By Elizabeth Hearst
The parent group of some of the largest financial institutions in the world, the Wolfsberg Group has issued guidelines on how financial institutions can “identify, mitigate and manage money laundering risks” by undertaking “Source of Wealth”(SoW) and “Source of Funds” (SoF) checks on customers.
The six-page document details the necessary steps banks and financial institutions should undertake as part of the “Wolfsberg Anti-Money Laundering Principles for Private Banking”.
The group details how SoW and SoF are “key elements” of the customer risk assessment and management for certain customers, with SoW used to identify how a customer accumulated wealth and SoF used to determine how and for what purpose an account will be funded.
The document identifies that by recording the SoW and SoF of customers it “enables the financial institution to understand the customer’s background and financial history”, “understand how and where the capital was generated”, “identify if the transactional activity is in line with what would reasonably be expected” and give the opportunity to “assess if activity and transactions are potentially suspicious”.
The group recommends that “in line with regulatory requirements, Financial Institutions should adopt a risk based approach with respect to the amount of information collected, and corroboration required for SoW/SoF purposes” and added: “This generally depends on the type of customer, their specific circumstances and risk rating”.
The Frequently Asked Questions (FAQs) document details the categories the group uses to determine SoW, including, “family and generational wealth”, “income, revenue and business activities” and “investment activities”.
It documents eleven frequently asked questions including the background information obtained by banks and financial institutions when determining SoW, the role of SoW corroboration in decision-making, the origins of financial transactions and transfers through customer SoF, the approach necessary by financial institutions to obtain information relating to high-risk customers and the approach to on-going due diligence and monitoring.
The full document can be downloaded here:
The group which represents some of the biggest financial institutions in the world such as Bank of America, Deutsche Bank, HSPC and Goldman Sachs have also recently published a report on “developing an effective AML/CTF programme”, which can be viewed here:
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