Client verification Current

Verifying a client's source-of-funds explanation is consistent with the matter

A practical approach to checking the explanation fits the matter, not just recording it.

A client's source-of-funds explanation is only useful once you've checked it actually fits the matter it's meant to explain. This guide sets out a practical approach to that consistency check. It is general information, not legal or compliance advice.

Action plan

1 Confirm you're checking how funds were obtained, not where they were sent from Source of funds is about how the money was earned or acquired, not the account it arrived from.

AUSTRAC's guidance is specific that source of funds refers to how and where the funds were obtained, not the account or channel a payment arrived through. For example, if a client transfers funds by bank transfer, the source of funds isn't 'the client's bank account' -- it's the underlying source, such as salary and wages, business income, or proceeds from a property sale.

  • Ask what generated the funds (salary, business income, sale proceeds, gift, inheritance), not just which account they came from
  • Treat 'bank transfer' or 'my account' as a channel, not an answer to source of funds
  • Note the explanation in the client's own words before assessing it

Done when: The client's source-of-funds explanation describes how the funds were obtained, not just where they were transferred from

AUSTRAC: source of funds and source of wealth
2 Check the explanation is consistent with the matter A source-of-funds explanation should make sense against what it's actually funding.

Once you have a genuine source-of-funds explanation, the practical check is whether it's consistent with the matter: does the stated source plausibly support the amount and nature of what's being funded, and does it fit what you otherwise know about the client.

  • Compare the stated source against the size and nature of the transaction or matter
  • Compare the explanation against what you already know about the client from onboarding
  • Note anything that doesn't add up rather than accepting the explanation as given

Done when: The source-of-funds explanation has been checked against the matter and against what else is known about the client

See requesting source-of-funds information for a higher-risk matter
3 Verify using independent and reliable sources where appropriate Verification, not just collection, is expected where the risk calls for it.

AUSTRAC's guidance describes verifying source-of-funds information using reliable and independent sources where appropriate, with the steps taken targeted to the customer's specific risk and proportionate to that risk level.

  • Verify the stated source using independent and reliable evidence where the matter's risk calls for it
  • Keep the depth of verification proportionate to the risk, not uniform across every matter
  • Document what was verified, how, and why that was considered sufficient for this matter

Done when: Source-of-funds information has been verified using independent and reliable sources proportionate to the matter's risk

AUSTRAC: source of funds and source of wealth