Setting up a company in Hong Kong or most well-regulated jurisdictions has never been that difficult to do. International business people around the globe are well used to having to provide certified passport copies, original address proof, business plans and so on to enable agents and licenced service providers to set up companies outside of one’s home country.
The challenge now, as we all know very well, is to get a bank account opened for the newly incorporated, or even an existing, company. Before we entered a world of almost zero international travel, we all readily boarded planes to set up companies and corporate bank accounts as were needed for trading, investment and establishing local businesses in foreign countries. This necessarily meant face-to-face interviews with bank officers in the target country as part of the bank’s client due diligence process.
However, in a world ruled by COVID-19, international travel is a luxury, and a risky one at that. And so the opportunity to have a face-to-face interview is very unlikely for most of us. In addition, bank compliance is increasingly becoming more onerous.
So, what is driving bank compliance? Given some very high-profile cases in recent years where banks were fined for money laundering (Goldman Sachs $6.25 billion, Wells Fargo $3 billion), it is understandable that banks have had to change their approach to client due diligence.
Some key drivers for bank compliance now are:
- Tax Compliance – knowing and being prepared to report the tax jurisdiction for each beneficial owner including FATCA reporting for the US.
- Combating Cyber Attacks.
- Safeguarding Confidential Data.
- Competing with Fintech Companies’ online banking platforms – which are growing daily in both number and sophistication.
- Spiralling Compliance Costs – as banks build massive internal compliance infrastructures.
- Knowing and Maintaining Client Information – which now means formal file/client reviews (often paid for by the client themselves in the form of an annual compliance fee) and many regular spot checks and requests for additional documentation for some normal and for some extraordinary payments.
Basic bank KYC and compliance these days includes but is not limited to:
· Passport copy, usually certified or notarised
· Proof of address (utility bill, bank statement)
· Details of directors, shareholder and beneficial owner (CV and background, source of funds)
· Bank reference letters
Information about the company and planned activities
· Company business plan
· Purpose for setting up the company and wanting a bank account, regions of payments, key existing customers, main existing suppliers,
· Information about planned activities of the new or existing company: purpose, size and main regions for payments in and out
Regular update of data
· Documentation for all payments larger or more frequent than the scope that was mentioned in the company bank account application
· Making sure payments fit to the common pattern of the respective industry
- Compliance with Local Financial Market Authorities – which means that when banks are inspected and critical cases appear, management and employees are very open to recommendations from their internal compliance departments and often to end some client relationships.
So how do we get new bank accounts opened for new or existing companies in various jurisdictions around the world?
· First, be very prepared to provide very detailed information on a regular basis to banks’ compliance departments.
· Second, find someone who lives and works where you want to set up, someone who intimately knows and understands the banking system there. It’s all about who you know. They may be able to help get bank accounts opened without the need for you to get on a plane.
· Third, diversify as much as possible. Is one bank account really sufficient? Open a second bank account in another country, even a third one. And use them to build transactional history,
· Fourth, consider a mix of both traditional banks and online (Fintech) banking solutions.
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