Source of Funds, Cash Rules & Red Flags

Source of funds versus source of wealth

In force nowLey 10/2010, arts. 8, 11 and 14

Source of funds explains the origin of the specific money used in this transaction. Source of wealth explains how the client built their overall financial position. Both must be plausible, consistent with what you know about the client, and documented — source of wealth in particular where enhanced measures apply, such as with PEPs.

What good source-of-funds evidence looks like

A client statement is a starting point, not evidence. Aim for documents that a third party could follow.

• Bank statements showing the funds accumulating or arriving, in the buyer's own name.
• Sale contract and completion statement for a previous property, matching the amount and date.
• Audited accounts, dividend documentation or a sale-of-business agreement for corporate wealth.
• Inheritance or gift documentation, with the donor identified.
• For crypto-derived funds: exchange statements, evidence of KYC at a regulated venue, and a traceable conversion into fiat — not a wallet screenshot.
• Where funds pass through an intermediary account (lawyer, gestor, family member), the chain must be explained and documented end to end.

Red flags around funding

Be alert to:

• Attempts to split payments to stay under thresholds
• Funds routed through multiple unrelated accounts or jurisdictions with no commercial reason
• Crypto-derived funds without a traceable, regulated conversion path
• Inconsistent or evasive answers about where the money came from
• Reluctance to provide standard documentation that any bank would also ask for
• Urgency to close before documentation can be produced
• Third parties funding the purchase with no explained relationship to the buyer

Spanish cash-payment restrictions — separate law, but critical to your work

In force nowLey 7/2012, art. 7, as amended by Ley 11/2021 — tax legislation, distinct from Ley 10/2010

Spain restricts cash payments in certain transactions. This is important: these limits come from tax legislation, not from Ley 10/2010, and they are not customer due diligence thresholds. A payment below the cash limit still requires full due diligence, and a payment that complies with the cash limit can still be suspicious.

• EUR 1,000 — general limit for payments in cash in operations where at least one of the parties acts in the capacity of an entrepreneur or professional.
• EUR 10,000 — limit for payments in cash where the payer is a natural person who is not tax-resident in Spain and does not act as an entrepreneur or professional.
• Breaching the cash limit is an administrative tax infringement with its own penalty regime, and the parties to the payment can both be liable.
• Keep the three regimes distinct: (A) these cash-payment restrictions under Ley 7/2012 as amended by Ley 11/2021; (B) your customer due diligence duties under Ley 10/2010, which apply regardless of payment method or amount; and (C) the EU-wide cash ceiling under the AMLR, which applies from 10 July 2027 — see Module 8.

Cash-adjacent risk in property deals

Even where no banknotes change hands through your office, cash-adjacent patterns are among the strongest indicators in the sector: undeclared cash top-ups at the notary, deposits paid in cash to a third party, funds arriving from bureaux de change or money remitters, or a buyer converting cash into bank balances shortly before purchase. Treat any of these as a trigger for enhanced scrutiny of the source of funds.

How to ask for source of funds without losing the deal

Most buyers are legitimate and will provide documentation if you ask early, professionally, and as a matter of routine.

• Ask at the start, alongside ID — not as a late surprise after a reservation is agreed.
• Frame it as standard for every buyer, because it is: 'Spanish law requires us to document this for all clients.'
• Be specific about what you need, so the client can produce it in one go.
• Never coach the client on what answer would be acceptable. That is how a documentation request becomes an offence.