🔹 Definition
Proof of Income refers to any documentation that verifies an individual’s or entity’s earnings over a specified period, commonly used for financial assessments, risk evaluations, and regulatory compliance. It is often required during loan applications, immigration processes, rental agreements, or AML/CFT checks, especially when validating the Source of Funds (SoF) or Source of Wealth (SoW).
Proof of income is critical for ensuring that funds used in a transaction or relationship are derived from legitimate, lawful, and stable sources.
🔹 Frequently Asked Questions (FAQs)
Q1: What are acceptable documents for Proof of Income?
- Recent payslips (usually 3–6 months)
- Employment verification letters stating salary
- Tax returns (e.g., IRS Form 1040, IRAS Notice of Assessment)
- Bank statements showing salary deposits
- Freelance contracts or invoicing records
- Business income statements or dividend reports for self-employed individuals
- Government benefit statements, such as pensions or subsidies
Q2: When is Proof of Income required?
- Opening bank or brokerage accounts with income thresholds
- Applying for loans, credit cards, or mortgages
- Rental housing applications or property purchases
- Visa and immigration assessments (e.g., self-sponsorship, EP/PR applications)
- Enhanced due diligence (EDD) for high-net-worth clients or large transactions
Q3: How is Proof of Income assessed in compliance checks?
- The source must be consistent with the client’s occupation and profile
- Income should be stable, verifiable, and come from legitimate economic activity
- The documentation must be authentic, recent, and unaltered
- May require cross-referencing with bank statements, tax filings, or employer verification
Q4: What are red flags in Proof of Income documents?
- Unusually high or inconsistent earnings relative to declared profession
- Documents from non-verifiable or unlicensed entities
- Fabricated or manipulated payslips or tax filings
- Income deposits from high-risk jurisdictions without supporting explanation
- Use of third-party income sources not disclosed during onboarding
Q5: Is Proof of Income the same as Source of Funds?
No, but they are related:
- Proof of Income shows the ongoing earnings from a job, business, or benefit
- Source of Funds (SoF) refers to the specific origin of money used in a transaction
- In many AML workflows, proof of income supports SoF validation, particularly in recurring or salary-based funding
