AML and source of funds: A practical guide for international investors.

BACKGROUND AND RELEVANCE

The prevention of money laundering and terrorist financing (AML/CFT) has become a decisive — and frequently critical — factor in any cross-border investment: opening bank accounts, acquiring real estate, subscribing for units in investment funds, incorporating companies or obtaining residence permits by investment. Banks, fund managers, notaries, lawyers and real estate agents are all obliged entities and cannot complete the transaction unless the source of the funds has been fully demonstrated.

For the international investor, demonstrating the source of funds is no longer a mere documentary formality: it is now a condition for the feasibility of the investment, and inadequate preparation is the leading cause of delays, blocked transfers and refusals to establish a business relationship. This note summarises the legal framework applicable as at July 2026 — with particular focus on the far-reaching European reform currently under way — and offers practical guidance on preparation.

The New Regulatory Landscape: The EU AML Package

In 2024 the European Union adopted the most profound overhaul of the AML/CFT regime since 1990, replacing the directive-based model with a largely uniform and directly applicable framework. The package rests on three pillars:

• Regulation (EU) 2024/1624 (AMLR) — the single rulebook: rules directly applicable in all Member States from 10 July 2027 on customer due diligence (CDD), beneficial ownership, politically exposed persons (PEPs) and suspicious transaction reporting, eliminating regulatory arbitrage between jurisdictions.
• Directive (EU) 2024/1640 (AMLD6) — governs beneficial ownership registers, financial intelligence units (FIUs) and national supervision; it must be transposed by 10 July 2027, with certain register-access rules phased in until 2029.
• Regulation (EU) 2024/1620 (AMLA) — established the European Anti-Money Laundering Authority, seated in Frankfurt and operational since 1 July 2025. From 1 January 2028 it will directly supervise around 40 high-risk financial institutions with cross-border activity, with its own sanctioning powers. Throughout 2026, AMLA is publishing dozens of Level 2 and Level 3 technical standards (RTS/ITS) and guidelines, most of them due by 10 July 2026 — which is why 2026 is the decisive year of preparation for the new regime.

 

Until 10 July 2027, the regime resulting from the 4th and 5th AML Directives remains applicable. In Portugal, the central statute remains Law no. 83/2017 of 18 August, supplemented by sector-specific regulation issued by the Bank of Portugal (notably Notice no. 1/2022), the CMVM and the ASF, as well as by the Central Register of Beneficial Ownership (RCBE) regime enacted by Law no. 89/2017. In addition, Regulation (EU) 2023/1113 (the travel rule), fully applicable since 30 December 2024, extends to crypto-asset transfers the duty to transmit information on the originator and the beneficiary.

Among the AMLR innovations with a direct impact on investors, the following stand out: (i) a Union-wide cap of EUR 10,000 on cash payments; (ii) the harmonisation of the beneficial ownership concept, with a 25% ownership-or-control threshold, including a multiplicative calculation across indirect ownership chains; (iii) mandatory enhanced due diligence for high-net-worth customers (total assets of at least EUR 50 million) in the context of certain services such as private banking; and (iv) the extension of the universe of obliged entities to include, among others, crypto-asset service providers, professional football clubs and traders in luxury goods.

Source of Funds (SOF) and Source of Wealth (SOW)

Two frequently confused concepts must be distinguished. The origin of funds the account it comes from and the activity that generated it. The source of wealth (SoW) concerns how the client accumulated their overall wealth over time (business activity, professional career, inheritances, investments). In higher-risk scenarios, obliged entities must verify both.

The collection and verification of these elements is mandatory, in particular, under enhanced due diligence measures (Articles 36 to 39 of Law no. 83/2017 and, from 2027, Articles 34 et seq. of the AMLR), notably where:

• the customer or the beneficial owner is a politically exposed person (PEP), in which case the law expressly requires establishing the source of wealth and the source of the funds involved;
• the transaction involves high-risk third countries identified by the European Commission or jurisdictions under FATF monitoring (the grey and black lists, updated throughout 2025–2026);
• complex or unusually large transactions, atypical patterns or opaque holding structures are involved (chains of companies, trusts, nominees);
• the relationship falls within private banking, services to high-net-worth clients or non-face-to-face channels combined with additional risk factors.

The standard required is that of independent documentary corroboration: statements by the investor alone are insufficient unless supported by verifiable documents, ideally issued by third parties (tax authorities, registries, notaries, auditors, financial institutions). Foreign documents must, as a rule, be accompanied by a certified translation and, where applicable, an apostille under the Hague Convention.

SUPPORTING DOCUMENTATION: A PRACTICAL MATRIX

The following table systematizes the documentation usually accepted by obligated entities to demonstrate the origin of funds, depending on the source invoked. The documentary chain must be complete: from the generation of the value to the account from which the payment will originate.

Source of funds	Supporting documentation typically required
Employment income	Employment contract, payslips, tax returns for the last 2–3 years, bank statements evidencing the accumulation of the funds.
Sale of real estate	Deed/sale and purchase agreement, proof of the price received, land registry records, evidence of payment of capital gains tax.
Sale of a business or shareholding	Share/quota transfer agreement, independent valuation, bank evidence of receipt of the proceeds, due diligence on the divested company.
Dividends and investment income	Distribution resolutions/minutes, corporate certificates, tax returns, statements of the receiving account.
Inheritance or gift	Grant of probate/certificate of heirs, will, deed of partition or of gift, proof of payment of the applicable tax.
Crypto-assets	Transaction history with a regulated provider (CASP authorised under MiCA), evidence of the original fiat source, on-chain traceability, compliance with the travel rule (Reg. (EU) 2023/1113).

 

Golden rule: traceability must be continuous. Where the funds have passed through several accounts or jurisdictions, each intermediate movement must be documented. Funds originating from high-risk jurisdictions, from non-transparent offshore structures or commingled with undocumented sources will tend to be rejected or subjected to prolonged additional scrutiny.

Practical Implications for Investing in Portugal

Banking. Account opening by non-residents is subject to full KYC. Portuguese banks apply enhanced measures to flows originating from risk jurisdictions and monitor the consistency between the customer's declared profile and the transactions executed, pursuant to Bank of Portugal Notice no. 1/2022.

Real estate. Real estate agents, lawyers and notaries involved in the transaction are themselves obliged entities. Proof of the source of funds is required at multiple points in the chain, and payments must be made through traceable means — cash payment is heavily restricted and will be capped, across the Union, at EUR 10,000 from 2027.

nvestment funds and residence by investment (ARI/“golden visa”). Since the 2023 reform, real estate investment is no longer an eligible route, and venture capital and alternative investment funds have taken centre stage. Fund managers, supervised by the CMVM, carry out their own due diligence on the subscriber, in addition to that of the depositary bank — investors should therefore be prepared for duplicate (or triplicate) documentation requests. European residence-by-investment programmes remain, moreover, under heightened scrutiny by the EU institutions and the FATF as a risk vector.

Corporate structures and the RCBE. Entities operating in Portugal must declare their beneficial owners in the RCBE; failure to file or to update the register prevents the performance of essential acts (distribution of profits, contracting with the State, real estate transactions).

PRACTICAL RECOMMENDATIONS

• Prepare the source-of-funds file before launching the transaction, organising the full documentary chain chronologically (generation → accumulation → account from which payment originates).
• Align the wealth narrative: source-of-wealth documents must be consistent with tax returns and with the transactional profile; inconsistencies are the main trigger for suspicious transaction reports.
• Avoid last-minute movements: consolidate the funds in the originating account well in advance and refrain from fragmented transfers or transfers through third parties, which may be read as smurfing.
• Treat crypto-assets with heightened care: use only providers authorised under MiCA and keep the full transaction history back to the original fiat source.
• Anticipate certified translations and apostilles of foreign documents, and check the status of the jurisdiction of origin on the European Commission and FATF lists.
• Monitor the 2027 horizon: anyone structuring long-term investments today should already do so in light of the AMLR, whose requirements — notably on beneficial ownership and high-net-worth customers — will apply directly from 10 July 2027.

 

FINAL NOTE This note is for information purposes only, reflects the legal framework known as at July 2026 and does not constitute legal advice. The AML/CFT regime is undergoing an accelerated transition until July 2027, with technical standards being published on an ongoing basis by AMLA and the EBA; each specific transaction should therefore be the subject of specialised and up-to-date legal analysis.