When something goes wrong with a client relationship, the question compliance teams and regulators come back to is usually the same: where did the money come from?
In the latest episode of Beyond the Check: Brick by Brick, host Rhian Del-Valle is joined by Jon Parish, Compliance Manager at Credas, Mike Ross, Head of Risk & Compliance at Anderson Strathern, and Luke Haddon, MLRO at Keystone Law, to explore source of funds and source of wealth, and why getting this part of due diligence right matters more than ever.
The starting point of the conversation was a common perception in the sector: that source of funds has become harder to get right. Luke pushed back on that idea. Having spent five years working with law firms on this exact problem, he argued that the underlying regulations have barely changed since 2017. What has changed is the sectoral guidance and expectation around what “reasonable measures” actually look like in practice, and that shift can feel unsettling for people used to a simpler, blanket approach.
That blanket approach, the panel agreed, is part of the problem. Requesting six months of bank statements as standard practice might feel thorough, but it doesn’t automatically tell you anything about the origin of the money sitting in that account. As Luke put it, real due diligence needs to be “a lot more surgical” and “a lot more precise,” built around fewer, more pointed questions rather than reams of paperwork.
Central to this is a framework Luke described as three overlapping pillars: information, verification and contextual questions. Gathering documents is only part of the picture. The real value, he explained, comes from asking a client two or three follow-up questions once they’ve given an initial answer, building out the wider context around a transaction rather than accepting the first explanation at face value.
This is where instinct plays its part. Fee earners aren’t expected to be AML experts, but they are expected to notice when something doesn’t sit right. “Your instincts only click if you ask enough questions to trigger something for it to go off,” Luke explained, encouraging fee earners to be, in his words, “5% more curious” in every client conversation.
Mike Ross picked up this theme from a firm-wide perspective. At Anderson Strathern, the aim has been to remove as much of the risk assessment burden as possible from individual fee earners, replacing it with a structured client and matter risk assessment that captures the facts, supported by system triggers and central team review. He compared it to a well-drilled sports team: everyone needs to know their role and trust that the person they’re passing to will be in the right place to receive it.
That doesn’t mean the human element disappears. Quite the opposite. Michael was clear that accountability can never be automated away. “You can outsource the work. You can’t outsource the accountability,” he said. “The buck absolutely stops with someone, and that will always be a person.”
The conversation also tackled a question that comes up often in practice: where’s the line between source of funds and source of wealth? Luke described the two as having significant overlap, particularly for straightforward transactions like a first-time buyer using savings and support from family. But as client circumstances become more complex, involving multiple properties or income streams for example, the two start to separate. Source of wealth, he explained, should be reserved for the highest-risk clients, such as PEPs, where a fuller picture of overall wealth is genuinely necessary, rather than applied as a default step in every case.
Jon Parish brought an audit perspective to the discussion, drawing on his experience supporting firms through the process. What he sees most often missing on file isn’t the underlying evidence, it’s the documented rationale that ties it all together. A well-reasoned note explaining why a fee earner reached a particular conclusion, even a few sentences long, can be the difference between a defensible file and one that raises more questions than it answers. “It’s what brings the evidence to life,” he said, and what turns a stack of bank statements into a genuine story about where the money came from.
On technology, the panel struck a balanced note. Automation and open banking tools are already transforming how firms gather and review evidence, cutting down significantly on the time spent chasing paperwork. But as Jonathan pointed out, the regulations are designed to keep a human firmly in the loop when it comes to interpreting risk and making a judgement call. Technology can present the evidence. It can’t decide what it means.
Michael summed up where that leaves firms. Reflecting on nearly two decades in the sector, he noted just how far tools have come since the days of manually poring over pages of bank statements with a highlighter. “Tools are really driving down the time spent on that stuff,” he said, “but there’s no silver bullet when it comes to AML.” Getting source of funds and source of wealth right will always come down to proportionate, risk-based judgement, informed by better questions, better context, and a culture where fee earners feel confident enough to ask them.
Watch the full episode of Beyond the Check: Brick by Brick to hear the complete conversation with Jon Parish, Mike Ross and Luke Haddon.
