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Proof of Source of Funds for a Bank
Your bank has asked where the money came from, a transfer is on hold, or private banking onboarding has stalled. It is an unwelcome position, but a manageable one. Proof of source of funds works when it answers the question compliance is really asking and arrives in a form the bank can put straight into its file. A client letter rarely does that. A legal opinion does. We trace the money from its first source to today’s transfer, back every link with documents, deal with the sanctions questions before the bank raises them, and carry the correspondence through to an outcome. If your bank has sent a request, get in touch: we will look at what you already have and tell you what the work actually requires.
Proof of Source of Funds for a Bank
- The Request Has Arrived. What Happens Now
- When a Bank Asks
- Source of Funds and Source of Wealth Are Different Questions
- Why a Client Letter Usually Is Not Enough
- What the Legal Opinion Contains
- Documents Left Behind in Another Country
- The Sanctions Dimension
- Correspondence and the Follow-Up Request
- How the Work Is Organised
- Why This Question Belongs with a Sanctions Lawyer
- Questions and Answers
The Request Has Arrived. What Happens Now
The letter looks routine: a list of documents and a deadline, usually somewhere between ten days and a month. Until it is answered, the payment does not move, the account may be restricted for outgoing transactions, and whatever the money was meant to close sits waiting.
Proof of source of funds is not a questionnaire and not a character reference. What the compliance department is deciding is not whether you are honest but what risk the bank is carrying: if a regulator or a correspondent bank asks tomorrow, can the bank point to a coherent, documented account of where this money came from? Where the file does not contain one, saying no costs the bank less than saying yes.
Which leads to a practical conclusion. The answer has to address the question behind the request rather than its literal wording, and it has to arrive in a form the bank can put in the file.
When a Bank Asks
- A large inbound transfer arrives from abroad, particularly the first one, or one that sits well outside the usual pattern on the account.
- An account is being opened, or a relationship is being onboarded in private banking, where the diligence starts deeper by design.
- Property is being purchased, and the closing funds come from another country or from a third party.
- A periodic review falls due, and the bank refreshes the file on a client it has held for years.
- The ownership of a corporate client changes: a new shareholder, a new beneficial owner, or a new source of funding appears.
The trigger can also be external: a name-screening hit, information from a correspondent bank, a change in the risk rating of a country connected to the payment. The wording of the request is almost always the same and rarely reveals what prompted it. Which documents the bank looks at first depends on the type of transaction and on where the money came from.
Source of Funds and Source of Wealth Are Different Questions
Requests usually run the two together, but they are tested differently, and confusing them accounts for a good half of the answers that fail.
Source of funds is the history of the specific money in the specific transaction: where this transfer originated, from which account, on what legal basis, through which payment route.
Source of wealth is the history of your estate as a whole: what you did, how you earned it, how the capital accumulated over fifteen or twenty years. The second question is broader and harder to answer, and it is the one left open when a client sends a statement covering a single deal and considers the matter closed.
A complete proof of source of funds addresses both levels and shows how one connects to the other.
Why a Client Letter Usually Is Not Enough
Clients write to the bank about what seems central to them: they are legitimate business people, the money was earned in business, the tax was paid. All of that may be perfectly true and still answer none of the questions the bank is actually asking itself.
Compliance is not testing sincerity; it is testing the joints. Is there a document behind every link? Do the amounts and the dates reconcile? Is there an explanation for the gap between the sale of an asset in one year and the transfer in another? Is it clear why the funds arrived from an account in a third country, and why the remitter is not the party named in the contract? A single unexplained gap devalues the rest of the file, and the client frequently has no idea where the gap opened, because to them the story is self-evident.
There is a second consideration. Whatever is sent to the bank stays in the file permanently. An imprecise or incomplete account given in haste works against you later: every subsequent clarification reads as a correction. The first answer matters more than the second.
What the Legal Opinion Contains
The opinion is a document on counsel’s letterhead, addressed to the bank and signed by someone who carries professional responsibility for it. It ordinarily sets out:
- A description of the client: citizenship, tax residence, occupation, and how the assets are held.
- A chronology of how the capital was built, from the earliest source to the present, period by period, with the supporting document identified at each stage.
- The legal characterisation of the key transactions under the law of the country where they took place: why each was lawful, what requirements applied, how title passed.
- The tax position: what tax arose and how it was paid, or, where no tax arose, why not.
- A sanctions analysis of the transaction and of the parties to it.
- The conclusion and a numbered schedule of exhibits the bank can cite in its own correspondence.
Length follows the history, not the wish to look substantial. A short opinion on one clean transaction works better than a hundred pages in which the bank cannot locate the link it needs.
Documents Left Behind in Another Country
A familiar difficulty: the capital was built in the country you left, the company was wound up years ago, the bank that held its accounts lost its licence, and access to the archives is limited. This is not a dead end, but it calls for a different technique of proof.
In place of the missing primary document, secondary evidence carries the weight: extracts from state registers, tax returns for the relevant years, audit reports, court and notarial records, corporate documents of the counterparty, material in the public domain. The value of such a file lies in convergence (several independent sources establishing the same fact), and for most banks that is sufficient.
We identify at the outset which documents will be needed and in what form. Translation and notarisation are arranged by the client; the list comes first so that nothing is translated twice or in the wrong form.
The Sanctions Dimension
For a US bank, money connected to the former Soviet states is almost never primarily a tax question. The real concern lies elsewhere: whether anywhere in the chain there is a person, a company, or a bank affected by the restrictions administered by the Office of Foreign Assets Control of the US Department of the Treasury (OFAC).
The opinion therefore addresses the participants separately: screening against the sanctions lists, analysis of the ownership structure under the fifty percent rule, the status of the banks through which the payments passed, and whether the transaction engages any sectoral restriction. Where the history does contain an episode involving a designated person or entity, it is far better to disclose and explain it. The bank will very likely find it in any event, and once found unaided it reads as concealment.
This is the element ordinarily missing from a memorandum prepared by an accountant or a tax adviser, and the reason banks want the document to come from a lawyer.
Correspondence and the Follow-Up Request
Delivering the document is not the end of the work. Banks almost always come back: a document on one particular episode, a question about an intermediate link, an explanation for a discrepancy in dates. We carry that correspondence through to a conclusion, and in most matters several rounds of clarification are simply how a review proceeds rather than a sign that it is going badly.
Where the bank has already raised closing the account, the situation is different: the timetable is tighter, the steps are different, and so is the negotiation with the bank. In that case, it is worth getting in touch at once rather than waiting for the closing date.
How the Work Is Organised
- A consultation: we read the request, review the documents you already have and the history of the capital, then set the scope and the timetable.
- An Engagement Agreement is signed and a retainer paid. Work begins once both are in place.
- Collection and analysis of documents, identification of the gaps in the chain, and a plan for closing them.
- Preparation of the opinion with its documentary schedule.
- Correspondence with the bank through to the outcome.
- We discuss the matter with you in English or Russian, whichever you prefer; documents for the bank are prepared in English.
Why This Question Belongs with a Sanctions Lawyer
When a US bank looks at money connected to the former Soviet states, its first concern is almost always sanctions rather than tax. OFAC sanctions are the core of our practice: delisting petitions, applications for specific OFAC licenses, and the recovery of blocked assets. The sanctions section of the opinion is therefore written the way the bank’s compliance team will read it, not assembled from a generic checklist.
We are US attorneys licensed in New York, and we work in Russian as well as English. You can explain the history of your money in your own language without losing detail, and the bank receives an opinion in English from a US lawyer, in a form it recognises.
The lawyer you speak to is the lawyer who signs the opinion and answers the bank’s follow-up questions, so nothing gets lost in hand-offs.
Questions and Answers
Typically two to six weeks, depending on how many episodes have to be closed and how accessible the documents are. Where the bank has set a hard deadline, the work is planned backwards from it: part of the material can go in a first package with the remainder to follow.
That is normal. Banks keep these requests generic precisely so as not to reveal what triggered them. The sensible first step is a narrowing letter from counsel. Even when the bank replies in general terms, the shape of its reply usually shows where the doubt sits.
Because the bank is not testing legality; it is testing provability. Money lawfully earned fifteen years ago is often harder to evidence than yesterday’s transaction: the companies are gone, the banks have changed hands, the paperwork is spread across three countries. The work consists of assembling a coherent and verifiable account from exactly that.
No. A missing primary document is covered by a set of secondary sources establishing the same fact independently. Episodes that genuinely cannot be evidenced do occur, but less often than people assume.
The decision belongs to the bank, and nobody can guarantee it. What can be influenced is what actually drives the outcome: whether the chain is complete, how well each link is evidenced, whether the sanctions questions were closed in advance, and how the correspondence is handled. That is where matters sound on the merits are most often lost.
The core is reusable, but the document is addressed to a particular institution, and each has its own questions and its own risk appetite. The usual approach is a base opinion with adaptations for individual banks, which costs considerably less than starting again.
Yes. Banks in the UAE, Switzerland, Cyprus, and elsewhere ask for the same thing for the same reasons, and their sanctions review is often stricter than that of US banks because of their correspondent relationships.
With a consultation. Contact us and send the bank’s request and a short account of where the money came from. We will look at what you already have and tell you what the work actually requires.
