30 Nov 2020

Now that I have set-up my international business, how do I open a bank account?

When you are a resident in any given country, opening a bank account is a relatively simple process. You contact the bank, exchange paperwork and in a short time you should have the ability to deposit and transfer your money and pay for your expenses with a credit/debit card. The situation is very different when you are trying to open a bank account for your international business. The difficulties largely arise from the enforcement of Anti-Money Laundering (AML) and counter financial terrorism regulations. These make international banking an increasingly complex, time-consuming, and burdensome process.

AML regulations dictate that prior to opening an account, banks must conduct thorough background checks. These will most likely include, among other procedures, KYC (Know your Customer) and KYB (Know your Business) guidelines.

KYC helps banks manage risk by better understanding their potential customers and their financial dealings. This is the bank’s first line of defense against suspicious activity. ID verification, proof of address, reference letters, evidence of the customers sources of wealth (must always be proven with the correct documentation), and in depth information on the activity of the company (flows of funds and identification of the entities with whom the company will do business) are just some of the various steps in this analysis. Failure to comply with these guidelines can lead to heavy penalties for the banks and put their compliance teams at risk.

KYB is another way of banks identifying shell companies and illegal activities. Steps in this process include but are not limited to: checking your business’s credentials, their Ultimate Beneficial Owner (UBO), understanding the activity to be undertaken, the business relationships, expected cross-border flow of funds and screening the company and its managers against identified blacklists to look for any sort of criminal endeavor.

Which bank should you choose?

Picking the right bank with which to open your international business bank account is crucial. Some banks may deny your application should they encounter any misleading information or if you fail to meet some requirements. Nowadays, it can take months to review your application. This can turn into a very frustrating and time-consuming process, especially when you don´t have any guarantee that your application will be successful. Furthermore, if your business operates outside the EU, particularly in markets which the bank deems “risky”, they most likely will not work with you. In many cases, all the information provided must be in certified and in English. The bank can, and will, at any moment, demand more documentation than what was originally requested.

Banks normally require a “pre-opening” form that states a business’s activity, number and amount of transactions, main suppliers and customers, and more. The UBO will have to provide evidence of all their sources of wealth. In addition, some banks require your physical presence to recognize the signatures, and very often they demand that the manager of the company be a resident of the country.

What alternatives do you have?

In addition to the traditional banking services, some legit alternatives are fintech companies. These entities are also subject to the AML and counter terrorism regulations described above but they work as an online payment platform and specialize in providing simple and effective financial solutions to businesses. Fintechs use technology to improve the banking experience and typically offer more generous rates and fees than their traditional counterparts. This is in part because these entities do not have as many infrastructure and overhead costs. They also have an edge over traditional banks when it comes to the online experience and accessibility. This is a big upside for international business, since they can more easily deal with issues without requiring physical presence.

Why should you hire NEWCO’s services?

With three decades of experience providing corporate services for international businesses, NEWCO can help streamline this convoluted and challenging process, by serving as an intermediary and guiding you through it. We assist our clients by identifying which bank is more suited for each company’s profile and activity, mediating and sending the necessary information to the bank, as well as filling out the “pre-opening” forms and all matter of legal and financial documentation needed. And “chasing” after the bank, repeatedly. Although banks increasingly pay more attention to the business and the intervening parties of the applicant company than to the introductory parties, and nowadays there can be no success guarantees, we do our utmost to facilitate and take the most burdensome aspects of the process off our clients’ shoulders.