Why is the source of funds verified?
Austrian banks and crypto service providers are subject to strict legal requirements, in particular the Financial Markets Anti-Money Laundering Act (FM-GwG). The aim of these regulations is to prevent illegal flows of money. Investors must therefore be able to transparently demonstrate where the funds used originate from.
Testing obligations: commercial versus private sales
From an anti-money laundering perspective, it is crucial, who sells or buys. Since the 4th Anti-Money Laundering Directive, commercial precious metal dealers are themselves classified as obligated entities. They are therefore subject to extensive due diligence obligations, in particular verifying the identity of the contracting party, documenting the transaction, and, where applicable, submitting suspicious activity reports if an individual transaction (e.g., the sale of gold) exceeds the amount of EUR 10,000.00 (Section 365m1 Paragraph 1 of the Trade Regulation Act). As a result, sales through dealers generally can be well documented and are later recognized as the source of funds.
In contrast, private individuals selling gold meet no statutory testing and documentation obligations. Therefore, in purely private sales, procedures often remain informal, or involve simple transfers or cash payments without clear proof dating back years. From a legal standpoint, this is permissible and unproblematic. However, the lack of documentation can later become a decisive disadvantage.
In practice: Evidence problems regarding deposits into bank accounts or on crypto exchanges
However, as soon as the proceeds from a gold sale are introduced into the regulated financial system – for example, through a deposit into a bank account or a transfer to a cryptocurrency exchange – strict anti-money laundering regulations. Banks and cryptocurrency exchanges are considered obliged entities and are legally required to verify the source of funds for their customers' invested amounts.
This inspection obligation exists regardless of whether the original gold sale itself was subject to inspection or not. For the crypto exchange, the sole deciding factor is whether the origin of the funds used plausible, comprehensible, and verifiable can be represented.
In practice, it therefore regularly becomes apparent that proceeds from private gold sales are critically scrutinized by banks and crypto-trading exchanges. Objective proof such as invoices, contracts, or confirmed payment flows is frequently missing. The mere explanation that the money originates from a private gold sale is generally not sufficient to meet the requirements of the anti-money laundering check.
The consequences can include account freezes, payment stops, or lengthy inquiries into the origin of funds. In individual cases, suspicious activity reports are even filed with the Financial Intelligence Unit established at the Federal Criminal Police Office – even if the funds were originally acquired legally. The central problem here does not lie in the legality of the gold sale, but in the lack of compliant traceability.
Practical recommendation for action
Anyone planning to use proceeds from gold sales to buy cryptocurrencies should address the issue of the origin of funds early on. Especially with private transactions, it can be useful to structure payment flows, timelines, and background information before encountering problems with banks or crypto exchanges. Even if accounts have already been blocked, a retroactive analysis of the asset history is often still possible.
As certified anti-money laundering experts and lawyers specialized in the verification of the source of funds we support our clients in the legally secure and transparent preparation of even complex asset structures. We assist you both with preventive documentation vis-à-vis banks and crypto exchanges and with the clarification of ongoing audit procedures and advocate – insofar as legally possible – for the Cancellation of already initiated account freezes and withdrawal restrictions For individual advice, you Roman Taudes and Anela Blöch at the phone number 01 3912345 or by email office@atb.law happy to help.
