Welcome guidance on “Best Practices on Source of Wealth Due Diligence”

Read more at: https://aml-cft.net/acip-releases-best-practice-paper-on-sow-due-diligence/

Singapore’s MAS-backed ACIP guidance on Source of Wealth Due Diligence brings a pragmatic shift.

The recent guidance from the AML/CFT Industry Partnership (ACIP), supported by the Monetary Authority of Singapore (MAS), marks a significant shift in how financial institutions (FIs) approach Source of Wealth (SoW) due diligence.

The guidance

• Introduces a risk-based, tiered approach to SoW due diligence, emphasising that the intensity of due diligence should be driven by the customer's inherent money laundering/terrorism financing (ML/TF) risk, rather than the banking segment they fall under.
• It is designed to help financial institutions, especially those in private banking and wealth management, meet AML/CFT expectations without excessive documentation.
• It is highly relevant for anyone refreshing onboarding procedures or re-assessing high-risk client files.
• It is a departure from previous practices that often reserved rigorous SoW checks for private banking clients alone.

Key highlights include:

• Private Banking and Wealth Management: Enhanced due diligence for all clients, focusing on plausibility, materiality, and prudence in assessing business ownership, investment gains, employment income, and inheritance.
• Retail Banking: This is a two-tier system in which basic SoW information is collected initially, with complete corroboration triggered for higher-risk customers.
• Corporate Banking: SoW risk is evaluated at entity and beneficial ownership levels, with heightened scrutiny for entities with opaque structures or connections to high-risk geographies.

What stands out?

• It clearly distinguishes between Source of Wealth (SoW) & Source of Funds (SoF) - both important, but with different due diligence aims
• SoW doesn’t need to be verified to the last dollar — it should be plausible, risk-appropriate, and backed by credible evidence
• Emphasises a risk-based, evidence-led approach over exhaustive documentation, in line with FATF standards
• Introduces six “plausibility indicators” to assess if SoW aligns with the client’s profile
• Includes practical examples, particularly for founders, HNWIs, and complex structures

References

• AML / CFT INDUSTRY PARTNERSHIP BEST PRACTICES ON SOURCE OF WEALTH DUE ... www.abs.org.sg/docs/library/acip-bpp-on-source-of-wealth-due-diligence.pdf
•  ACIP releases best practice paper on SOW due diligence https://aml-cft.net/acip-releases-best-practice-paper-on-sow-due-diligence/