What is Proof of Funds?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 10 September 2019
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A proof of funds is a document prepared by a financial institution that affirms that an individual or business entity has the funds on hand to enter into a given financial transaction. A document of this type is sometimes prepared at the request of a seller who is considering an offer from a buyer. The seller requests the proof through the buyer, who in turn authorizes his or her bank or other institution to provide data that confirms the ability to honor the terms of the transaction.

It is important to note that a proof of funds does not constitute a guarantee from the financial institution that issues the document. At no point does the institution function as a guarantor that will honor the debt obligation if the buyer chooses to default at some point in the future. The proof is simply to affirm that as of the date of the request, the buyer does have the resources to honor the debt, and those resources are readily available.


While a proof of funds is often requested for legitimate reasons, the document has also become a tool in the hands of scam artists. Requesting and obtaining the proof is helpful to a con artist, since the document affirms that the intended victim does possess considerable wealth, or at least enough to benefit the criminal in the event that the scam is successful. This allows the con artist to quickly move away from potential victims who do not have the financial resources desired, and focus his or her attention on others who do possess significant financial resources. Doing so helps to ensure a higher return for the effort put into the scam operation.

Many banks and other financial institutions tend to discourage their clients from authorizing the issuance of a proof of funds unless the identity and reputation of the entity requesting the document can be firmly established. Legitimate businesses that request this type of document can normally be affirmed through the use of information that is freely available to the general public. Banks and similar institutions can also often access data on legitimate business enterprises, including entrepreneurs, with relatively little effort. In the event that the investigation into the background of the seller provides any information that causes some degree of alarm, the proof of funds should not be authorized and the proposed business deal should be rejected at once. Depending on the information that is uncovered as part of the investigation, alerting local law enforcement authorities may be appropriate.


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