A few weeks ago, I revisited a post about how to incorporate an offshore company. Today we will continue this trend and rewrite another popular post in need of a facelift, namely How to Open an Offshore Bank Account.
This post is not about optimizing your chances to have your application be approved. I have written elsewhere about that.
In the most fundamental sense, an offshore bank account is a bank account held with a bank in a jurisdiction (meaning an independent country or a subnational territory such as Hong Kong or British Virgin Islands) which is different from the one in which you are resident and/or of which are a citizen.
However, if you live in Italy and open a bank account in France, the bank account in France is usually not considered an offshore bank account. There is typically an element of banking secrecy or tax advantage involved for a bank account to be referred to as offshore. In reality, with the advent of TIEAs and DTAs and other changes in the international financial services sector, the benefits of secrecy and any tax advantages a bank account in and of itself may have are much less prominent than often advertised.
Whatever your reason for wanting to open an offshore bank account, make sure that the decision you make is an informed one. I strongly recommend reading the following posts to broaden your horizons:
I assume now that you have done or will do enough research on how to choose and how to evaluate offshore banks.
DIY vs DFY
Whether to do it yourself (DIY) or have it done for you (DFY) is a question you will have to ask yourself.
If the account is opened as a part of forming an offshore company, your service provider will almost definitely insist on that they help you open the bank account. Most service providers charge a few hundred upwards to a thousand USD/EUR for this service.
Do you need someone’s help? Probably not, but it is very convenient. Very few banks actually require an intermediary but it will very often help convince a bank to take on clients that they otherwise wouldn’t, such as companies that are smaller or higher-risk than the bank’s usual requirements.
In many cases, though, all you end up doing is paying someone to help you fill out the bank application forms and forward all the documents to the bank.
The downside to relying on your service provider is that they may not have the banking connections that you need. If you want to bank in a particular jurisdiction or with a particular bank not supported by your service provider, you are faced with a problem. Large and reputable service providers can leverage their reputation to establish a connection with the bank on your behalf (especially if they are physically present where the bank is), but this tends to come at a premium rate.
Can you do it yourself? Yes, if your business is an attractive prospect to the bank. This means showing transparency to the bank and backing up your business with a solid business plan including financially sustainable projections for the first two years. It also means showing either an initial deposit or annual turnover in line with what the bank expects.
Filling In The Application
By now you have either got the forms from the bank or from your service provider. A really good service provider will have filled in everything for you (or offer it as an extra service) and you just need to sign it.
It’s perfectly OK to ask the bank for help with filling in the form. Not all fields are crystal clear and can require explanation, especially in case of complex ownership structure.
When opening a bank account for an offshore company, check with your registered agent if they are willing to forward mail to your residence or if you should specify another address (your residence, a PO box if permitted, other) as the mailing address.
Documents Required to Open an Offshore Bank Account
This is the part people have the biggest problem with. It also causes a lot of unnecessary delays with the bank.
Certification, Notarization, and Apostille – Oh My
Banks are required by law to identify the signatories and the beneficial owners of all bank accounts. That’s more or less the full extent of the legal texts in most jurisdictions.
This means a bank needs to know your name, nationality, date of birth, address, and possibly some other contact information such as a phone number or email address. In theory, banks could allow and accept applications from anyone using just a basic sign-up form much like the ones you encounter on Amazon and Netflix.
However, because banks can face severe repercussions for failing to validate the identity of an account holder, they ask for supporting documents to verify the applicant’s identity.
Because it is easy to tamper with copies when the bank has not seen the original, banks usually ask for documents to be certified. There are essentially three tiers of certification: certification, notarization, and apostille. There is a fourth, but we try to not speak too much about the old sleeping giant that is legalization.
The most basic is (confusingly) just called certification. This is when a copy is made of for example your passport and someone writes a note on the copy saying that they certify it is a truthful copy of the original and that they have seen the original. Virtually anyone (except for the bearer of the document to be certified) can be a certifier but in reality it’s limited to legal professionals, accountants, or others of a reputable legal or financial professional. I have seen many banks that trust a company enough to have the company’s CFO or other senior manager act as a certifier of passport and other documents.
Next we have notarization. This is a person who is registered and or licensed with the government one way or another to certify documents. Notaries are almost exclusively lawyers by training. Common law countries have so-called notary publics or public notaries. Public notaries may in some cases have less powers than a notary and some banks will therefore reject certification by a public notary.
Lastly, we have apostille. Under the succinctly named Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents for Foreign Public Documents, the age-old process of legalization was finally put to rest in – as of writing – 105 jurisdictions.
Before the Apostille Treaty, the only way to have a document certified internationally was to have a copy certified at the embassy of a certain country. Without going into too much detail, the Apostille Treaty essentially bestows those powers in notaries or public notaries. In order to prove that the notary has been bestowed such powers, the certified copy will have apostille affixed. This is an assurance from the government (which has signed the Apostille Treaty) that the certifier is duly registered and authorized.
What about countries that aren’t signatories to the Apostille Treaty? Some banks there still ask for apostille under the reasoning that the document is certified by a notary and the additional level of apostille strengthens the trust in the copy, but most either settle for notarization or require the age-old legalization process.
The only truly universal piece of document required to open a personal bank account is a proof of identity, usually a passport but any photo ID may suffice (up to the bank’s policies).
However, in many cases (especially for remote account opening) some sort of proof of address may be required. Banks usually ask for a utility bill, bank statement, credit card statement, or official government letter (such as proof of tax payment or tax return).
Additionally, some banks may ask for references. The most common is a reference from your local bank. Most banks are happy to write such references, but you may need to speak to a branch manager or other senior official with the bank as the front-line customer service might not have a clue what you are talking about. It’s not unusual for banks to charge around 10 to 100 EUR/equivalent for a reference.
Sometimes, a professional reference is requested. This would be a reference from a lawyer, accountant, doctor, or person of other licensed and regulated, reputable profession. It’s often asked that the relationship span a certain number of years. This type of reference can be challenging to procure, which banks are well aware of and will often waive the requirement if the rest of your application looks good.
For you as director and or shareholder, the bank will require the same documents as mentioned above under Personal Accounts.
If nominees are involved, the bank will require documents for them as well.
Now, the bank will also need documents for the company itself. Usually, this includes some or all of the following:
- Documents which set out the primary rules of the company, usually called Articles of Incorporation, Articles of Association, or Articles of Organization; even more variations exist.
- A memorandum of association (if one exists), which is a document which outlines the function of the company. Also called memorandum of incorporation.
- Certificate of incorporation to prove that the company is incorporated.
- For companies that have been incorporated for some time (as determined by the bank’s application policy), a certificate of good standing may be required to prove that the company is still registered. Often not necessary in jurisdictions with public company records.
- Certificate of incumbency which may list the company’s members, shareholders, directors, officers, and other officials. The purpose of this certificate is to prove who is allowed to sign agreements on behalf of the company.
- A proper business plan.
All but the business plan usually need to be certified. If you are opening the account by introduction from your registered agent or service provider, they will normally take care of the corporate documents.
The documents required to satisfy the banks for other entities, such as trusts and foundations, are largely the same as for corporate accounts but depending on your role in the entity, the documents you need to provide should not be that much different from a personal account.
The trustee, registered agent, foundation manager, or equivalent will normally take care of everything else.
Now that you have filled in the application forms, written a spectacular business plan that you genuinely believe in, and have compiled all the documents you need, head down to the nearest post office or courier to send the documents to the bank or to the introducer. Registered mail and couriers are recommended because they are associated with a lower risk of being intercepted or lost.
If everything is fine with the application and the bank approves it, you have successfully opened an offshore bank account!
Expect anywhere from a few days to several weeks for the application to be processed.
If you are meeting the bank in person, head over to How to Open an Offshore Bank Account in Person to learn how to handle that process.