Proof of source of funds from crypto: what goes into a source of funds report?

Who asks about the source of your funds, and why?

In our experience, questions about the origin of funds usually come from the tax authority or the bank. A solicitor or conveyancer handling a property purchase, a mortgage lender, an accountant, or a solicitor in a divorce or an estate may ask too. It does not mean anyone is accusing you of anything. It is often a routine check.

Under the Money Laundering Regulations 2017, banks, solicitors and other firms must monitor their customer relationships and, where necessary, look at the source of funds (MLR 2017, regulation 28). With crypto, that question is often harder to answer than with ordinary savings. That is why they ask for more evidence.

Why is a statement from your exchange often not enough?

A statement from your exchange shows what you hold now and what you sold. It usually does not show where your first deposit came from. Perhaps you bought in 2017 on an exchange that no longer exists, sent crypto to your own wallet or switched between networks. For a bank or solicitor, part of the story is then missing.

A declaration of your own helps, but is not always enough. You can read more in our blog on the source of funds declaration. What often does help is an independent report that shows the whole route.

What goes into a Paucitas source of funds report?

Every report is tailored, but these five parts almost always appear:

• The starting point. Where the money came from: for instance a transfer from your own bank account, years ago.
• The route. Every step from the first purchase to today, through exchanges and wallets, with details anyone can check.
• Ownership. Which wallets and accounts belong to you, and how that is shown.
• Timeline and value. Amounts at each moment, purchases, sales and withdrawals, so the growth can be followed.
• The conclusion. In plain English, with the attachments included, so that someone with no knowledge of crypto can follow it too.

Paucitas does more than follow transactions. We go through all the documents, emails, conversations and other correspondence you have, such as old confirmation emails from an exchange or bank statements. That gives a complete picture, with a timeline and, step by step, where the money came from and where it went. Want to know what this means for your situation? Get in touch and we will think it through with you.

Who writes a source of funds report?

A bank or solicitor mainly values a report from an independent party that does not simply take your side, but shows what can be seen. Paucitas is such a party: an expert firm based in the Netherlands, founded in 2021 and registered with the Dutch Chamber of Commerce under number 83489649. Our company details are public, you are welcome to visit our office, and you can read clients’ Google reviews on our site. Simcha Schrijver has more than ten years of experience with crypto.

Paucitas does not give tax advice. We provide the evidence; you or your adviser handle the return. HMRC explains which records it expects you to keep on gov.uk. Also read what your bank wants to see when it asks about the origin of crypto.

How does Paucitas work and what can you expect?

Paucitas does all tracing itself, without tracing tools. You provide what you have; you don’t need to have everything, and we help you gather it. You can send it digitally or bring it to our office. An investigation takes from the same day to around two weeks. Every investigation is tailored: you get a tailored quote in advance that we go through together, with no surprises.

You can always call, 24/7, on +31 20 244 5774. Through the contact form you’ll hear from us within 1 to 3 hours, and we answer emails within 24 hours, usually the same day.

Sources: legislation.gov.uk, Money Laundering Regulations 2017, regulation 28; gov.uk, tax when you sell cryptoassets.