Since Tranche 2 started on 1 July 2026, real estate agents, conveyancers, lawyers, and accountants have been asking clients where their money comes from more often than ever. The two questions sound similar, and many firms use them interchangeably. Under Australia’s AML/CTF rules they are different checks with different evidence, and mixing them up leads to either too little information or a lot of unnecessary paperwork.
This guide explains source of funds vs source of wealth in plain terms, when each one is needed, what evidence AUSTRAC itself gives as examples, and what a small firm should record. It is general information for Australian reporting entities, not legal advice.
The difference in one sentence each
AUSTRAC’s guidance for the public describes them this way:
- Source of funds is how and where the customer got the money for a specific transaction.
- Source of wealth is where the customer’s entire wealth and assets come from, which may have built up over many years from several sources.
AUSTRAC adds a point that catches many firms out: source of funds means how the money was originally earned or obtained. It does not mean the account or place the money was transferred from. A bank statement showing a deposit arriving from the client’s savings account tells you where the money sat, not where it came from.
| Source of funds | Source of wealth | |
|---|---|---|
| The question | Where did the money for this transaction come from? | How did this person build everything they own? |
| Scope | One transaction or relationship | The client’s overall financial position |
| Timeframe | Usually recent | Often years or decades |
| Typical answers | Salary, business income, sale of a property, inheritance, investment income, a gift | Career earnings, a business, investments, inheritance, property |
| What it tests | Whether this money is legitimate | Whether the client’s overall wealth makes sense for who they are |
When you need to establish them
Source of funds and source of wealth are not routine checks for every client. AUSTRAC’s guidance says there are specific circumstances when you must establish them, and that it may otherwise be appropriate as an enhanced customer due diligence (CDD) measure to manage a customer’s money laundering and terrorism financing risk. AUSTRAC also notes that these checks are not relevant to every type of risk.
In practice, the situations where a small firm is most likely to need them are:
- the client is a politically exposed person (PEP) in circumstances where AUSTRAC’s PEP guidance requires it, such as a foreign PEP
- the client has been rated high risk and your AML/CTF program calls for enhanced CDD
- a transaction is unusually large, complex or does not fit what you know about the client
- the money comes from overseas, from a third party or in a way the client cannot easily explain
Check your own program, because it should set out when your firm collects and verifies this information.
What evidence AUSTRAC gives as examples
AUSTRAC lists examples of evidence that may be acceptable. For source of funds, they include:
- reliable and independent online sources, such as government databases and credible media reporting
- a signed letter from the customer’s accountant confirming the source of funds
- a payslip summary or employer letter confirming employment and salary
- a letter from an estate executor confirming an inheritance distribution
- a sale record or title deed for property that was sold
For source of wealth, the examples include an accountant’s letter confirming sources of wealth, pay summaries from current and past employers showing wages built up over time, an executor’s letter for an inheritance, and sale records or title deeds.
AUSTRAC also says you must verify the information you collect as appropriate to the customer’s risk, and that evidence verifying source of wealth can also verify source of funds where the two are not distinct. A retiree buying a unit with the proceeds of selling the family home, for example, may satisfy both with the same sale record.
Two small-firm examples
Illustrative example 1: a property deposit. A buyer pays a deposit through a real estate agency and says the money is an inheritance. The source of funds question is answered by an executor’s letter or estate distribution statement. If the buyer is otherwise low risk and the amount fits the inheritance, source of wealth may not need separate checking.
Illustrative example 2: a new trust for a foreign PEP. An accounting practice is asked to set up a family trust for a client who is identified as a foreign PEP. AUSTRAC’s PEP guidance points towards establishing both source of funds and source of wealth here. The practice asks how the money settled on the trust was obtained and how the client built their overall wealth, verifies both with documents appropriate to the risk, and gets senior manager approval before proceeding.
When the answers do not add up
The purpose of these checks is to see whether the money and the client’s profile fit together. Warning signs include:
- an explanation that does not match the client’s known occupation or age
- money arriving from a third party with no clear connection to the client
- funds routed through several accounts or entities before reaching you
- reluctance to provide any supporting evidence, or documents that look altered
AUSTRAC’s own examples include a case where a bank could not obtain the information it needed to establish source of funds and source of wealth, formed a suspicion on reasonable grounds and lodged a suspicious matter report. In another, the evidence reasonably established both and no report was needed. Either outcome is acceptable when it is reasoned and recorded. If you form a suspicion, be careful not to tip off the client.
What to record
Keep a short note on the client file that shows:
- why you collected source of funds, source of wealth or both
- what the client told you
- what evidence you obtained and how it verifies the explanation
- whether the explanation fits the client’s profile, and your conclusion
- any approval, risk rating change or further action
Keep these records with your customer due diligence records, which generally need to be kept for 7 years after the business relationship ends.
Frequently asked questions
Is a bank statement enough to show source of funds?
On its own, usually not. AUSTRAC says source of funds is how the money was originally earned or obtained, not the account it came from. A statement can support the explanation, but it rarely answers the question by itself.
Do I need to check source of wealth for every client?
No. These checks apply in specific circumstances and as an enhanced CDD measure where risk calls for it. Your AML/CTF program should say when.
Can an accountant’s letter be used?
AUSTRAC lists a signed letter from the customer’s accountant as an example of acceptable evidence for both source of funds and source of wealth.
What if a client refuses to explain where the money came from?
Treat it as a risk factor. You may be unable to proceed, and you need to consider whether a suspicious matter report is required. See our guide on what to do when a client won’t provide information.
Is this the same as asking about the client’s income?
Income is one possible source. Source of wealth looks at the full picture, including businesses, investments and inheritances built up over time.
How NameScan can help
Source of funds and source of wealth checks often follow a screening result, such as a PEP match or adverse media. NameScan lets small firms run PEP, sanctions and adverse media checks on a pay-as-you-go basis, record their decision on each result and keep a dated record alongside the rest of their CDD file.
Start screening with NameScan, or read our guide to screening relatives and close associates of PEPs.
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