Source of funds and source of wealth in Luxembourg

What is the difference between source of funds and source of wealth?

Source of funds means, in Luxembourg, the origin of the money involved in a given business relationship or transaction: the activity that generated those funds and the means by which they were transferred. Source of wealth means the origin of the customer's total wealth, for example an inheritance or savings.

The distinction is not a matter of vocabulary. The same amount can have a perfectly documented source of funds, a transfer from a known business account, and an unexplained source of wealth, because nobody has shown how the wealth feeding that account was built up. It is almost always there that files get stuck.

The two questions do not share a horizon. Source of funds is asked transaction by transaction and follows the money coming in; source of wealth is asked at the level of the person, once, and is then updated when their situation changes. Two horizons, so two sets of documents: an answer to one is never an answer to the other. Both arrive alongside the identification of the beneficial owner without merging into it, and belong to the file described on our AML/KYC compliance page.

What does Luxembourg law require on the source of funds?

The amended law of 12 November 2004 imposes due diligence obligations in Luxembourg: identify the customer and the beneficial owner, understand the purpose and intended nature of the business relationship, and exercise ongoing vigilance including, where necessary, verification of the source of funds.

Supervision of these obligations is not confined to the financial sector. The Registration Duties, Estates and VAT Authority acts, on the basis of article 2-1, point 8, of that law, as the supervisory authority for accounting professionals other than the holders of the regulated title of expert-comptable, and for persons carrying out economic and tax advisory activities. Our firm falls directly within its scope.

The guide that authority publishes for those professions is explicit about timing: when entering into the business relationship, the professional must hold information on the source of the funds, for example which account the funds that will pay for the service come from. It is not a document to be chased afterwards.

Enhanced due diligence moves the bar: where the customer or the beneficial owner is a politically exposed person, the professional takes adequate measures to establish the source of wealth and the source of funds involved in the business relationship or the transaction. The documents collected then remain at the disposal of the Luxembourg anti-money laundering authorities for at least five years, together with the results of the examinations carried out on transactions: a file that was built and then lost counts, at an inspection, as a file never built.

Which documents evidence the source of funds?

In Luxembourg the source of funds is evidenced by reliable and independent documents corroborating where the money credited to the account or used in the transaction comes from: statements, contracts, notarial deeds or tax assessments, depending on what generated the money.

No Luxembourg text publishes a closed list of those documents, and that is a constant source of misunderstanding: the professional decides what is probative given the risk assessed, while the customer expects a list. The table below reflects what is asked for in practice, not an enumerated regulatory requirement.

For a company, the bank asks for the articles of association, or the draft where they have not yet been filed, and for the documents evidencing its sources of income and its activity: annual accounts, list of shareholders, a recent organisation chart showing ownership percentages and, where relevant, intermediate holding companies. Authorised signatures and the identity documents of persons holding a power of attorney complete the file described on our page on opening a bank account in Luxembourg.

The document most often missing is not an exotic one: it is the link between the account the money leaves and the person who holds it. An anonymised statement or a transfer routed through a third-party account is enough to reopen the whole chain.

Which documents evidence the source of wealth?

In Luxembourg the source of wealth is evidenced by a documented account of how the customer's wealth was built up, whether through a career, a business sold, an inheritance or investments, and not by proof of the latest transfer received on the account.

The practical test fits in one sentence: the source of wealth of the customer or of the beneficial owner must be readily explainable, for instance in the light of their occupation, an inheritance or investments. Wealth that cannot be explained by the profile declared is a signal in itself, before any analysis of flows.

The questions the authority recommends professionals ask themselves are the ones a banker also asks: are the provenance and origin of the funds of the customer or beneficial owner difficult to trace? Are they consistent with that person's profile? Do they come from countries associated with higher risk? Consistency matters more here than exhaustiveness, and we recommend writing that chronology on a single page with the documents attached: it is the paper nobody prepares and everybody asks for again.

When does enhanced due diligence require both origins?

Enhanced due diligence requires both the source of funds and the source of wealth to be established in Luxembourg in the situations the law treats as higher risk: a politically exposed person, a link with a high-risk third country, or a customer who has been the subject of a suspicious transaction report.

Politically exposed persons are the natural persons who hold or have been entrusted with a prominent public function, together with their family members and persons known to be closely associated with them. The classification is not a matter of intuition: the authority publishes a technical note devoted to identifying such a person.

High-risk third countries trigger the same requirement: the professional obtains additional information on the source of funds and of wealth of both the customer and the beneficial owner. The classification is assessed against the list drawn up under Directive (EU) 2015/849 and against the work of the Financial Action Task Force.

Two thresholds are often quoted without being understood. The threshold of 15,000 euros concerns the occasional customer: identification and due diligence measures apply to transactions reaching that amount, in one or several operations that appear to be linked. The threshold of 10,000 euros brings traders in goods who accept a cash payment of that amount within the scope of the law.

Why the bank asks again for what the accountant has already seen

In Luxembourg the bank asks again for the source of funds documents already given to the accountant because every professional subject to the law answers personally for its own due diligence: the file built by one does not discharge the other from its obligations.

That repetition is irritating and looks bureaucratic. It follows a simple logic: the law places the obligations on the professional itself, which must be able to demonstrate, through the formalisation of the checks carried out, that it complied with them. A document filed with a third party demonstrates nothing in that professional's own file.

The practical price of the repetition is time. We regularly see companies that are legally ready wait several weeks for their account to be opened, not because the file is doubtful, but because the documents arrive in fragments. Building the file before the first request is the only real lever on that delay, and it is prepared from the company formation stage.

The same chain of documents serves elsewhere: identifying the beneficial owner, described in our article on the register of beneficial owners, relies on the same identity papers and the same organisation chart. Keeping a single file, dated and versioned, saves reconstructing the same story three times.

What happens if the source of funds cannot be established?

If the source of funds cannot be established, the Luxembourg professional does not enter into the business relationship, and informs the Financial Intelligence Unit without delay as soon as it knows, suspects or has good reason to suspect money laundering.

A refusal is not a penalty imposed on the customer, but a mechanical consequence: without the required information the professional cannot apply the due diligence measures, nor perform the service without having applied them. A customer who has been the subject of a suspicious transaction report is moreover classified as high risk.

On the professional's side, the breach is inspected. The Registration Duties, Estates and VAT Authority carries out on-site inspections at which the presence of the person responsible for compliance is mandatory, unless a signed power of attorney is produced; it selects the professionals inspected on criteria that include the assessment of the anti-money laundering questionnaire, turnover and the national risk assessment. Since 1 October 2024 a service dedicated to those inspections sits within its financial crime division.

The scale of administrative sanctions under article 8-4 runs from a warning to a reprimand, a fine and a public statement, up to a proposal to withdraw the business permit, that last step resting with the Minister of the Economy. For a firm, the heaviest sanction is not always the monetary one: it is the publicity given to the breach.

Sources and verification

Written for Financial Services Luxembourg and reviewed before publication by Mickaël LOC, licensed accountant (authorisation 10077274). The definitions, obligations, thresholds and procedures cited in this article were verified on 15 September 2026 against the official sources listed below.

On the guichet.lu side: the guide « Your path to a successful bank account opening » for commercial businesses, published with the Luxembourg Bankers' Association, for the definitions of both origins, the requirement of reliable and independent documents and the list of documents requested from a company; the page on cash payments of 10,000 euros or more; the page on the duty of professionals to cooperate. On the side of the indirect tax portal of the Registration Duties, Estates and VAT Authority: the guide to professional obligations for accounting and economic and tax advisory professionals, for the supervisory competence drawn from article 2-1, point 8, the information on the source of funds required when entering into the relationship and the high-risk classification following a suspicious transaction report; the page « Se poser les bonnes questions » for the three questions on traceability, consistency and higher-risk countries; the page on on-site inspections for the mandatory presence of the person responsible for compliance, the selection criteria and the creation on 1 October 2024 of a dedicated service; the technical note on identifying a politically exposed person; the page on administrative sanctions for the scale under article 8-4. On the CSSF and legilux side: the amended law of 12 November 2004, the Grand-Ducal Regulation of 1 February 2010 and CSSF Regulation No 12-02 of 14 December 2012.

Three limits must be flagged. The primary text of the law of 12 November 2004 was not read in its original source: legilux.public.lu, cssf.lu and the PDF files on pfi.public.lu are unreachable from our drafting environment, and those texts were consulted through indexed extracts; the numbering of articles 2-1, 3, 3-2 and 8-4 quoted here depends on them. The amounts of the administrative fine scale applicable to professionals supervised by that authority could not be confirmed and are therefore not quantified. Lastly, no official closed list of supporting documents exists: both tables are tables of practice, and a professional may legitimately ask for others. Readers can confirm these points on legilux.public.lu, on cssf.lu and on pfi.public.lu.

This article states the law as it stands at the date of publication. Thresholds, obligations, procedures and penalties change, and any decision binding your structure must be checked on the date you rely on it. Report an error to contact@financialservices.lu: the correction is dated in the article.