Source of Funds means where the money you send to the Financial Institution comes from and how it gets there (for example, a salary payment, sale of property, or a transfer from another bank). It also covers the way the money is transferred – bank transfer, card payment, cash deposit, etc., and the typical amounts involved.
The Source of Funds is usually linked to the purpose of the account. As part of a risk-based approach, the Financial Institution must understand:
where the first (initial) deposit comes from; and
if there are any risk indicators, ask for more information about later deposits and incoming transfers.
This helps the institution confirm that the funds are legitimate and consistent with the customer’s profile.