Every international entrepreneur needs to open international bank account. The opening of such bank accounts has, unfortunately, become more and more cumbersome in the last couple of years.
Why this is, I will discuss in later postings. What is important for now is that you understand the process and requirements of opening a bank account before you get into the process.
Keep reading (that’s an order) because you will ensure that your international bank account opening processes will go much smoother.
I have been at a LOT of bank account opening meetings and have filed a lot of applications. It is surprising to see how poorly entrepreneurs are prepared for this.
Most of the time you will have an introductory meeting with the bank and often you will be using an introducer to do the bank account opening for you. Here are a number of requirements you will be asked for.
And more importantly… why:
No, banks are not interested in your summer job as a bartender in Greece, that you have perfect Microsoft word capabilities or that your hobby is collecting stamps (although those stamp collectors are not to be trusted, if you ask me…).
They want to verify your story.
If you have been flipping burgers for a decade and propose a business that will receive large payments from Colombia, a bank might assume that something is fishy.
Of course this is an extreme example, but a resume reveals a lot about who you are and where you are capable of. And it is surprisingly easy to spot “polishing”.
Source Of Funds
Banks have to understand what your business is. With an existing account they can easily figure this out by the amount and descriptions of your transactions. But when you are opening a new account, they are in the dark. That is why they always ask their clients what the initial source of funds is and what is the expected frequency and volume of transactions of the first suppliers and future customers.
This will give the bank a good indication as to the size and nature of your business.
This way they can also spot potential tax issues since they see the location of the business and where the people running the company and beneficiaries are located. If initial funds come from a private account in a high tax jurisdiction they have likely already been taxed.
Clients often try to skip through this phase. They present vague information and sometimes even get agitated because it is a “new business”. But that is like calling an airline to buy a ticket not knowing where you want to go or on which date. You have to give the other party something to work with, right?
Banks will ask you for an up to date utility bill in your personal name. For the bank, this is the only proof of where you actually live they have. And why is that important?
It is an indication to see if there is a possibility for tax evasion. It is also important for the bank to know that they send your login details to the right location. They will want to have an address to give you a legal notice and it might be determining if you will be subject to automatic exchange of information.
When you are dealing with a sales representative of a bank, you are not looking at the person who gives the final approval. The application has to go through the compliance department. The easier it is for the representative to understand your case, the easier it will be for him to present it to the actual decision makers.
Try to realise that there is a
humpbacked, drooling compliance officer behind the curtains who should be able to understand your business model in 5 seconds. The clearer the information you present, the bigger the chances are that you will glide through the compliance approval process without being disturbed by additional questions.
And it is a good test, because if you cannot do this, you might not have thought carefully about the business you intend to set up.
Also know that compliance approves a case as it is presented. When your case changes (you wish to add a different currency, add an additional signatory or the transacted volumes are much higher than originally thought) it might trigger the necessity of an additional approval. Make sure your case is as complete as possible from the start.
Updating Bank Records
This can be really annoying because it is usually enforced by blocking incoming funds until you provide the bank with what they need. One of the downsides of all the regulations nowadays (one of the many) is the desperate need to comply with all sorts of regulations. It has become more important for banks to keep the authorities happy than it is to keep you happy.
When your passport expires, someone might ask for a new scan. If you move, someone will want to see a new utility bill. If your company has a corporate shareholder, you might be asked if it is still in good standing and who is the shareholder.
The only way to prevent this from interfering with your business is to be proactive with updating your details yourself. Of course no-one does this, and you will likely run into this problem at one point.
Final Thoughts On Opening An International Bank Account
Banks become more regulated and difficult by the day. But there are always options. If you apply the logic and the steps outlined in this article when opening your international bank account, you should be able to prepare yourself well and avoid most of the pitfalls during the account opening process.
Boa sorte (as they say in Brazil)
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