and compliance with regulations, but more and more companies in non-regulated industries are looking into this for their own Due Diligence (DD) processes.

With the knowledge of whether a counterparty poses any risks related to money laundering, fraud or other financial crimes, financial institutions and companies performing KYC / CDD can better assess their risk profile, particularly when dealing with high-net-worth individuals or politically exposed persons (PEPs), where the risk of illicit activities may be higher.