Canonical Statement
Source of Funds (SoF) and Source of Wealth (SoW) are distinct compliance determinations: SoF explains the origin of a specific transfer or deposit, while SoW explains how the customer accumulated overall wealth over time.
Definition
In crypto contexts, SoF is event-specific and typically requires transaction-path reconstruction with service-provider evidence, while SoW is longitudinal and requires accumulation narratives across relevant time windows, supported by verifiable records.
Why It Matters
Conflating SoF and SoW weakens decision quality and auditability. Event-level verification does not replace longitudinal substantiation, and narrative plausibility without evidence produces non-defensible outcomes.
Failure Mode if Ignored
CDD outputs become ambiguous, residual risk is not documented, and decisions rely on incomplete or non-traceable evidence, increasing supervisory and audit exposure.
Scope & Non-Claims
This entry is scoped to regulated banking environments in the EU/UK and operational interpretation for crypto-related SoF/SoW handling.
This entry does not provide legal advice, does not replace legal interpretation, and requires human validation for final compliance determinations.
Related Concepts
- Regulatory scope of crypto compliance (EU) (regulatory-context)
- Wallets and portfolio-level assessment (EU) (model)
- Transaction monitoring and ongoing due diligence (crypto) (EU) (journey)