Opening a Foreign Bank Account: Possible Obstacles in the Way
You have a legal opportunity to open a corporate account with a foreign bank but the task is not easy. Every bank will have its own procedures and requirements and below we describe the most common obstacles that might arise on your way to opening a foreign bank account for your company.
First of all, you will have to submit the full set of corporate documents. Some banks want to see original documents while some other banks will be satisfied with notarized/ apostilled copies.
Second, you will have to describe the business activities that the company is engaged in. You will have to provide the following information:
- A description of your company’s business activities. You may be asked to submit contracts and invoices that confirm the truthfulness of the description.
- Information about your counteragents: those who you send money to and those who send money to you.
- Expected annual account turnover, transaction frequency, transaction amounts, and so on.
The activities of the company have to be understandable for the bank manager processing your application for services. Besides, the activities have to be legal and more or less homogeneous or interconnected. Banks like their corporate clients to be engaged in a single and clear type of activities.
Third, you will have to submit the personal data of all beneficial owners of the company. The data include the following items:
- Personal identification documents;
- Proofs of residential addresses;
- Information about the sources of personal income such as job contracts, ownership certificates, lease agreements, bank statements, etc.;
- Letters of Recommendation from important business partners;
- Names and spheres of activities of other companies owned by the applicant including their web addresses and other details;
- Résumés containing information about the company owners/ directors’ educational background and work experience. It is important to have a company manager whose education and work experience are relevant to the business activities that the company performs.
Since recently, banks have been curious not only about the corporate applicant’s character but also about the character of the applicant’s partners. Suppose one of your counteragents is a British LLP. The bank administration may want to know who the Partners are and what each of them does. It may sound frightening but if one of your counteragents is ‘sanctioned’ in this or that respect, your application for banking services may be declined.
The application processing may extend over 2 or 3 months if you are opening a corporate bank account in a foreign country. Accelerated application processing opportunities are rarely available. And even after such a long time, there is no guarantee that a bank account will be opened for your company.
If you are lucky enough and your application is approved, you will have a corporate bank account, access to online account management applications, and bank cards if you need them.
Compliance, due diligence, KYC
Everyone who has opened a foreign bank account will have heard these words when filling out bank forms. All banks have Compliance Departments today responsible for client identification and information assessment. The Compliance officer will evaluate the information supplied by the applicant as well as the information about the applicant from other sources. All banks have to follow the KYC (Know Your Customer) principle and all banks have to conduct due diligence procedures.
They do not do it because they are so whimsical. Rather, they have to meet the requirements put forward by their national (and supranational in case of EU countries) financial regulators. The AML/ CFT measures taken in the world these days are exceptionally stringent.
It must be noted that banks have always conducted some due diligence checks when taking new consumers onboard. However, the ‘rules of the game’ have become much tougher over recent years. If you fail to supply a document that confirms the legality of the money transferred to your account, the account can be frozen or closed. If a transaction suddenly deviates from the normal character of transactions to and from your account, it can be closed again.
Today banks also inquire about the tax residency of the company and its beneficial owners. You will have to provide your taxpayer number when opening a foreign bank account. The bank needs it for the purpose of exchanging fiscal information within the CRS framework.
These factors show that you have to document all your business and financial activities to be able to set up a corporate account with a foreign bank. Besides, you will need some expert advice to avoid the possible obstacles. Please visit https://internationalwealth.info/en/ and request professional assistance in opening a foreign bank account.
Modern trends in the banking industry
Below we describe some prevailing tendencies in the modern banking world. To be frank, very few of these tendencies are beneficial for the bank client.
- No to offshores. Banks all over the world are reducing the portion of offshore companies in their client portfolios or simply getting rid of all of them. A shell company is also going to have a hard time trying to set up a foreign bank account. The tendency is bound to continue.
- Business presence. Banks prefer companies registered in the same country where the bank is stationed. The company should at least have some economic substance in the country such as an office, assets, and personnel. Ideally, the company should do the reporting in the country where the bank is located and pay taxes there.
- Client transparency. Banks prefer corporate clients with understandable and transparent businesses, clear sources of income, trackable money flows, and totally ‘clean’ beneficial company owners and counteragents.
- Strengthened due diligence requirements. The due diligence requirements continue to toughen. This concerns both prospective bank customers and those who have already opened accounts there.
- Problems for startup companies. The chances of a startup company to open an account with a reputable bank are close to zero. The reason for that is lack of operation history. High-risk companies (blockchain and cryptocurrencies, unlicensed forex, payment systems, gambling, dual-use goods, precious metals, etc.) will also find it difficult to open corporate bank accounts today. On the other hand, banks will gladly provide services to companies dealing in international trade, transportation, forwarding and logistics activities, the IT sphere (if their projects are easy to understand), and companies licensed in the EU.
- US dollars. Many banks refuse to open US dollar accounts for customers and make US dollar transactions.
- Sanctions. If a company’s beneficial owner or a counteragent is ‘under sanctions’ the application for banking services is going to be declined in all likelihood.
- Automatic exchange of information. Countries that have not joined the CRS group are few and far between today. It is probably too early to understand if the system works well or not but chances are that we will soon find ourselves in a totally new fiscal reality.
However difficult opening a foreign bank account may be, this is not impossible at all especially if you use professional support in solving the task.
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