Updated
GL-C-05
Glossary · Banks and finance
Capital legalisation
Documentary proof that the money was earned legally (not to be confused with laundering — here everything is transparent and lawful). Needed to open an account abroad and invest in a program. Includes SoW, SoF, statements, declarations, and AML reports.
01 / In 30 seconds
The short answer
- What it is
- Documentary evidence that your capital was earned lawfully
- What it includes
- A dossier on the source of wealth and of specific funds: SoW, SoF, statements, tax returns
- Where it is required
- When opening an account, making a programme investment or a major transaction
- Not to be confused with
- This is not legalising illegal income but evidencing lawful income
- The main rule
- The dossier is assembled in advance, not in response to a request
02 / In plain words
What Capital legalisation means
Capital legalisation, in our context, is documentary evidence that money was earned lawfully. The term is sometimes confused with money laundering, but the meaning is the exact opposite: this is about transparent capital whose origin you need to be able to show with documents.
The dossier answers two different questions. The first is how your wealth was earned in principle: business, salary, sale of assets, inheritance, investments (source of wealth). The second is where exactly the money for this transaction or investment came from: from which account, from the sale of what, from which receipts (source of funds). One does not substitute for the other — both are usually requested.
The set is made up of documents, not explanations: contracts, statements, tax returns, documents on the sale of assets, business accounts, confirmations of a gift or inheritance. The key requirement is an unbroken chain from the source of income to the account from which the payment is made. A break in the chain is the most common reason for additional requests and refusals.
A case from practice
A client’s capital had been built up over years from several sources, and some of the documents were in archives. We assembled the dossier over several months before filing. The check went through without protracted requests — all the answers were ready in advance.
When it is required
- Opening an account abroad
- An investment under a citizenship or residence programme
- Property purchase
- A large international transfer
- Entering private banking
- A request from the bank’s compliance
03 / What it covers
What the dossier includes
Source of wealth
- The business and its accounts
- Employment income
- Sale of assets
Source of funds
- Account statements
- Specific receipts
- Movement up to the payment
Special cases
- Inheritance
- A gift from relatives
- Investment income
Confirmations
- Tax returns
- Contracts and certificates
- Audit reports
04 / How it works
How the dossier is assembled
Map out the sources of income
Gather supporting documents
Build an unbroken chain
Close gaps with explanations
A dossier ready for filing
05 / Key facts
What you need to know
01
SoW and SoF are different questions; both are needed
02
The larger the sum, the deeper the check
03
The chain must be unbroken
04
Cash and informal income are the hardest to evidence
05
Documents from archives and earlier years are requested in advance
Common mistakes
- Starting to gather documents after the bank’s request
- Explaining the source in words instead of documents
- Leaving gaps in the chain of fund movements
- Mixing personal and business flows
- Hiding difficult episodes instead of explaining them
06 / Expert advice
How to prepare in advance
Gathering starts before filing and before going to the bank. A map of the sources of income over the relevant period is drawn up, documents are gathered for each, and a chain is built up to the account from which the payment will be made. Gaps — old transactions, income without documents — are closed in advance with certificates, affidavits and indirect evidence.
What we do for you. This is the most important part of the preparation. It is on the source of funds that applications most often stumble. We start work with a review of the sources of capital and assemble the dossier well before filing — because such documents are much harder to obtain after the fact.
Klara RihterBanking compliance and source of funds specialist
07 / Questions
Frequently asked questions
Documentary evidence that your money was earned lawfully. It has nothing to do with money laundering — the meaning is the exact opposite.
Source of wealth explains how your wealth was earned overall. Source of funds explains where exactly the money for this transaction came from. Both are usually requested.
Contracts, statements, tax returns, business accounts, documents on the sale of assets, confirmations of inheritance or a gift.
Gaps are closed with indirect evidence, certificates and affidavits. But such points are explained in advance rather than left to the reviewer’s discretion.
This is the hardest situation. It is dealt with separately and candidly: hiding episodes is pointless, as the check will see the break in the chain anyway.
Before filing and before approaching the bank. Documents from archives and from past counterparties take a long time to obtain.
Related terms
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