What does an IT business need to open an account in a foreign bank?

Most often, the owners of a rapidly developing, and yet very perspective IT business, choose Europe as one of the most favorable continents for registering a company and opening a bank account. European countries are characterized by their economic and political stability. It is for this reason that IT companies are trying to enter the European market and open their current accounts in European financial institutions (banks or payment organizations).

What should be taken into account when opening an account for an IT company?

IT business today is one of the most perspective and, at the same time, one of the most difficult for the sectors to provide banking services, and for most banks, this activity is classified as High risk.

Why do banking and payment institutions refer to this particular area of activity as High risk? Because IT is a type of activity that is very difficult for banks to verify, it is also highly likely to encounter difficulties of various kinds, including problems with the law, customer dissatisfaction, or developing software products or writing codes, which can lead to negative consequences. Therefore, financial institutions are forced to carefully check the declared activities.

When submitting documents for opening a current account, an IT company must already have: a developed website; detailed presentation of the declared activity, business plan; the presence of at least one employee who can confirm their experience in this field; examples of software products that have already been created; a list of counterparties with which the company plans to work; availability of bank statements if the company already has an open account with another bank or payment system; developed instructions for the return of money, if the business involves the return of money to the client; and other conditions at the request of the bank.

Therefore, in order to successfully open an account, IT companies should carefully prepare company documents.

Compliance procedures for IT companies

Do not forget that further work with a financial institution also requires constant attention. Financial institutions, at the request of their regulators, are forced to conduct compliance checks of the declared business and all transactions conducted by the company. And this means that any transaction that an IT company conducts must be documented or justified.

If the bank or payment organization is not satisfied with the supporting documents or their absence at all, and at the same time the transaction looks doubtful or risky for the bank, the financial institution may block the current account before the trial, and in the most unsatisfactory ending, close the account altogether.

If we compare all the same requirements for opening and maintaining a current account of banks and payment organizations (hereinafter referred to as payments), then payments are not so demanding in opening accounts for business. But you shouldn’t, also don’t take seriously opening an account with a payment organization and collecting documents for a successful opening.

Yes, payment systems are more loyal in conducting compliance checks of their future customers compared to banks; loyal to transactions; loyal to checks of counterparties; loyal to the verification of the beneficiaries of the company. Given all the difficulties for a young developing business, a payment system may be the only option for a company that operates with high risk and at the start of development.

How to choose a financial institution for an IT company?

When choosing a bank or payment organization for opening an account abroad for IT business, you need to consider first of all:

• the scope of the company itself and the requirements of the financial institution for this business;
• procedure, terms and cost of opening an account;
• reputation and image of the bank and payments;
• size and rating of the financial institution:
• customer feedback on working with a financial institution;
• availability and validity of the necessary financial licenses;
• the cost of servicing the business and the conditions for a refund when closing a current account;
• annotate under what conditions a bank or a payment system can block an account;
• optimization of the client’s activity;
• study of services and products provided by a bank or a payment system;
• the presence of limits when opening an account.

If a company is engaged in software development, for example, it can open an account with a financial institution by providing all the necessary documents and information listed above. If a company operates in the gaming business, gambling or the same forex, opening an account for the company is possible only in the payment system if there is a license for this type of activity.

Required documents for opening an IT company account

When collecting and submitting a standard package of documents for opening an account abroad for an IT company, you should pay attention to important aspects.

1. You should seriously approach the preparation of a business plan for an IT company. The business plan should accurately describe the company’s program of activities, goals, the product that the company produces, for which industry the company provides services, a list of customers, it is desirable that there is information about them on the Internet. Even if the company is new and has not yet been in business, you need to provide a business plan indicating directions for future activities.
2. It is necessary to provide documents for the owners of the company (beneficiaries). It is important for the founder of the company to confirm his experience in this area so that the bank does not give the impression of a risk, and this does not negatively affect the opening of an account.
3. It is important to have real partners, contractors with whom the company works or plan to work in the future. If the new company or start-up does not yet have partners, the applicant should describe the market for future activities, and how to find future customers.
4. If the company’s activities are subject to mandatory licensing in the field of IT (for example, forex, gaming business), it is necessary to provide the relevant licensing documents that are mandatory for the compliance department of the bank or payment system.

Often, the compliance department of a bank or payment system asks to provide, in addition to the standard package, other documents that it deems necessary to confirm the reality of the company’s activities and its relations with counterparties: service agreements concluded with counterparties, office lease agreements, the availability of a website and other.

Where is the best place to open an account for IT business?

Opening an account in a foreign bank for an IT company has recently become a more complicated and lengthy process. But still, for companies with more transparent activities and real partners and clients, it is still possible to open an account in a foreign bank, if you choose the right bank, prepare and provide the bank with the requested documents for opening an account, based on the recommendations mentioned above.

Top 5 banks to open an account for IT business:

1. Zapad Banka (Montenegro) is a fairly popular Montenegrin bank with a good reputation and reliable clients, it opens accounts only for European companies that file reports in the country of their registration and pay income tax, and can also confirm the presence of a real office in the country of registration of the company. At the same time, the bank does not open accounts for companies registered in offshore jurisdictions.
2. AS LPB Bank (Latvia) is a Latvian bank that opens accounts for companies that can confirm their ties with the EU countries and the company’s office in the country of registration.
3. Universal Capital Bank (Montenegro) is a Montenegrin bank that opens accounts for European companies, as well as companies registered in Hong Kong, except for classic offshore jurisdictions.
4. Hellenic Bank (Cyprus) is one of the very first Cypriot banks that opens accounts for companies from all over the world, among the advantages of which there is no commission for opening an account.
5. Rietumu Bank (Latvia) is a Latvian bank that opens accounts for companies from the EU, after they confirm their actual presence in the country of their registration (presence of an office, payment of taxes by the company, submission of financial statements by the company).

If the company’s activities have a high level of risk or the beneficiary does not want to spend his energy in the “struggle” for opening a bank account, then an alternative to a bank account are payment systems that work with high-risk clients and open accounts for any type of activity, except for prohibited ones.

Top 5 payment systems for IT

Below we offer for consideration the top 5 payment systems for opening an account for an IT company:

1. MultiPass (England),
2. SatchelPay (Lithuania),
3. Unlimint (Cyprus),
4. Payonner (USA),
5. Wise (England).

These payment systems offer more favorable conditions to their customers and opening an account in them is simplified as much as possible.

By opening an account in a foreign bank or payment system, it is possible to get benefits such as access to SEPA/SWIFT transfers, IBAN accounts, fast payments, use of multi-currency accounts, access to foreign currencies, issuance of virtual and physical corporate cards, increasing the prestige of the company.

To start the very opening of a current account for your business, we still recommend contacting specialists and lawyers who will help you go through all the processes painlessly for you. The specialists of our company Azola Legal Services will help you choose the most optimal solution for your business. We will be glad!