The BEPS (Base Erosion and Profit Shifting) project affects 135 countries that have joined the convention. The MLI (Multilateral Instrument) started to be applied on January 1 of this year. These international efforts aimed at global tax law unification are putting banks’ Compliance Departments to some really hard work. The world is actively fighting money laundering and tax avoidance, which certainly has consequences for all international companies. Banks do not take onboard foreign companies that do not comply with all the contemporary requirements. The new reality makes it imperative to apply for professional assistance if you would like to set up a corporate account in a foreign bank.
Why have banks stopped opening accounts for foreign companies?
Previously, banks used to compete for the client: they made attractive offers, provided for personalized banking solutions, and did not care very much where the client’s money came from. Things have changed drastically today. The banks are now highly selective about who they want to service and opening a foreign bank account has become a true challenge. Doing it on your own, without any professional assistance is close to impossible.
The toughened Due Diligence requirements have led to the closure of multiple bank accounts that non-resident companies used to have. This has deprived them of the financial instrument that they need to carry out business abroad.
The matter is that the global efforts aimed at increasing business transparency and eliminating discrepancies in the national tax and financial regulations are making the banks responsible for knowing whom they provide services to. If at some point it turns out that the bank has opened an account for an untrustworthy client, huge fines will follow. Moreover, if the matter becomes serious, the bank may even lose the banking license, which would be no less than a catastrophe.
This is the reason why banks want to be overly cautious when considering applications for services. If the applicant foreign company has a complex corporate structure, the bank managers are going to be very suspicious about it and they are going to scrupulously inspect the application documents.
The Covid-19 pandemic has limited everybody’s freedom of movement severely. Opening a corporate bank account remotely is still theoretically possible but without professional advice, doing so is going to be even more difficult than setting up a corporate bank account on a personal visit to the bank office.
What can make a foreign bank deny service to you?
Opening a corporate account in a foreign bank starts with going through the client identification procedures. The KYC (Know Your Client) requirement makes the bank responsible for checking all new applicants for services as well as all existing clients very thoroughly. The consequences of taking up an unreliable client can be disastrous. If the Compliance Department officer knowingly lets a ‘dirty one’ get through, he or she may well go to jail!
As far as corporate applicants are concerned, the bank officers will want to make sure that the company applying for banking services is not a shell company. They will also want to develop a full understanding of the company corporate structure. The Compliance Department officer considering your application will be interested in finding out the following pieces of information, among other things:
- What country is the foreign company managed from?
- Does it have real connections with the jurisdiction where it is domiciled?
- Does it file tax reports and other financial reports to the authorities on a regular basis?
- Does it pay the taxes on time?
- Does the company have an office and employees (you may be asked to supply a photograph of the office building with your company sign on, job contracts with your employees, and so on)?
- What is the real purpose for which the company has been set up? Does the company have a history of operations?
- What is the essence and the types of financial operations that the company carries out?
You have to understand that the Compliance Department must conduct due diligence checks that include an analysis of the company owner’s personal information and an analysis of the corporate information as well. In this way, the bank seeks to minimize the risk of taking onboard a client that might use the account for money laundering and/ or terrorism financing purposes. If the Compliance Department finds some discrepancies in the company description or if it finds out that some false data have been supplied, service will be denied to the foreign applicant.
To improve your chances of acquiring a foreign bank account for your non-resident company please apply for our Preapproval service. A preapproval is a provisional consent on the part of the bank to provide services to the applicant. It takes less time, money, and effort to acquire a preapproval of your application in comparison to setting up a bank account. At the same time, it increases your chances to find a foreign bank that will agree to provide services to your company.
Specifics of the interview with the bankers
The video interview with the banker is another challenging stage that you will have to go through when applying for services to a foreign bank. The company owner/ director has to provide detailed personal and corporate information to the interviewer.
You must have your passport available at the interview and you must make a sample of your personal signature during the interview.
You will be asked about the business specifics, about the company counteragents, stockholders, partners, the expected account turnover, and so on and so forth. Please be prepared to talk about your business processes: where you purchase raw materials, how you process them, who you sell the products to, what countries they go to, what currencies you use, and so on.
It is undesirable to give short answers to the interviewer’s questions: he or she should not have any reasons to suspect that you are trying to hold something back. Vague answers also need to be avoided. ‘What business area is your company engaged in?’ Saying ‘We are into sales’ would be a bad answer because it is too vague. If instead you reply, ‘We provide intermediary services to buyers and sellers of oil products’, the Compliance Department officer will be satisfied as he or she will clearly see what kind of business you are involved with.
The process of setting up a corporate account in a foreign bank will be fast and easy if (and only if) the bank officer can clearly understand the company business structure and the nature of its financial operations.
Some reasons for service denial
When you apply for opening a corporate account in a foreign bank, service can be denied to you for various reasons. The most frustrating thing about it is that banks most often provide no explanations for service denial. Thus, the better you are informed about the factors to take into consideration, the better are your chances for success. Here are some possible reasons for service denial:
- False/ incomplete information about the types of company business activities;
- Types of company business activities totally unrelated to each other;
- Incomplete package of application documents;
- An overly complicated corporate structure;
- Improperly completed bank application forms;
- Counteragents in questionable jurisdictions;
- Lack of accounting and financial reports;
- Uncertainty about the legality of the sources of corporate capital.
What benefits does expert support bring when opening a corporate account in a foreign bank?
Opening a corporate account in a foreign bank is a complicated and time-consuming process these days. The compliance requirements have become strict indeed and meeting the contemporary standards is rather challenging.
Offshore Pro Group will be happy to provide legal support to you in the process of setting up a corporate account in a foreign bank. We offer the following services:
- An analysis of your company corporate structure for compliance with the modern requirements;
- Assistance in completing bank forms and questionnaires;
- Assistance in compiling a full set of application documents;
- Mediation of your negotiations with the bank;
- Translation and notarization of the application documents;
- Comparison of foreign banks for the benefits that each of them offers;
- Submission of the application documents to the bank officers;
- Preparation for the video interview.
Would you like to be successful in setting up a corporate account in a foreign bank? Please contact us by email (see top of the page), live chat or WhatsApp and take your company to the next level!