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Corporate Source of Funds and Source of Wealth requirements

Mason Friis-Burden
Updated

As part of the requirements as a regulated financial institution, Saxo must obtain information and documentary evidence of the client’s source of funds, source of wealth and intend to invest.

Source of funds refers to the origin of the funds involved in a business relationship (i.e. the funds deposited into the Saxo account). It includes the activity that generated the funds used in the business relationship.

Source of wealth refers to the origin of the client’s total wealth, not necessarily limited to the funds transferred into the Saxo account. 

In certain instances, Saxo is required to also collect Source of Funds (SOF) documentation to corroborate the information provided by the client. The type of SOF documentation can vary depending on the source of income.

This is a non-exhaustive list of documents that might be requested:

In order to ensure a smoother onboarding process, in addition to the requested source of funds documentation, it is recommended to provide supportive explanations to help Saxo in forming a full picture of the client’s financial situation and avoid additional questions. In general, the supporting explanation should cover:

  • The time the source of income was received,
  • How the source of income was acquired,

  • If this originated in the past, explanation about the flow of funds tracing back to the original funds.

     

Please note

In case of multiple client relationships with Saxo, the same source of income might not be sufficient to justify the activity of multiple accounts.

 

Company Sale 

If the client declares their SoF to be from a company sale, we must collect one of the following: 

  • Copy of contract of sale signed by solicitor/lawyer, plus bank statement showing the proceeds. 
  • Signed letter from solicitor/lawyer or regulated accountant incl. specifics of the sale i.e. date, amount, ID of the company. 

Company profits 

Company profit is essentially the financial gain a company makes after subtracting all its expenses from its total revenue.    

A company's revenue can come from various sources, depending on its business model and industry. Here are some common sources: 

  • Sales of Goods: Revenue from selling physical products, such as electronics, clothing, or food items. 
  • Services: Income from providing services, like consulting, maintenance, or legal advice. 
  • Rentals and Leases: Income from renting out property or equipment. 
  • Sales of real estate / subsidiary 
  • Investments: Earnings from investments, including dividends, interest, or capital gains. 
  • Subscriptions: Regular income from subscription-based services, such as streaming platforms or software-as-a-service (SaaS) products. 
  • Licensing Fees: Revenue from licensing intellectual property, such as patents, trademarks, or copyrighted content. 
  • Advertising: Revenue from selling advertising space, either online, in print, or on broadcast media. 
  • Royalties: Payments received for the use of the company's intellectual property, such as music, books, or technology. It’s a form of passive income. 

It is essential that we collect trustworthy documentation of the company’s accounts and financial activities. However, not all companies are legally obliged to audit their financial statements therefore in such cases we collect all of the following: 

  • Financial Statement (not in draft or project version) signed by the director,  
  • Tax documentation (Tax Submission and Tax Return document), 

OR 

  • Proof of submission to the tax authority. 

This is a minimum requirement, so more could be necessary to collect depending on the circumstances. And in some jurisdictions, it is not possible to acquire proof of tax submission. 

Multiple Financial Statements may be collected depending on the case and risk, but the general approach should be to always collect the latest annual audited financial statement. 

In some case the financial statements do not give enough details or are not reflecting the recent revenue of the company to clarify the SOF, therefore additional/substitute documents may be collected, or external research performed on trusted open sources. 

E.g.: the latest available financial statement displays the result in X, but the sale of subsidiary happens in X+1 therefore won't be reflected in the X financial statement. In that situation a sale agreement or share transfer agreement should be requested.  

Loans 

If the client declares their SoF originates from a loan, it is relevant to establish the source of the loan as it will influence the documentation we need to collect.  

If the loan was provided by a financial institution, we only need to collect the loan agreement issued by the loan provider. 

If the loan was provided by a private person or a company, where providing loans is not part of their usual business, we need to collect all the following: 

  • The loan agreement between the loan provider and the loan borrower.  
  • Documentation of the transfer of the loan amount from the specified loan provider, such as a bank statement showing the complete transfer amount. 
  • A description clarifying the purpose of the loan. 
  • Documentation of how the loan provider accumulated the funds, which have been loaned out. 

Netherlands deviation 

A loan between a first-degree family or an employee and the client is acceptable in NL. However, a loan from a non-licensed entity to the client cannot be accepted. The funds cannot be accepted in the form of a loan.  

Trading profits 

When the SoF originates from a client’s previous trading activity, we need to collect: 

  • Trading account statement  
  • Portfolio statement 

In addition, we must understand how the client generated the funds which were originally used to trade with. Generally, an explanation from the client will suffice and we do not need to collect additional documentation related to the original source of funds.  

Inter-company payments 

Inter-company payments are defined as any type of financial transaction between two or more affiliated companies within the same ownership structure or corporate group. 

If the client declares that their SoF originate from inter-company payments, then we must collect all of the following: 

  • An explanation of the purpose of the payments 
  • Financial Statement (not in draft or project version) signed by the director, 
  • Tax documentation (Tax Submission and Tax Return document), 

OR 

  • Proof of submission to the tax authority. 
  • If the payment is recent, we need a proof showing the amount and date of the payment. 

If the inter-company payment has repayment conditions, it may be relevant to refer to the section regarding Loans. 

Dividends 

If a client declares their SoF originates from dividends distributed by another corporate entity (corporate to corporate), it is essential that we collect trustworthy documentation of the company’s accounts and financial activities. However, not all companies are legally obliged to audit their financial statements therefore in such cases we collect all the following: 

  • Financial Statement (not in draft or project version) signed by the director, 
  • Tax documentation (Tax Submission and Tax Return document), 

OR 

  • Proof of submission to the tax authority. 

Can also be accepted: 

  • Minutes confirming the dividend distribution (detailed) and
  • Bank statements showing the date of receipt and amount of funds (ideally from client and subsidiary) 

This is a minimum requirement, so more could be necessary to collect depending on the circumstances. And in some jurisdictions, it is not possible to acquire proof of tax submission. 

UK deviation

SOF documentation to collect:

  • Financial Statements, including the information regarding the amount of dividends OR dividend receipt (e.g. also include minutes confirming the dividend distribution),
  • Bank statement showing date of receipt and amount of funds plus name of company paying the dividend).

Cash injection/new equity 

If the client declares that their SoF originates from cash injections / new equity, then we must collect all of the following: 

  • Explanation of the relationship between the receiver company and the creditor, as well as the purpose of the cash Injections. 
  • Audited Financial Statement 
  • Bank statement capturing the immediate payment, in full or part, from the creditor’s account to the company’s account (our client). 

  • Documentation of how the creditors have generated their funds. 

    UK deviation

    If the client declares that their SOF originates from cash injections / new equity, then we should collect the following:

  • Explanation of the relationship between the receiver company/ individual and the client, as well as the purpose of the cash Injections.
  • Bank statement capturing the immediate payment, in full or part, from the creditor’s account to the company’s account (our client).
  • Plausibility assessment of how the creditors have generated their funds.
  • Recent financial statements gathered from Companies House.

Operating cash-flow 

If the client declares that their SoF originates from operating cash flow, and the financial statements are not audited (because not all companies are legally obliged to audit their financial statements), we collect all the following: 

  • Financial Statement (not in draft or project version) signed by the director, 
  • Tax documentation (Tax Submission and Tax Return document), 

OR 

  • Proof of submission to the tax authority. 
  • Rationale for why the client is investing their operating cash flow. 

This is a minimum requirement, so more could be necessary to collect depending on the circumstances. And in some jurisdictions, it is not possible to acquire proof of tax submission. 

UK deviation

If the client declares that the SOF originates from operating cash flow, we should collect the following:

  • Recent financial statements,
  • If the above does not explain the client’s investment, we should gather a plausible explanation for the discrepancy, a recent bank statement, or half yearly financials or equivalent.

Sale of real estate 

If the client declares that their SoF originate from a sale of real estate, then we must collect one of following:  

  • Signed letter from solicitor/lawyer; or regulated accountant; or  
  • Signed letter from estate agent (if applicable); or 
  • Copy of sale contract  

UAE deviation 

For sales of Real Estate in the UAE, we accept purchase and sales deeds issued by the relevant government body. 

BG Saxo (Italy) deviation 

A signed letter from the real estate agent is not an acceptable document. 

Netherlands deviation 

In NL you can obtain the Deed of Delivery from public source https://www.Kadaster.nl  or you can collect Deed of Notary (Nota van afrekening) AND Invoice/ Bank statement. We request a bank statement to ensure that the client is indeed using the funds in their account to invest with us, rather than using the money for other purposes, such as purchasing another house or paying off a mortgage. 

Insurance payments 

In this case we must collect the policy liquidation document from the insurance company to evidence the amount received by the beneficiary. 

Royalties 

Income from royalties is money an individual earns when others use his intellectual property—such as creative works, inventions, or natural resources—and pay you for the right to do so. When received by a company, royalties should be visible according to the profit and loss statement of the company. 

Clients may also have a royalty’s statement, showing the detailed income received. 

Sale/trade of crypto assets 

Generally, for income from the trade or sale of crypto assets, we need to collect the following documents: 

  • Trading account statement  
  • Portfolio statement 

In addition, we must understand how the client generated the funds which were originally used to trade with. Generally, an explanation from the client will suffice and we do not need to collect additional documentation related to the original source of funds.  

However, in certain scenarios, we need to collect additional information such as: 

  • SOF documentation related to the original source of funds used to purchase crypto assets, 
  • understanding of the client’s crypto trading activity 
  • type of exchange/wallet used 

Therefore, we could ask the clients for additional questions related to their crypto-trading activities. 
 

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