Introduction
Monetary Authority of Singapore (“MAS”) has recently published a circular for Financial Institutions (“FIs”) with the objective of streamlining their Source of Wealth (“SOW”) establishment processes to reduce unnecessary burden on legitimate businesses and investors.
Source of Funds (SOF) refers to the origin of the specific funds or money used in a particular transaction or business relationship. SOW refers to the origin of a customer’s entire body of wealth, including the seed money that generated subsequent wealth, as well as any gifts or other assets received.1
Materiality and Relevance Principles for SOW Establishment
MAS has laid out three (3) guiding principles that should anchor every institution’s SOW framework.
| Core Principle | Recommended Practice |
| Focus on Material or Higher SOW | FIs should direct their verification efforts toward SOW information that is most significant or poses the greatest risk, rather than attempting to corroborate every detail provided by the customer. A targeted approach ensures that compliance resources are deployed efficiently, without subjecting low or medium risk customers to unnecessary scrutiny. |
| Obtain Relevant and Pertinent Information | FIs should assess whether the information already on hand is sufficient to establish the customer’s SOW before requesting additionaldocumentation. Unnecessary or excessive requests, such as long-dated financial2 or employment records, should be avoided unless it is deemednecessary. |
| Take Measures Appropriate to Customer’s Risk Profiles | FIs should apply different SOF/SOW measures that is commensuratewith individual customer’s risk profile and circumstances, rather than applying a “one-size-fits-all” approach. FIs should have a clear risk-based justification, requesting additionalinformation for higher risks customers; allowing its onboarding process to remain efficient and proportionate without compromising on the integrity of its compliance review. |
The following examples illustrate how SOW establishment should be approached across different customer risk profiles:
| Risk Level | SOW Establishment |
| Low or Medium | FIs may adopt one or more of the following approaches to identify acustomer’s SOF/SOW, including but not limited to: Onboarding Questionnaire; Subscription Agreement; SOW Declaration Form; or Publicly available information (i.e. company website) As the customer’s risk profile is neither material nor poses a higher risk, corroboration step is not mandatory. |
| High | In addition to identifying the customer’s SOW, FIs are expected to corroborate the origin of wealth, with the approach differing depending on whether the customer is an individual or a corporate entity. The following are non-exhaustive illustrative examples of the types of documents that may be required to corroborate the SOW: Employment / Salary Income Recent payslips or salary statements; or Tax assessment notices or income tax returns. Business Ownership / Entrepreneurship Financial statements or audited accounts; or Shareholder agreements or certificates. Investments / Portfolio Bank statement showing investment holdings; or Portfolio valuation reports. Inheritance / Gifts Grant of probate or letters of administration; Will or trust documents; or Deed of gift or statutory declaration. |
Summary
In brief, this circular outlines MAS’ key guidance on adopting a risk-proportionate approach to SOW establishment, emphasizing the principles of materiality and relevance in the verification and corroboration process. Rather than applying a one-size-fits-all compliance framework, FIs are encouraged to calibrate their SOW measures in a targeted and purposeful manner, guided by the customer’s individual risk profile and legal entity type.
For the industry as a whole, a more streamlined and risk-proportionate SOW process allows FIs to focus their compliance efforts where they matter most, reducing unnecessary friction for legitimate businesses and investors during onboarding. This would help to strengthen the overall effectiveness of Singapore’s AML/CFT regime and reinforce Singapore’s reputation as a trusted and competitive financial hub.
How We Can Help
As a compliance solutions advisor and funds specialist, we provide specialized solutions in accordance with MAS observations and recommendations to help your institution meet these regulatory requirements. Feel free to reach out to us for non-obligatory discussion.
