What is the Limit for Proof of Source of Funds for Cash, Precious Metals and Cryptocurrencies?

Due to the latest tightening of anti-money laundering laws, the media are once again reporting frequently on topics such as cash limit and proof of source of funds requirements. Often enough, this results in irritating formulations and misunderstandings. This not only damages consumers who are misinformed, but also the state’s reputation as a legislator.

The most recent example is the regulations concerning the proof of source of funds. We therefore summarize what the limit is for the obligation to present proof of origin for various assets.

There is no Blanket Limit on Proof of Source of Funds for Assets

Proof of origin of funds is generally evidence of the legitimate origin of financial resources and assets. While proof of origin is particularly targeted at cash. However, assets subject to proof can also be, for example, gold, silver, other precious metals, cryptocurrencies like Bitcoin, cars, jewelry and precious stones.

In the fight against money laundering, lawmakers want to make sure that your assets are not the proceeds of crime. Illegally acquired assets should not be brought into the economic cycle and thus “laundered”. In order to make the regulations on proof of origin of funds as comprehensible and practicable as possible, a flat-rate amount applicable to all cash transactions would have made sense as a threshold above which proof of origin must be presented.

However, the German Money Laundering Act (“Geldwäschegesetz“, GwG) regulates things in a much more differentiated manner. The limit for the presentation of the proof of origin depends in particular on the contractual partners involved in the transaction as well as the object of the transaction.

On a separate page, you can find out the latest date from which you must comply with the limit for the proof of origin in the following cases according to the current legal situation.

As of What Amount Proof of Origin of Funds Must be Provided in Connection With Cash?

It is not possible to give a general answer to the question of how much proof of the origin of funds must be provided in connection with cash. This is because the GwG differentiates between a wide variety of case constellations in the case of cash transactions. However, cases that are particularly relevant to everyday life can be grouped as follows.

1. If you deposit cash into your checking account, the limit is EUR 10,000. Up to this amount, you can make cash deposits to your checking account without having to provide your bank with proof of the source of funds. However, this does not result from the GwG itself. Rather, the Federal Financial Supervisory Authority (“Bundesanstalt für Finanzdienstleistungsaufsicht“, BaFin) formulates this limit in its most recent special section of the Application and Interpretation Guidelines (“Auslegungs- und Anwendungshinweise“, AuA) to the GwG, which applies to credit institutions (link to the AuAs in our FAQ).
   
   
2. For payments with cash when purchasing goods and items, there is basically no limit for a proof of origin. This means that for normal cash purchases, regardless of the purchase price, you generally do not have to provide proof of source of funds. However, there are exceptions to this principle. These apply, for example, to precious metals such as gold and silver (see below) and real estate. It is also important to note that traders must require you to provide proof of source of wealth whenever a cash payment is unusually large. When this is the case depends on the individual case. For car dealers, for example, a cash purchase of EUR 30,000 will not necessarily be unusually large.

Excursus: Based on these case groups, it becomes clear beyond the limit for proof of origin for cash that the much proclaimed cash ceiling does not actually exist in Germany.

Limit on the Purchase and Sale of Precious Metals Without Proof of Origin

As described above, payments with cash in Germany can generally be made without providing proof of origin of funds.

An exception to this principle under certain circumstances is the cash purchase or sale of precious metals such as gold, silver or platinum. On the one hand, the legislator differentiates according to where you want to buy or sell the precious metals. On the other hand, it is decisive whether you buy or sell the precious metals as a so-called existing customer or as an occasional customer.

Important: According to the current legal situation (August 2021), the above-mentioned obligation to require proof of origin for precious metal trading only applies to credit institutions! Precious metal traders who are not credit institutions are not obliged to demand proof of origin. For more information and a practical overview of all cash limits in connection with precious metals, please see our page on proof of origin for precious metals.

For the purchase of precious metals at banks without presentation of the certificate of origin, the limit is 2,500 EUR, if you want to buy or sell the precious metals only as an occasional customer. You are an occasional customer if you do not have any other business relationship with the bank.

This limit for the purchase of precious metals such as gold and silver without proof of origin increases to 10,000 EUR if you are an existing customer of the bank. You are an existing customer, for example, if you have a current account with the bank and thereby maintain a business relationship. As a result, your bank already has a lot of information about you.

Exceptions to the Proof of Source of Funds for Independent Precious Metal Dealers

So, when buying precious metals, you provide proof of the legitimate origin of your cash through the proof of origin of funds. It is the other way around accordingly: when selling gold, silver and other precious metals, you have to prove that the precious metals are not profits from crime.

If you want to buy or sell precious metals from a dealer who is not a bank, there is no limit to buying or selling without proof of origin. This is because independent dealers, unlike banks, are not (yet) obliged to observe so-called enhanced due diligence obligations within the meaning of the GwG. However, these traders are also obliged to demand proof of origin if they have clear indications of an increased risk of money laundering, e.g. if the cash payment is unusually high.

Up to What Limit Can I Trade Cryptocurrencies Without Proof of Source of Funds?

It is becoming more and more common for crypto exchanges to block their users’ accounts until you provide proof of origin for their fiat money or cryptocurrencies. This has also been hitting existing customers out of the blue lately.

So the question here is the limit on transactions without proof of origin in cryptocurrencies.

However, the money laundering regulations show themselves to be much less concrete at this point than in the cases of cash and precious metals. It is true that the GwG stipulates that crypto exchanges must observe the so-called general due diligence obligations already for transactions of cryptocurrencies with a value of EUR 1,000 or more. Crypto exchanges satisfy these general due diligence obligations by, among other things, establishing and verifying identity. However, the GwG does not contain an explicit obligation to require proof of origin.

Recently, one of the largest crypto exchanges in the world, Binance, introduced mandatory identity verification for all users. The crypto exchange Bitpanda also requires proof of funds origin. The well-known crypto exchange Kraken also requires proof of origin of funds and cryptocurrencies.

Nevertheless, crypto exchanges must require proof of funds origin from their users in certain cases. When exactly this is the case is also subject to their own discretion, in particular. Crypto exchanges, as so-called obligated parties under the GwG, must.

“(…) for the prevention of money laundering and terrorist financing, have an effective risk management that is appropriate with regard to the type and scope of their business activities.”

In doing so, they have to

“(…) identify and assess those risks of money laundering and terrorist financing that exist for transactions conducted by them.”

Scope for Crypto Exchanges on the Limit for Requiring Proof of Source of Funds

The GwG does not explicitly list cryptocurrencies as a risk factor. Nevertheless, crypto exchanges must comply with the so-called enhanced due diligence obligations of the GwG in any case when higher risks for money laundering are present. According to the GwG, a higher risk exists in particular if it is a matter of

“(…) a transaction that is particularly complex or unusually large, or follows an unusual transaction pattern (…)”.

Each crypto exchange is therefore free under the anti-money laundering rules to define and weight these factors itself. One could even argue that it does well to do so. Criminals could otherwise always come up with new methods to circumvent the criteria established by the crypto exchange.

Therefore, currently, no limit can be given for transactions with cryptocurrencies without proof of origin. Nevertheless, should you ever be affected by an unexpected blocking of your account due to a demand for proof of funds origin, we will tell you possible first steps you should take and provide samples for correspondence with the demanding body.