Source of Funds (‘SOF’)
The source of funds refers to the derivation of the specific funds or assets which are the subject of the business relationship or the transaction which is to take place. In practice, it is the activity, event, transaction, contract, business, occupation or employment from which the funds used are generated or derived.
The SOF should be identified for every individual transaction, for example, every time that funds are used to capitalise or otherwise finance an authorised person. The information on the SOF will be required both at the application stage in respect of the initial capital and any other type of financing and on an ongoing basis thereafter, where necessary.
When submitting a SOF declaration, individuals concerned should be aware that simple and general descriptions about the source of funds used or an explanation stating that the funds to be used are derived from the business activity of the individual is not considered as sufficient and may lead to several overall delays and time-wasting.
Also, funds should ideally be remitted from a regulated credit or financial institutions within the European Union or within a jurisdiction with a high standard of AML/CFT. Moreover, funds should ideally be remitted from the account held in the name of the relevant individual.
However, if said funds are provided by or through a third party, a clear and detailed explanation enlightening the Authority on the relationship between said individual and the abovementioned third party must be submitted/included. The latter submission should comprise a justifiable and rational reason why the relevant action is being taken.
Needless to say, as in most cases regulated by the MFSA, the Authority assesses all individuals on a case-by-case basis and reserves the right to request additional documents as it deems fit.*
* Malta Financial Services Authority – Guidance Note on the Submission of the Source of Wealth and Source of Funds.