Account opening procedure

How do I open a corporate bank account?

It is a global trend for banks, which used to provide their services to the owners of offshore companies, to adopt more complicated account opening procedures. In the first instance, this has to do with the recent full–scale campaign for the prevention of terrorism, corruption, ‘laundering’ of the proceeds of crime and illegal business activities.

The second reason is that the countries, which have been recently admitted to the EU, are striving to bring their banking systems into compliance with EU bank directives. All EU banks are now required to confirm customer identity and contact information. This is why clients now have to provide more details to their banks regarding all the members of the corporate structure and the company’s objectives and activities.

Do I have to be present to open an account?

Account opening procedures and requirements may differ quite substantially from bank to bank. However, some common rules apply. For instance, a potential customer has to meet a bank representative or come to the office of a lawyer’s firm (if the bank has an agreement with that firm regarding the provision of such services). For the meeting, the customer has to have a complete set of properly executed corporate documents. It is always required that an account signatory appear in person for a meeting with bankers. Sometimes, the presence of the beneficial owner of the company is also required. These meetings are also usually attended by the customer’s legal adviser, who in this case acts as an ‘introducer’.

If the account signatory and the account beneficiary are not the same person, the bankers are sure to request a meeting with the beneficiary as well. In addition to this, both the beneficiary and the account signatory have to provide detailed information on themselves and their businesses. Even though an account may be opened for a new company, bankers are well aware of the fact that behind each new company there is always a long-established business.

Opening an account from abroad

You will not normally have to go to Switzerland, Cyprus, or Latvia, for example, in order to open an account in a foreign bank. They may have a presence in your country, so it is quite sufficient to meet a bank representative in your locality. Some banks may send their representatives to your country, in order to meet their potential customers.
However, you will have to travel to some other countries, such as Hungary or Singapore in order to open accounts there.

Going through the interview with the banker

During your interview with the bank representative you will have to provide detailed information about yourself and your business. You should also be prepared to answer the bank officer’s questions regarding the source of funds. The officer will need to know your phone and fax numbers, e-mail address, mailing address of your actual enterprise and your residential address. You will have to fill in and sign account opening forms as well.

Particulars concerning your company’s business and approximate turnover on the account will be of primary concern for the bank. When asked a question about the company’s line of business, you should not say something as laconic as ‘trading’ or something similar. It is far better to give a detailed reply like ‘oil products intermediary transactions’. The bank may want to know about your business partners: What would the business pattern look like? What, where and from whom will you buy? What, where and to whom will you sell? To/from which countries will outward and inward payments flow?

In many cases bank officers who conduct interviews will verify the correctness of the information by asking indirect questions. If a customer states that the company’s main objective is, for instance, trading in gold, the bank officer may ask the customer on the spot how much a troy ounce is.

The account opening procedure could be relatively uncomplicated if the company simply does import-export operations. If you show in your application form that you will work in the real estate business, investments, lending etc., you will have to provide a detailed description of your business.

Sometimes banks require the introducing law firm to write their own Letter of Introduction. This Letter usually contains detailed information on the company’s director, his or her current enterprise and business activities in recent years.

On some rare occasions banks may ask the customer to provide a detailed business plan and a complete list of business partners who will receive/make payments to and from the account etc.

And the last but not least: it will do no harm if you bring your business cards and advertising brochure describing your business along with you to the interview.

Account opening documents

First and foremost, you have to submit apostilled corporate documents, preferably with the recent date on the apostille. If it is an old company, the bank may require additional documents, such as a Good Standing Certificate, Directors and Shareholders Certificates, Resolutions of Directors Appointment, Share Issuance Resolutions, share certificates, trust declarations and a power of attorney (in case of a nominee director and shareholder).

You will also be asked to provide your ID and a proof of address, as well as IDs and proofs of addresses of the director, attorney, shareholder and beneficial owner of the company. Addresses may be verified by utility and telephone bills with clear indications of the applicant’s name and address.

Sometimes, banks require a reference letter from another bank or a business partner. The reference has to be from a reputable and well-known business (this cannot be an offshore business), which is easily recognisable and may be found in corresponding catalogues, on the Internet etc. Each reference letter has to be executed on the bank’s or company’s letterhead and contain the necessary details and the name of the person whose signature appears below the reference.

Each particular bank also sets its own requirements as to certification of the documents you provide to the bank. In most banks, copies of the documents may be certified by a bank officer. However, it is not uncommon for a bank to require documents with a notary’s certification, or, alternatively, you may be asked to provide original documents for a certain period to be considered and examined by the bank.

How many accounts may be opened for an offshore company and in which countries?

There are actually no limitations on the number of accounts and jurisdictions where you can open an account for an offshore company. An exception to this is the incorporation of an insurance company, where insurance coverage has to be deposited with a particular authorised bank.

In many jurisdictions there is no mandatory requirement to open bank accounts in the country of the company’s domicile, that is, you do not have to open a bank account in the country where the company has been incorporated. This is true for all offshore territories, as well as Cyprus, the UK, New Zealand and others. However, in Switzerland, the Netherlands or Austria this requirement does apply.

One more thing: where a company has several accounts in different banks and is tax liable at the place of incorporation, it has to submit bank statements for every existing account together with its tax return.

When may a bank refuse to open an account?

The reason for not opening an account may lie in the bank taking a dislike to a company’s activities as declared by the client. It is not advisable to declare more than one type of activity. If the company does really undertake several types of activities, they should at least be interrelated. For instance, a company may import agricultural machinery and trade in grain.
If you have to declare several independent activities (say, trading in coal and investment transactions), you should expressly state this from the very beginning, or…simply buy several companies and open several accounts.
And it goes without saying that you should not declare that your business is ‘financial mediation’. In this case you are almost certain to be rejected by any bank.

When may the bank close an account?

If the bank suspects that a company is engaged in activities other than those detailed in account opening forms, the company’s account may be blocked until the situation is clarified.

Banks will hardly agree if you indicate ‘account replenishment’ as a reason for payment over and over again. You should always be prepared that a bank may ask for the documents underlying any payment.

Unfortunately, some banks may act quite unpredictably where it concerns closing customers’ accounts. This primarily concerns American banks, which may send their customer a notice requiring them to close an account within a week without ever bothering to explain the reason why.