The Malta Financial Services Authority (MFSA) has recently issued a Guidance Note on the submissions of the source of wealth (SOW) and source of funds (SOF). The Guidance Note provides detailed instructions on the due diligence process carried out by the MFSA whenever persons holding significant or controlling interests with authorised persons, Politically Exposed Persons (‘PEPs’) or other individuals on a risk basis are requested to submit a declaration regarding their Source of Wealth (‘SOW’) and Source of Funds (‘SOF’).
Source of Wealth
The guidance note clarifies that SOW means how the Applicant’s overall wealth has been gained throughout the years. The SOW of PEPs, Ultimate Beneficial owners and qualifying shareholders must be declared at the application stage and in the event of a change in the qualifying shareholding structure of an authorised person or other material changes such as inclusion in a list of unreliable debtors.
The SOW declaration must establish information on the individual’s net worth listing all assets and liabilities and all sources of wealth, including documentary evidence, and must be endorsed by an accountant or auditor. The declaration must also comprise documentary evidence on the source of such net worth, with the Applicant being accountable for determining whether the proceeds arise from a legitimate business. Documentary evidence might need to be certified following the Financial Intelligence Analysis Unit (‘FIAU’)’s Implementing Procedures by embassy officials, legal professionals or accountancy professionals, among others. Specific documentary evidence, however, must be submitted in an original or fully certified format, such as contracts of sale of property and wills or grants of probate.
This Guidance Note provides a non-exhaustive list of various possible sources of wealth, which includes the following:
- Employment income
- Sale of company
- Sale of shares or other investment
- Property sale
- Company profits/dividends
- Maturity/surrender of life policy
- Divorce settlement
- Retirement income
Source of Funds
SOF refers to the origin of the particular funds or any other monetary instrument subject to the transaction.
The SOF must be substantial and provide a detailed description of the source of funds and how the Applicant obtained such funds; thus, merely stating the bank or financial institution from which the funds were received is not sufficient. The Applicant must substantiate with supporting documentation the activity, event, transaction, contract, business, occupation or employment from which the funds were generated. Ideally, The Applicant should remit the funds from a credit or financial institution regulated in the EU or another jurisdiction with an AML/CFT regime. Funds should also originate from an account held in the name of the individual concerned or an entity of which such individual is the 100% beneficial owner. The Applicant must explain if the funds are obtained through a third party.
MFSA reserves the right to demand further information and documentary evidence for SOW and SOF declarations.
FF International provides various services to clients relating to anti-money laundering including the preparation of AML policies and procedures, enhanced due diligences services and source of funds and source of wealth independent reviews and reports.
For further information, please contact:
Franco Falzon C.P.A. LL.M (Managing Director) or Olga Ivanova LL.M (Corporate & Legal)
T: +356 2010 7771 (office)
M: +356 9989 5679 (mobile)
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