Source of Wealth Done Right: Proven Practices Inspired by MAS Guidance

Singapore’s Monetary Authority of Singapore (MAS) recently published comprehensive best practices for Source of Wealth (SoW) due diligence, offering valuable insights that transcend borders. These recommendations were jointly developed by the AML/CFT Industry Partnership (ACIP), a public-private forum that unites financial institutions, regulators, law enforcement, and government bodies to address emerging money laundering and terrorism financing risks. Forget one-size-fits-all KYC: this guidance marks a paradigm shift from Know Your Customer to Know Your Transaction, diving deeper into Source of Wealth (SoW) than ever before. MAS’s new, in-depth best practices set a global benchmark — a unique playbook that redefines due diligence.

Amid a surge in crypto adoption and persistent money laundering risks—estimated at over USD 1.4 billion annually—global regulators demand more rigorous Source of Wealth checks. While the European Banking Authority (EBA) has issued detailed guidance on Enhanced Due Diligence that includes SoW components, MAS’s new standards uniquely hone in on the practical aspects of SoW verification, offering a complementary, depth-first playbook for institutions worldwide. Let's dive in!

1. Adopt a Risk-Based and Proportional Approach

1.1 Evidence-Led Over-Exhaustive Documentation

MAS’s guidance emphasizes that SoW due diligence should be both risk-based and evidence-led, aligning with Financial Action Task Force (FATF) standards which prioritize material risk drivers over blanket documentation requirements. By focusing on the most relevant and high-risk factors, institutions can:

• Allocate Resources Efficiently: Rather than collecting every conceivable document, compliance teams can concentrate on gathering credible evidence tailored to the client’s risk profile. FATF Recommendation 10 underscores the importance of applying due diligence measures “in a manner that is proportionate to the risk” rather than “unduly burdensome” processes.
  

• Enhance Decision-Making: An evidence-led approach encourages analysts to assess the quality and relevance of each piece of information, ensuring that investigations are grounded in verifiable facts rather than being drowned in paperwork.

“Information collection should be balanced against the level of risk and the nature of the relationship. Institutions should not apply the same level of scrutiny for all customers.” — MAS Guidance (p. 8)

1.2 Plausible and Risk-Appropriate Verification

The guidance clarifies that SoW does not need to be verified to the last dollar; instead, it should be plausible, risk-appropriate, and backed by credible evidence:

• Plausibility Over Perfection: Institutions must confirm that the declared sources of wealth make sense in light of the client’s profile and transactions, rather than verifying every cent.
  

• Risk-Appropriate Depth: The level of verification should match the risk category. High-net-worth individuals or politically exposed persons (PEPs) warrant deeper scrutiny, such as external valuations or third-party confirmations, while lower-risk clients may suffice with standard attestations.
  

• Credible Evidence: Leverage multiple, independent sources—such as public registers, professional appraisals, and blockchain analytics for crypto assets—to triangulate and validate SoW assertions.

“Source of Wealth verification should be sufficient to provide a reasonable degree of confidence without requiring absolute proof of every detail.” — MAS Guidance (p. 9)

2. Ongoing monitoring

"A customer’s underlying SoW risk can change during the lifecycle of their relationship with the FI (e.g., fresh funds introduced into the relationship, changes in their transacting behaviour, change in SoW profile etc.) (...) as a customer transacts and engages with the FI.

• Continuous Monitoring & Alerts: For high-risk or dynamic client profiles, implement ongoing SoW monitoring with automated alerts to flag significant changes in wealth sources or transaction patterns over time.

• SoW risk reassessment in case of significant changes in circumstances such as: Total Assets Under Management, Transaction throughput, Customers NetWorth, KYC characteristics and length of relationship.

3. Leverage Multiple and Independent Data Sources

MAS stresses corroborating SoW claims through diverse sources: client documents, public/commercial databases, corporate registries, property databases, tax filings and OSINT, including blockchain explorers for crypto (a semi-primary data source).

4. Senior Management Oversight

MAS guidance underscores that effective SoW due diligence is not solely a compliance function—senior management must champion and oversee the program. Key expectations include:

• Board-Level Accountability: The board or senior leadership should receive periodic reports on SoW findings, risk trends, and any material gaps in controls, enabling informed strategic decisions.

• Clear Governance Frameworks: Governance structures must define roles, responsibilities, and escalation paths for SoW issues, ensuring that exceptions or high-risk cases are promptly elevated.

• Resource Commitment: Senior management should allocate adequate resources—technology, personnel, and training—to sustain a robust SoW regime, reflecting the institution’s risk appetite.

• Performance Metrics & Reviews: Establish key performance indicators (KPIs) for SoW checks (e.g., time to review, percentage of high-risk triggers followed up) and review these metrics at the executive level to drive continuous improvement.

  
  

By embedding SoW diligence into governance and oversight, institutions demonstrate a top-down commitment that reinforces a culture of compliance.

5. Practical Examples of SoW Best Practices

MAS’s guidance provides detailed, category-specific recommendations to illustrate how institutions can apply the risk‑based, evidence‑led approach in different scenarios: Inheritances & Gifts, Business Ownership, Sale of goods that cannot be easily valued, Employment Income and the one that ChainComply's specializes in: Investment Gains.

Zoom on Source of Wealth in Crypto: Continuous Vigilance in a Pseudonymous World

MAS highlights that digital asset transactions should be scrutinized with the same rigor as fiat transactions:

• Obtaining trading records and account statements (e.g. for exchange hosted wallets)

• Understanding details of the customer’s investment strategy and consulting in-house subject matter experts if necessary.

• Assessing the plausibility of seed funding and investment returns

• Assessing trends of wealth generation (e.g., whether wealth has been derived from one-off vs. ongoing investment activities). ..with additional crypto-wealth-specific steps like:
  

• Obtaining on-ramp and off-ramp evidence to validate fiat-to-crypto conversion and vice versa

• On-Chain Transaction Analysis: Utilize blockchain explorers and analytics to trace fund origins, identify mixing services, and detect suspicious flows.

• Wallet Profiling: Assess the transaction history and counterparties of key wallets to infer the origin of funds.

• Digital Asset Valuation: Ensure valuations reflect market conditions and convert on-chain balances into fiat-equivalent values for consistency in SoW assessments.

• Proof of ownership: Witnessing the customer logging into his private un-hosted wallets. Videos and screenshots may be recorded as corroborating evidence. Furthermore, Satoshi Test and/or message signing may be further performed to verify ownership and control.

Access the full MAS guidance and quotes: Industry Perspectives on Best Practices for Source of Wealth Due Diligence

How ChainComply Supports Crypto-Related SoW Due Diligence

ChainComply’s digital AML platform is designed to streamline end-to-end Source of Wealth investigations for banks and crypto exchanges:

• Integrated Data Feeds: We pull clients' data history in real time via APIs or CSV and augment it with data thanks to our connection to best-in-class blockchain analytics tools.

• Simple yet comprehensive visualisations of Source of Wealth, including trading, Staking, Airdrops, DeFi revenues, external deposits (fiat and crypto)

• Unmasking the whole story: We help to uncover the overall customer story (both on-chain and on-exchange transactions), including hidden wallets.

• Risk-Scored Evidence Collection: Automated scoring of clients' on-chain transactions based on risk relevance, integrating with any blockchain forensic tools. 

• One-Click Reporting: Dynamic case templates with embedded data visualisations and comments sections to streamline investigation workflows, guaranteeing consistency and full audit trails with a single click.

• One-off or Continuous monitoring modes available
  

Discover how ChainComply can elevate your SoW program: chaincomply.io

Disclaimer: For informational purposes only; not legal advice. Consult local regulations and legal counsel, as the MAS best practices may not apply in your jurisdiction.