How to pass bank compliance when opening a foreign account?

Every business owner, sooner or later, begins to think about the possibility of expanding their horizons beyond the borders of their native country. And it doesn’t matter what exactly your business is aimed at – import/export of products or provision of IT services overseas – in the context of the accelerated pace of business globalization, opening an account in banking or financial institutions abroad becomes a strategically correct decision to expand your capabilities.

At first glance, it may seem that opening an account abroad is a simple process – filling out a form and attaching several specified documents, and the account should be opened on the same day. Still, as practice shows, this process’s “inner kitchen” is a little more complicated than it might seem on the surface—at first glance.

In this article, we will lift the veil of internal compliance control in banks and payment systems when opening an account so that you have a complete understanding of the details, the omission of which will lead to refusal to open an account, even if it seems that the documents are drawn up “perfectly.”

Compliance procedure: what is it, and why is it needed?

To understand the compliance procedure in a bank, we need to delve a little deeper into the terminology and understand what this term is.

So, Compliance is a procedure aimed at checking the company’s activities and all persons associated with the company (beneficiaries, shareholders, directors) for compliance with internal and external requirements and standards, both the bank itself and international legislation.

If we translate from legal language into human language, all personal documents and company documents that are submitted to the bank for review must present the entire structure of the business and you personally, as the owner, as transparently as possible.

Here lies one of the reasons why we strongly recommend hiring international lawyers with relevant experience when opening accounts in foreign banks. After all, they will be the ones who will be able to understand the company’s ornate business processes and present your business to the bank’s discretion as simply and transparently as possible, without raising a ton of additional questions from the bank, which will only delay the application review process, and in some cases, will serve as a reason for refusal to open an account.

The bank will check everything – from personal documents to business partners- as part of compliance with the AML (anti-money laundering) law requirements.

Thorough analysis of income received

When considering an application, the bank will pay special attention to the amount of income received and, especially, from what sources this income was obtained.

The standard practice is this: if the owner of a business can show that he is simultaneously employed in this or another company and that he officially receives wages on a bank card, a personal bank account statement that will confirm this is sufficient.

But here, you also need to understand that the income must correspond to the position held, and if the director receives a conditionally minimum salary and this is his only income, the bank will have questions, which will delay the procedure and may even serve as a refusal to open an account on such an application.

Fortunately, there are other options for displaying personal income by the requirements of current legislation. This is where lawyers come into play and will help you analyze your situation and collect the necessary documents. We firmly believe there are no hopeless situations; perhaps your situation just needs to be considered from a non-standard angle.

Thorough analysis of business relationships

In the context of interaction with a bank or payment system, high importance is attached to a thorough analysis of business partners. The Bank strives to clearly understand the scope of the company’s activities, that these activities are correctly reflected in legal documents, and that business partners’ activities are correlated with the company’s main activities.

Among the most common mistakes, we can note the following:

• If your business supplies goods or services to countries on the sanctions list, your application will be rejected.
• If you do not show at least two or three partners for incoming and outgoing payments, your application will be rejected. But even here, we have several options for presenting the business so that the absence of partners at this stage does not seem suspicious.
• If everything is in order with partners for incoming and outgoing payments, but contracts and a detailed description of services and accounts under these contracts have not been provided, the application will be refused.
• If business partners are involved in illegal schemes, the case of which has been publicly reported, the application will be refused.

The factors listed above are definitely only part of the possible reasons for an application being denied. However, they are not the final solution. It is important to conduct a thorough analysis of all aspects of the business relationship and provide documentation that fully reflects the actual activities of the business. This will give the bank a clear picture of your transactions and strengthen confidence that the company’s activities are fair and comply with all legal requirements.

As lawyers, we, in turn, will help you reflect on the specifics of your activity as clearly and correctly as possible and help you prepare the missing documents so that banking compliance goes quickly and painlessly.

Being careful when filling out banking forms

Based on practice, many business owners, to save money, initially try to open accounts in foreign banks on their own while avoiding professional advice from international lawyers or entrust this issue to a full-time lawyer whose specialization is tailored to another area of legal activity. The result is a lot of wasted time, effort, and nerves and a refusal to open an account.

But it’s difficult to blame anyone for this because, from the outside, it seems that this process does not require special knowledge: collect documents, submit them to the bank, and wait for an account to be opened.

But, as previously mentioned, everything is not as simple as it seems at first glance.

Even if you provide a satisfactory package of documents, you can fill out bank forms incorrectly and incorrectly reflect information about yourself and your business. If you are lucky and you find a loyal representative of the bank, perhaps he will help you adjust the questionnaire, but you should not take this example as a regular practice and not an exception to the rule.

In a standard situation, the bank will consider that the applicant is trying to hide information and the business is not transparent, and on this basis, it can also be refused.

The above situation would be doubly disappointing if all the documents were prepared according to the bank’s requirements and took a lot of time.

If you nevertheless decide to open an account on your own, without the help of professionals, we strongly recommend that you communicate with the bank about any unclear questions in the application form because the possibility of opening an account depends on this. Typically, bank employees are friendly towards potential clients and will not refuse to clarify specific points. All you have to do is display the information correctly.

Thus, in the modern world, opening an account in foreign banks or payment systems is becoming an integral part of the strategy for the successful development of your own business, representing a vital tool for entering the international market even in the face of modern challenges.

To successfully complete the compliance procedure in a bank, it is essential to delve into the intricacies of this process, identify the main points that the bank will focus on when considering an application, study the compliance risks in the bank, and first carefully analyze your business and all the business relationships that have been built over the years.

To resolve this issue, we recommend seeking help from our team of professional lawyers. Having many years of experience in this field, our experts know all the intricacies of the compliance control procedure in a bank. We are ready to thoroughly analyze your situation and provide qualified assistance in opening an account abroad as soon as possible.