A comprehensive guide to Source of Funds checks (2026)
Updated 11 March 2026
Source of Funds refers to the origin of the money used in a particular transaction, such as when purchasing property, making an investment, or transferring capital.
This guide provides a broad overview of Source of Funds checks, explaining:
- What they are
- Why they are required for Anti-Money Laundering (AML) compliance and preventing financial crime
- The key considerations when conducting due diligence
Whether you are a legal professional or the end user in a Source of Funds check, this guide addresses common questions and practical challenges around Source of Funds verification.
What is Source of Funds?
The Legal Sector Affinity Group (LSAG) defines Source of Funds as the funds that are being used to fund a specific transaction. It is a core part of client due diligence and requires firms to understand both where the money came from and how the client obtained it.
These transactions can include buying a property, investing, or starting a business. Source of Funds checks are about finding out where the funds being used originated from, whether it’s savings, inheritance, salary, a loan, or elsewhere.
However, a true source of funds check is so much more than looking at a set of bank statements. As the LSAG puts it, the question you are seeking to answer should not simply be, “where did the money for the transaction come from?” but also “how and from where did the client get the money for this transaction or business relationship?” It is not enough to know the money came from a UK bank account.
Source of Funds vs Source of Wealth
Source of Funds and Source of Wealth are distinct compliance concepts used during customer due diligence. However, there is some overlap between the two.
- Source of Funds: The origin of money used in a specific transaction
- Source of Wealth: How a person accumulated their total wealth over time
For example, If a client purchases a property using proceeds from selling shares, the share sale would be the Source of Funds. However, the regulator may also expect firms to understand how the client built their overall wealth, rather than a specific portion of it.
Examples of Source of Wealth might include inheritance, salary, investments, business profits, and divorce settlements among others.
Understanding both concepts is important because AML guidance expects firms to obtain sufficient information about a client’s financial circumstances when assessing risk.
Why do you need a Source of Funds check?
In the UK government’s 2025 report, The National Risk Assessment of Money Laundering and Terrorist Financing, the National Crime Agency estimated that over £10 billion is laundered through UK property each year.
Source of Funds checks help confirm that money being used in certain transactions is legitimately earned or acquired. They are essential for Anti-Money Laundering (AML) compliance, preventing fraud or financial crime and ensuring compliance with regulatory requirements when buying a property or making large investments.
The Solicitors Regulation Authority recently shared a statement on the importance of a proactive and well-documented approach to understanding the origin of your clients’ funds. They said that failing to do this can leave you exposed and at risk, and even published a range of information to help.
Still not sure why all of this is necessary? Check out our airport queues analogy.
At Armalytix, we believe we can help stem the rise in financial crime, stop the vulnerable being exploited and protect consumers from making poor financial decisions with our digital checks. Our Chief Commercial Officer Mike Ward has said that conveyancers, estate agents and lenders need to be increasingly vigilant to do their part in preventing money laundering.
“The property market remains a hotbed for dirty money. However, we can strengthen compliance by using technology that promotes transparency and upholds the integrity of the financial ecosystem.”
What documents are used in Source of Funds checks?
Both the professionals carrying out the checks, and the end users providing their information often ask what evidence is required.
The specific documentation will depend on the transaction, the client’s financial situation, and the level of risk, but here are some examples of documents that may be used in a Source of Funds check:
- Payslips or employment income records
- Bank statements showing savings and account balances
- Inheritance paperwork
- Property sale contracts
- Investment account statements
- Gift letters, and potentially SoF for the person giving the gift
The level of evidence required is proportionate to the risk, which means higher-risk transactions will require more detailed verification. This can take time, so digital tools, including those that are able to make use of open banking, can speed up the process.
You can find out more by reading our complete guide to open banking.
How far back should the Source of Funds check go?
There is no fixed timeframe for Source of Funds checks.
While three-six months is a commonly requested period for bank statements to show salary / savings, you should be prepared to go back as far as is necessary to evidence the origin of a specific lump sum. For example, if funds arrived in an account two years ago from an inheritance, the inheritance documents from two years ago will be required, not just the last six months of statements.
The key objective is to build a clear audit trail showing how the funds were obtained and how they moved into the account used for the transaction.
Why are Source of Funds checks so long and difficult?
Lawyers are increasingly having to trawl through client bank statements and other financial documents to establish a client’s financial position.
Legal professionals in particular face significant hurdles in conducting SoF checks for residential, commercial and corporate clients, including:
- Manual, time-consuming processes that slow legal workflows
- Varying levels of complexity in each transaction
- Sensitivity around requesting financial evidence from long-standing corporate clients
- Complex financial structures and money movements between companies
Regulators emphasise that firms must take a risk-based approach, which means higher-risk clients or transactions require more detailed verification and documentation. These hurdles can put a strain on client relations.
With increasing regulatory demands, legal professionals need efficient tools to conduct Source of Funds checks without disrupting their client relationships. That’s why our solutions at Armalytix provide the technology and automation needed to enhance compliance, reduce risk, and save valuable time.
The ability to save precious time and financial resources is critical for stretched law firms. Louise Stephens-Pantojam, Head of operations at Leading Property Lawyers Limited, said about Armalytix:
“The introduction of Armalytix took away the whole admin burden, and allowed our skilled team to utilise their skills. As a business, we got better value for money out of our people.”
How can I make Source of Funds checks easier?
Understanding your client’s true financial position and the ability to identify risk sooner are two key requirements for firms undertaking SoF checks.
But how to achieve that? Critical to the solution is having an integrated check that combines fact finds, questionnaires and accurate data, all analysed and presented using smart technology to present the firm doing the check with the information they need to assess risk quickly and effectively.
Armalytix offers a solution that makes this process easier, faster, and more accurate.
We do this through:
- Up-front fact finds that help you understand the background and circumstances of how the purchase will be structured and financed
- Highlighting high-risk cases such as money from overseas, cash transactions,and more. giving you the ability to carry out more extensive investigations where enhanced due diligence is appropriate
- A Legal Eye-endorsed SoF questionnaire that is the most robust on the market, designed by risk and compliance experts to prove the appropriate supporting evidence
- Market-leading analysis that provides a clear audit trail on file, and a report that includes the answers to the fact finds and Source of Funds questionnaire
- Income and Risk insights that make it simpler for your firm to spot the clients you should not be dealing with
- Our Account Verification tool that helps you stop money going to the wrong accounts
For your clients, we provide a simple, digital journey which integrates effortlessly into your existing workflows. With over 1K Trustpilot reviews and an Excellent 4.7 rating, our end users say the process is straight forward, quick and easy.
“The Armalytix verification process with JS Law was smooth, straightforward, and very easy to follow. The platform is well designed, secure, and clearly guided me through each step of the source-of-funds and income verification process.
Everything was explained clearly, and I appreciated how quickly the system reviewed and completed the checks. It made what could have been a stressful compliance stage feel very simple and organised.” – Armalytix user, BB Luis.
Frequently asked questions
Are Source of Funds checks legally required?
Yes. In regulated sectors such as legal services and financial services, firms must scrutinise transactions and conduct customer due diligence under the Money Laundering Regulations 2017 and related legislation.
This often includes verifying the origin of funds used in a transaction.
What is the difference between Source of Funds and Source of Wealth?
Source of Funds refers to the origin of money used in a specific transaction, while Source of Wealth describes how a person accumulated their overall assets over time.
What documents are required for Source of Funds checks?
Typical examples include:
- bank statements
- payslips
- inheritance paperwork
- property sale documentation
- investment account statements
Why do solicitors ask for detailed financial information?
Legal professionals are required to understand the origin of funds used in transactions in order to prevent money laundering and comply with regulatory requirements.
If you would like to know more about how we can help your firm enjoy a smooth process for your Source of Funds obligations, book a free demo (or request a sample report) to see how the platform supports your compliance workflows.
