Source of Funds (SoF): Source of Funds refers to the origin of the specific funds or assets used in transactions between the financial institution and the customer. This can include salary payments, business income, sale of property, investment income, etc.
Source of Wealth (SoW): Source of Wealth refers to the origin of the total amount of wealth the customer has accumulated over time. It describes the activities or circumstances which have generated the customer’s overall wealth. This can include inheritance, investments, property sales, business ownership, or other significant financial activities.
Narrative on Wealth Generation
A narrative on wealth generation should provide a detailed description of how the individual has accumulated their wealth over time. It should include:
- Personal Background: Brief biography, including education and career history. Key milestones in the individual's professional life that have contributed to wealth accumulation.
- Professional Achievements: Details of business activities, including the nature and size of businesses owned or operated. Description of key roles and positions held in various organizations. Significant transactions, such as sale of businesses or assets.
- Investment Activities: Information on major investments in stocks, real estate, or other assets. Details on the growth and returns of these investments over time. Evidence of investment decisions and performance, including dividends or capital gains.
- Inheritance and Gifts: Information on any inheritances received, including details of the benefactor and the value of the inheritance. Description of any significant gifts received and their sources.
- Additional Sources: Any other significant sources of wealth, such as income from intellectual property or significant legal settlements.
Calculating Source of Funds and Source of Wealth
Source of Funds Calculation
To calculate the SoF, you would identify the specific transaction(s) and the origin of the funds used in these transactions. For example:
- Salary Payments: Monthly salary of AED 50,000 for the past 2 years = AED 50,000 x 24 = AED 1,200,000.
- Business Income: Annual net profit from business = AED 2,000,000 over the last financial year.
- Investment Income: Dividend income from investments = AED 500,000 in the past year.
Source of Wealth Calculation
SoW involves a more comprehensive overview of the customer’s total wealth accumulation:
- Inheritance: Received AED 5,000,000 from the estate of a deceased relative.
- Business Ownership: Valuation of the business owned = AED 10,000,000. Sale of another business = AED 3,000,000.
- Real Estate: Sale of property for AED 4,000,000. Current real estate holdings valued at AED 8,000,000.
- Investments: Total investment portfolio value = AED 6,000,000. Accumulated dividends over the past 5 years = AED 1,000,000.
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