In recent months, there have been reports in the press about the problems investors in crypto currencies have transferring their gains to their bank accounts. Not only gains from crypto platforms, but also large-ish inheritances or sales of properties abroad are monitored with questions about the origin of the money, and if no acceptable answer is given, a freeze of the assets.
Cryptocurrencies pose a particular problem, as it is not clear what happened on the crypto platform. You prove that you inherited or sold a property, but that is not simple with cryptocurrencies.
Banks must also monitor all money transactions to ensure they are not part of a money laundering scheme or meant to finance terrorism. They must verify the origin of large sums of money and report large cash transactions. Banks have automated processes to screen transactions in the light of their AML policies.
These processes determine what information the compliance department must check before the bank can accept the funds. Following several warnings from the international financial authorities and the tightening of the anti-money laundering legislation, banks want to collect sufficient information to be able to comfortably accept the funds. They focus on the origin of the funds, the currencies or products in which the funds had been invested, the platforms and exchanges used, and whether the income had been duly taxed.
Not all banks have a crypto policy yet, and there are significant differences between banks. Some banks shun bitcoin almost entirely and other banks only accept funds from a list of ‘classic’ coins (Bitcoin, Ethereum, … ). Other banks analyse the facts of the case meticulously before accepting the funds.
In practice, banks like to receive a complete file with a detailed history of all transactions, and the platforms used and all currencies in which the client has invested. A few statements and screenshots from platforms are not enough.
An important aspect is whether the gain has been correctly declared and taxed. Can you prove that the gain you made in the past did not have to be declared? If necessary, the bank will expect a tax regularisation. If the gain was made in a year for which you have not filed an income tax return yet, an advance tax ruling may be required before the bank will accept the funds. A tax ruling is a decision of the Ministry of Finance confirming how the tax laws must be applied in a specific situation, and that the client – and the bank – legal certainty about the tax regime of the gain. Of course, the advance ruling must be applied for before transferring the money to Belgium.
Too often, crypto investors try to transfer their funds to their Belgian bank account without giving the bank an advanced warning. This is often the same account or the same bank from which the funds were originally transferred to the platform. The investors think they are safe because the bank cannot question the origin of the invested funds and cannot refuse the funds.
It is indeed correct that if all the funds can be traced back to the initial transfer, there can be no discussion about the origin of the funds. But that only ticks one of the boxes. The bank will still want to analyse the currencies or products in which the client had invested, the platforms and exchanges used and the tax regime.
If during an investigation it later turns out that some of these remain unexplained, the banks will not hesitate to freeze the account linked to these funds and report the file to the Financial Intelligence Processing Unit (CTIF-CFI).
To avoid such uncomfortable situation, to say the least, it is important to put together a complete file that will be acceptable to the bank. Just transferring the funds with your fingers crossed that no questions will be asked, is not a good idea. Many banks do not hesitate to block the accounts of customers who cannot prove that the funds in their account have been duly taxed.
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