… And what you can do to improve your situation.
An unfortunate side effect of this blog has been that some readers see what I write as some one-size-fits-all guide to offshore finance. Perhaps the blame is partly mine, but I try to be clear that what I write may not be applicable to everyone.
The most common question I have got relates to banks and, in particular, remote bank account opening and non-resident bank accounts.
Non-Resident Bank Accounts
This is a bank account that belongs to someone who is not a resident in the jurisdictions where the bank account is held.
Non-resident bank accounts pose a certain degree of risk to the bank. Why? Because aside from freezing or closing the account (which aren’t always legally permitted), they have no recourse in case of a dispute. This is especially true for credits.
Unless you have a very good reason for banking in the relevant jurisdiction, it will often seem a bit unusual to bank there. Who are you? Are you doing something you don’t want your local bank or government to know?
This is why some banks will turn you away saying that they require account holders to have a national ID card or residence permit. In 99% of all cases, this is just the bank saying no because they don’t want anything to do with you.
To avoid this, prove that you have a good reason to bank there and that you will be a worthwhile client for them.
A brand new Seychelles IBC selling ebooks won’t be welcome at a bank in Abu Dhabi; an established company that plans to engage in trade in the Gulf region may be.
For a company account, it’s about history (age of company, solid finances, established customer base) and how much money you bring. If you got one of the two covered, your banking options will increase.
A small-time saver looking to place a one-off of a few thousand EUR and then a few hundred EUR a month in Monaco will be turned away; someone with a family inheritance of several million will be accepted with open arms.
For personal accounts, different banks will take a different approach. Personal accounts are usually considered lower risk since they are hardly used for tax evasion and money-laundering activities are relatively easy to spot on a personal account. Here it comes down to the bank’s preferences. You can open savings accounts with relatively low amounts in most corners of the world. Current accounts are a bit more restricted, since they are often used for frequent transactions.
Some banks only cater to wealthy people. Unless you have a few million to deposit, don’t even bother contacting banks that clearly are only interested in wealth management and private banking services.
Remote Bank Account Opening
Opening offshore bank accounts by correspondence is increasingly going away. Regulatory pressure is the main reason for this. This regulatory pressure is based on money-laundering concerns and bank accounts being opened in fake names, names of deceased people, or names of bought identities (criminals will often pay homeless people to get a passport and then use that passport to open bank accounts).
Restricting account opening to people who show up in person is also a way for banks to weed out clients they don’t consider serious enough. If you can’t even bother showing up at the bank, how serious are you really as a company? If you can’t spare a few hundred or thousand to come visit the bank, what kind of capital does the company have?
It is also relatively easy to falsify passports and other documents banks ask for, whether by modifying a real one or completely fabricating one. All you need then is a corrupt lawyer or notary to certify the copy. A good compliance officer will spot a fake passport but it’s safer to simply require a personal visit from the prospective customer.
The remedy against this is supposed to be apostille, which is a further verification done by a government body. However, even then, there is a risk of corruption. Apostille from a thoroughly corrupt country means nothing.
This is why banks ask that you show up in person. If you have crossed a border, it means someone else has verified your passport. In case you required a visa to enter the country, your passport has been checked by the embassy or immigration department before the travel began and then again at border control. Unless you have multiple passports, which is why some banks will check for entry stamp, where one is given.
What You Can Do
To open a non-resident account, make sure that you have a good reason for it. Attractive banking secrecy isn’t enough of a reason. Good reasons can be:
- Trading in that jurisdiction or region.
- Making regional investments, diversification.
- Attractive financial stability.
- Wealth management and private banking (if you have the money for it).
- Long-term savings.
- Long-term savings in local currency.
Banks can still reject you for any reason they see fit. This is by no means a guarantee.
Taking it one step further and opening the account remotely, the banks are even more restrictive. Here it comes down to two things: amount of money and referrals.
Wealth management accounts can be opened in places like Singapore without a visit to the bank, but since most people will not have several millions to deposit, the only realistic option left is to visit the bank.
This is where referrals come in. A referral can either be a person who acts as an introducer and whom the bank trusts enough. If this introducer refers you to the bank, they will likely accept you.
Another form of referral is intra-bank referral, where you visit the bank in another country. This of course only works with international banks that are present in more than one country. If you happen to live in (or near enough) for example London, Zürich, Geneva, or Frankfurt, chances are you have banks in all major offshore financial centers represented near you.
You first contact the bank in the offshore jurisdiction, explain your situation and your reasons for opening an account there, and if they indicate that they are open to it, inquire if you can visit a foreign branch of the bank and open the account there. Your success rate here is going to vary a lot, but it just might save you a trip to the other side of the planet. In some cases, the bank will charge an extra fee for this; usually not more than a few hundred.
Hi Streber, about the last paragraph of your response, could you tell me which private banks may well fit in that description ?
Hi Javier,
I know it’s not a very helpful answer, but that would be in essence be all private banks. Their business model is conserving capital on your behalf, which is a very low-risk endeavour and therefore typically subject to comparatively lenient due diligence.
I have an article coming next month which goes more in-depth about private banking, in which I will mention a couple of banks. The Swiss are the masters of private banking and you can’t walk more than a block in central Geneva or Zürich without seeing a private bank.
One bank I’ve mentioned a lot in the past is Jyske Bank in Gibraltar and next week I will talk about Crèdit Andorrà which will include some praise for their private banking and wealth management services.
Hope that helps; stay tuned!
A few specific comments since being turned down by banks can be frustrating as they often don’t tell you why and often don’t tell you their requirements going in.
1. Providing more due diligence tends to help – for whatever reason banks love paperwork even when it means nothing, burying them in it can be helpful specifically if it helps to make a reputable case for you. I’ve had senior bank people at for example Singapore banks tell me “I want evidence to show that you are who you are”, we’ve gone so far as to provide them with diligence packages that included recorded conversations with clients, copies of invoices, signed agreements with clients, etc. to prove our business activities are what we say they are and this has helped smooth the process over considerably. This is probably also where jurisdictions that require audited financial statements (Hong Kong, Cyprus, Gibraltar resident companies, etc.) have some advantages opening accounts over companies incorporated in countries without reporting requirements. This of course has some trade offs that come with it but it’s generally advantageous when opening bank accounts.
2. Nature of business seems to be a big point of contention – the main decline reasons I’ve seen are:
– No local connection (or regional, for example SEB wants to work with companies with a Baltic connection, Standard Bank wants to work with companies with an African connection, etc.)
– Unfavorable jurisdiction this can be for the UBOs (most specifically for Americans, I had Investec Mauritius tell me they would go so far as to potentially deny companies because the company had clients in the US due to their fear of FATCA, and I have associates who have been flat out told by private banks in Singapore that if they were US residents they’d be denied and they weren’t excited about Australia or UK either but people from more remote less established countries they’d welcome with open arms) but also for the companies themselves (for example CIM seems to pretty much reject all tax haven companies, BOV has a lot of similar restrictions, etc.)
– Nature of business this is a big one for example Lloyds in I believe it is Jersey only wants a very limited range of companies, a lot will decline online gaming companies, etc. but in general this seems to revolve around the AML, fraud, etc. concerns of certain types of business (you see this among CSPs and trust companies as well)
I generally find it’s helpful to learn a bit about the bank in advance if possible (higher up personal relationships seem to help a lot as well) and to understand where they are coming from. If you can speak to their concerns and desires in advance you’ll have a much better chance for example understanding how they make money (there’s a reason it’s a lot easier to get set up at private banks where they are making money managing your money than in retail banks where your savings just sit there, commissions managing $250k are substantial when retained but just having the odd deposit and withdrawal hardly makes the investment of on-boarding a client worthwhile) and what their risks are.
All very good points. Thanks for your comment(s)!
Due diligence is ultimately more about the bank protecting itself in case of a legal dispute or criminal investigation than it actually cares about who you are. You could walk into a bank to open an account for a run of the mill IBC, and most banks would trust you after you the usual corporate documents. The reason they would ask for more is because you seem off or the banks considers you or the structure risky.
Bank business activity requirements tend to be fairly weak policies, at least with banks that engage in global banking open to anyone. In the case of Lloyds, they might not want your business in Jersey but would accept you in UK. If you can convince them why, it is sometimes possible to open an account effectively in the UK but domiciled in the Jersey for tax/secrecy/whatever purposes, or vice versa. HSBC, BNP, and other large banks do this from time to time. It’s a selective process, though.
Private banking is indeed subject to more lax due diligence. Some private banks lock you in by only accepting incoming from and outgoing transfers to accounts in your own name, or from a list of pre-approved third parties. For private banking, that should be fine.
“Some banks only cater to wealthy people. Unless you have a few million to deposit, don’t even bother contacting banks that clearly are only interested in wealth management and private banking services.”
Do you know good (stable and great returns) banks which accept lower deposits for wealth management and private banking? For example, banks accepting 50k to 500k deposits. First bank that comes in mind for PB with a 200k deposit: jyskebank.com
If you can go up to 250,000 CHF or EUR, there are a couple of Swiss banks that will consider you, such as ZKB, Julius Bär, Heritage (starts even lower), EFG, Falcon PB, Pictet, and so on. I don’t have experience with all of them but I can’t imagine any of them being anything but good at what they do. National Bank of Abu Dhabi (NBAD) has a branch in Switzerland. If their UAE based private banking is anything to go by, they might accept you for under 500,000.
I was recently in Andorra and opened a private banking account with a minimum deposit of 100,000 EUR. Both Crèdit Andorrà and BPA start their minimum around that amount (BPA will hint that they expect the capital to grow over time), and they both do a good job. For private banking, I’d say BPA has a slight edge of Crèdit Andorrà.
There are a couple of banks in Monaco that might fit your bill. Monegasque banks usually start at around a million but CMB for example will settle for 250,000 in some cases.