How to confirm the source of funds for a bank?

If you plan to open and use a foreign bank account, be prepared to collect and provide banks with various information. We recently shared two universal factors that will increase your chances of opening a corporate account if observed.

Today, we will talk about a very important requirement that everyone who will open or use accounts abroad will probably encounter, namely confirmation of funds’ source you will deposit into the account.

Where did the funds come from? What evidence do you have of this? Which of your documents will the bank accept, and which will it consider suspicious? Can a loan be indicated as a source of funds? What about the money received from the sale of cryptocurrency? Did you pay taxes on this income? This article will be useful to anyone planning to open a corporate account, including cryptocurrency specialists and entrepreneurs.

As a rule, the bank requests confirmation of the source of funds in two cases:

1. When opening an account: where does the client get the money to deposit into the account or do business;
2. For large transfers between accounts: where did the funds coming into the account come from?

The main criterion that the bank is interested in is the "purity" of the origin of your funds. It means taxes must be assessed and paid on your money. The bank will consider the following documents to be good evidence of the origin of funds:

1. Tax return if you are an individual - employee or self-employed. It is the simplest and most understandable option;
2. Calculation from the accounting department of the company you work for. The document must indicate the details of this legal entity, your data, salary amount, and taxes withheld;
3. Documents confirming capital gains;
4. A notarized contract of sale or donation of valuable property, for example, real estate, cars, expensive assets in the form of equipment, valuable pieces of art, and so on;
5. A document confirming inheritance, the income you will transfer to the company's account.

If your funds come from dividends, they are generally taxed at the company level, so you may ask the company for an explanation or provide a tax return. If you received dividends from a company in a foreign jurisdiction, your personal tax return and supporting documents may be required.

There are many options for confirming income; even a properly documented lottery win can help you.

We also want to debunk the common myth that it will be enough to provide a loan agreement for the money you will transfer to the account. Almost all banks will refuse to accept such a reason or will require an explanation of your connection with the lender, the origin of the money from the lender itself, and how you plan to return it. Generally, banks do not like and do not accept any transfers from third parties, whether a loan repayment of a debt or just a transfer.

... It is more difficult for clients from the CIS region to open foreign accounts than citizens of many other countries. For example, you will transfer money from a personal account to the account of your foreign company. In that case, you need to consider currency and investment restrictions on withdrawing funds abroad and other internal regulations and restrictions in your country. Antwort Law has many years of helping clients who have encountered obstacles in transferring money from their home country, helping them open accounts with reputable banks, and maintaining relationships with bankers worldwide ...

Let's take a separate look at what to do if the money is received after selling cryptocurrency, for example, if you are a crypto trader and once bought a coin or token and then resold it profitably and made a profit.

Indeed, the regulation and taxation of cryptocurrencies vary in many countries, and your country may not withhold taxes on them. In this case, you need to think through, prepare, and provide the bank with the following documents in advance:

1. An extract from the trading platform where cryptocurrency trading took place;
2. Confirmation of the source of your funds for the purchase of this cryptocurrency.

Also, if you have any other income that was not subject to taxation by law, then you will probably need to attach another of the documents confirming this, for example:

• a legal opinion of a lawyer or an opinion of an accountant;
• a letter from the tax service or the relevant regulator (government organization).

By collaborating with Antwort Law, you can rest assured about the legal aspects of your business and the precision in document preparation. We would be happy to assist you and offer you to schedule a free consultation with our specialists.

Lidia Ivanova,

International Lawyer
Antwort Law