Bitpanda: The absurdity with the proof of origin of funds

Bitpanda: The absurdity with the proof of origin of funds

The Austrians seem to have let their success go to their heads a bit lately. At least Bitpanda has recently been demanding proof of the origin of the funds from its customers to a not insignificant extent.

Especially the request for the income tax return seems to me personally as if the Austrians don’t even know what they are doing anymore. Presumably, however, this is not due to Bitpanda, but to the government of Austria, because it had revised its own money laundering law very strongly with the AML5 guidelines of the EU

According to § 5 FM-GwG (Austria), the limit for deposits, transactions, transfers, etc. is 15,000 EUR. It does not matter whether it is only one transaction in the amount of 15,000 EUR or several transactions whose value together exceeds 15,000 EUR. The equivalent value (current market value) of cryptocurrencies must also be used accordingly.

The question therefore arises whether the requirement of too many proofs of origin of funds constitutes an unjustified interference with the right to property within the meaning of Art. 5 of the Austrian Constitution.

The Austrian Federal Constitution guarantees property in Article 5 of the Basic Law of the State. All encroachments on property are subject to the reservation of the general interest, legality and proportionality

The reservation of proportionality comes into consideration. Therefore, it must be examined whether the request for income tax returns or the scope of this verification is still proportionate if the deposit originates from an EU bank account

According to Section 6 (1) No. 4 FM-GwG, Bitpanda is only obliged to obtain and verify information on the origin of the funds used. However, Section 8 FM-GwG states that simplified due diligence obligations can be applied to customers if an obligated party (Bitpanda) determines on the basis of its risk analysis (Section 4) that there is only a low risk of money laundering or terrorist financing in certain areas.

The risk analysis under Section 4 FM-GwG has to include the “Report from the Commission to the European Parliament and the Council on the assessment of the risks of money laundering and terrorist financing associated with cross-border activities for the internal market” (COM(2019) 370 final). It is clear from the report that there is an increased risk with virtual currencies, and therefore a horizontal threat, only insofar as the transactions with virtual currencies take place anonymously (2.2.1. of the report). However, since there is no anonymity in the case of transactions from EU bank accounts and the purchase of virtual currencies on one and the same platform (in this case Bitpanda), there cannot be an increased risk in the sense of the Commission’s report either. Which is why Bitpanda would inevitably have to conclude in the context of the risk analysis required under Section 4 FM-GwG that only simplified customer due diligence can be applied

However, since Bitpanda is also obligated to its customers and their assets, even a waiver of the simplified due diligence requirements would unreasonably restrict the rights of customers to their assets

This in turn leads to the fact that the simplified due diligence can not only be applied, but must beapplied.

According to all of the above, in the case of deposits from EU bank accounts, the requirement of income tax declarations or the extent of verification by Bitpanda is no longer proportionate.

Therefore, there is no longer proportionality.

Therefore, in the requirement of too many proofs of origin of funds, lies an unjustified interference in the property rights of customers by Bitpanda in the sense of Art. 5 of the Basic Law of the State.

What happens if I do not provide the proof?

Presumably, the contractual relationship will be terminated and the funds will have to be paid out or transferred. However, what exactly happens at Bitpanda is not known.

First feedback

One person has already received a positive feedback 1 day later and the account has been “unlocked” again. Of course, the person has submitted some documents, but not all requested by Bitpanda (referring to the above short report [The question therefore arises whether by requesting too many proofs of origin of funds …]).

Feel free to write your experiences in the comments.

Note: Of course, this is not legal advice and I do not offer legal advice. It is merely an informative article with a very brief legal opinion. How you handle the information published here is entirely up to you. I do not assume any liability or any other kind of responsibility and recommend you to consult an attorney licensed in your area.

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