… 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.