One of the most significant challenges that business owners face when starting a new company is opening a business bank account. To open a corporate bank account, you must meet a number of strict requirements. Strict rules and complex legislation make opening a bank account a time-consuming process.
Major Difficulties in Opening a Business Bank Account
Tough Regulatory Requirements & Compliance Pressure:
Banks must adhere to the international agreement to combat financial crimes such as money laundering and terrorist financing. The pressure on banks to comply with legislative measures such as anti-money laundering (AML) programs and counter-terrorist financing (CFT) programs makes opening bank accounts much more difficult. As a result, banks are under a lot of pressure from regulatory and compliance bodies to act carefully with customers who are attempting to open an account for a new business.
Client’s Business History:
When applying for a bank account, you must demonstrate your reputation to the bank. The company’s founder must prove that he or she has extensive knowledge of the industry in which the company will operate. Previous business experience helps in accelerating the process by establishing a person’s reputation and financial history.
Lack of Physical Office Space:
Banks need your business to have a physical location. Some banks will send an inspection officer to the address mentioned in the documents to verify that your company has a physical presence there.
Visa or permit:
Most banks demand that you have a resident visa or permit in the country where the business is registered. Furthermore, some banks may require you to have a local address. Check to see if the bank wants you to have proof that your company’s shareholders have residency visas or permits. Some banks need at least one shareholder to have evidence of this.
Incomplete information/weak business plan:
When starting a business, having a solid business plan is essential. Banks demand to know the company’s economic foundation. Banks would be happy to look over biographies of the founders, a financial plan for a company that is opening a bank account, future suppliers and intended clients, and so on. Failure to provide a strong business plan and other financial details that demonstrates the company’s financial credibility can cause the process of opening a business bank account to be further delayed.
Involvement with High-Risk Countries
If you do business with sanctioned or high-risk countries, you can have difficulty opening a bank account for your company. Financial Institutions are expected to follow legislation in compliance with the risks of money laundering and terrorism financing associated with companies dealing with high-risk countries.
Banks must also enforce all relevant measures and countermeasures relating to High-Risk Countries as established by the national regulators for Combating Money Laundering, Terrorism Financing, and Illegal Organizations, including those relating to the implementation of UN Security Council and Financial Action Task Force decisions (FATF).
This requires a higher degree of scrutiny, such as thorough oversight of the Business Relationship, higher levels of internal reporting and management approval, more regular transaction monitoring, and more frequent review/updating of customer due diligence details. When dealing with high-risk countries, financial institutions must consider implementing appropriate internal policies, processes, and controls.
The list of sanctioned countries includes Cuba, Myanmar, Iran, North Korea, Ukraine (Crimea), Sudan, and Syria. In the course of opening a company bank account, Nigeria, Somalia, Ethiopia, Serbia, Yemen, Kenya, Uganda, Saint Kitts and Nevis, Anguilla, Malta, Cyprus, Zimbabwe, China, and Libya are considered major high-risk countries.
High-Risk Individuals
Being a citizen of a high-risk country will make opening an account a difficult task. Sanctions against a single individual may be imposed by governments all over the world.
Transferring funds to and/or from Specifically Designated Nationals (SDNs) is forbidden. Individual SDNs can be found anywhere in the world. Human rights violations, nuclear proliferation, terrorism, drug trafficking, transnational criminal organizations, and sanctioned regimes may all be related to SDNs.
Minimum Balance Requirement:
Most banks impose a minimum balance requirement on all corporate accounts. Depending on the bank you want to open an account with, the minimum balance varies from EUR 10,000 to EUR 500,000. It’s also difficult to get a relationship manager if your company has a low account balance.
Opening a bank account for a business is a time-consuming operation for entrepreneurs who want to start a new business. This is where Bank.pro can assist. With a thorough understanding of international and local legislation, as well as broad experience working with banks for a variety of business accounts, Bank.pro is recognized as one of the best business introducers for opening a company bank account.
