Asked and Answered: 8 Burning Questions about Proof of Funds in the European Crypto Space

8 questions about Proof of Funds TRASTRA

As the EEA's leading crypto debit card issuer, TRASTRA is required by law to request users to provide proof of funds when a deposit is made. This action may seem capricious or arbitrary on our part, but nothing could be further from the truth. In fact, the rationale for this article is to illustrate that asking you to disclose to us something as personal as the origin of your wealth is a must

How do I know TRASTRA won’t disclose my personal data to a third party?

You’ve probably heard the abbreviation GDRP (General Data Protection Regulation) before, and it’s one of the cornerstone regulations of all commerce and trade in the EU. Since TRASTRA is a regulated entity registered with the FCA, compliance with the GDRP requirements is essential. 

Who in the crypto space has the right to ask for proof of funds?

Suppose a financial services provider in the EEA does NOT ask you to complete KYC (Know Your Customer) proceedings to verify your account. In that case, you may find yourself in a precarious legal position. Asking customers about the source of their funds and collecting pertinent documentation has been a legal obligation and an accepted standard in the financial industry for years. Cryptocurrency service providers in the EU joined the fray on Jan 10, 2020, with the enactment of the so-called 5MLD (the European Union’s Fifth Money Laundering Directive) designed to amend the existing Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations of 2017. The newest round of measures to combat international financial crime – 6MLD – was introduced on Jul 20, 2021.

What if I don’t want to give out my secrets?

Alas, it’s not optional. Depending on the jurisdiction, there may be some leeway regarding the amount that requires a proof of funds verification process. Still, if you want to operate in the crypto space, you have to comply with this tedious but essential rule. Sorry. 

What are the limits under which I can operate freely without disclosing the origin of my assets?

Funny thing: though disclosing the exact limits used for AML6 purposes is not recommended due to the potential for abuse, the information is available freely on the EU Parlament and European Commission’s web resources. 

Where can I get some authoritative info on this? I want to do some reading!

We’re glad you asked. Here’s a bit of a backstory on the 6MLD for you. On Jul 20 2021, the European Commission presented a package of legislative proposals to strengthen the EU’s anti-money laundering and countering terrorism financing (AML/CFT) rules. The package also includes the proposal for the creation of a new EU authority to fight money laundering.

The measures improve the existing EU framework by considering new and emerging challenges linked to technological innovation. These include virtual currencies, more integrated financial flows in the Single Market and the global nature of terrorist organisations. We strongly believe that familiarising oneself with this body of work is crucial for reaching a high level of success in the digital economy. 

The suggested package consists of four legislative proposals:

A new EU AML Authority (AMLA

At the heart of the legislative package is the creation of a new EU Authority, which will transform AML/CFT supervision in the EU and enhance cooperation among FIUs. AMLA will be the central authority coordinating national authorities to ensure that the private sector correctly and consistently applies EU rules. AMLA will also support FIUs in improving their analytical capacity around illicit flows and making financial intelligence an essential source for law enforcement agencies.

A Single EU Rulebook for AML/CFT 

The Single EU Rulebook for AML/CFT will harmonise AML/CFT rules across the EU, including more detailed restrictions on Customer Due Diligence, Beneficial Ownership and the powers and task of supervisors and the FIUs. Existing national registers of bank accounts will be connected, providing faster access for FIUs to information on bank accounts and safe deposit boxes.

Complete application of the EU AML/CFT rules to the crypto sector 

At present, only specific categories of crypto-asset service providers are included in the scope of EU AML/CFT rules. The proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. In addition, anonymous crypto asset wallets will be prohibited, fully applying EU AML/CFT rules to the crypto sector.

EU-wide limit of €10,000 on large cash payments 

Large cash payments are easy for criminals to launder money since it is challenging to detect transactions. That is why the Commission proposed an EU-wide limit of €10,000 on large cash payments. This EU-wide limit is high enough not to question the euro as legal tender and recognises the vital role of cash.

Third countries 

Money laundering is a global phenomenon that requires vibrant international cooperation. The Commission already works closely with its international partners to combat the circulation of dirty money around the globe. The Financial Action Task Force (FATF) issues recommendations to countries. The EU will also list a country that FATF lists.

The future AMLA should be operational in 2024. This package is part of the Commission’s commitment to protecting EU citizens and the EU’s financial system from money laundering and terrorist financing. Ensuring the efficiency and consistency of the EU AML framework is of the utmost importance.

Why is trust important to us? As cryptocurrencies make their way into the financial mainstream, TRASTRA considers it essential to provide all our users with a reliable, secure, and fully compliant platform for their transactions. 

What is “proof of funds” anyway?

Proof of funds (POF) refers to a document or documents that demonstrate a person or entity has the ability and funds available for a specific transaction. Proof of funds usually comes in the form of a bank, security, or custody statement. The purpose of the proof of funds document is to ensure that the funds needed to execute the transaction are accessible and legitimate.

Understanding Proof of Funds (POF)

When an individual or entity is making a large purchase, the seller usually requires proof of funds. This ensures that the buyer has the money available to make the purchase and has legal access to the funds, as the proof of funds comes from a verified authority, such as a bank. 

It’s important to note that in most instances, the proof of funds must refer to liquid capital, primarily cash. Certain investments, such as retirement accounts, mutual fund accounts, and life insurance do not qualify as proof of funds.

Once you have your proof of funds document in hand, you want to ensure that it is secure at all times. In addition, it contains important financial information that should be safeguarded. Some con-artists planning a financial scam may seek/request proof of funds to ensure they concentrate their efforts on someone with significant financial worth. Therefore, it is crucial to ensure that you only give proof of funds to trusted individuals you have thoroughly investigated.

Does it work the same for cryptocurrencies?

Basically, yes. We require documentation listing cryptocurrency withdrawals from other platforms (i.e. exchanges, trading platforms, online gambling sites, and others) with account details included. It would help if you also had your full name, email address and the platform’s name (origin of the funds). And finally, any other data, such as transaction IDs and additional information, allows us to attribute your funds to your person.

What if I’m unable or unwilling to provide what you ask?

It is our legal obligation to conduct a PoF review. Unfortunately, if you’re unable or unwilling to provide the required information, we will be forced to terminate your account.

Please note that TRASTRA cannot provide account-related support via social media, nor will we share any information regarding pending cases via social media upon request for reasons of data security. However, TRASTRA’s customer support is always at your disposal via a chat on our website or by email.

 

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