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Can I accept a client’s explanation as to the “source of funds”?

Where the source of funds is clear and there are no inconsistencies with the client’s profile and activities, the client’s explanation will likely be sufficient to satisfy the requirement. In other cases, it may be appropriate to obtain supporting documentation to confirm the source of funds. In circumstances that raise suspicions, for example where the client’s explanation is unusual or inconsistent with your knowledge of or experience with the client, you may need to undertake enhanced due diligence, including obtaining supporting documents.

In all cases, you should practice within your area of competence and exercise your professional judgment to assess risk. Seek advice from the Director of Practice Management at the Law Society for further guidance and resources with respect to addressing risks.