International banking: practical tips on setting up an account in another jurisdiction
As a CEO of an international private bank, I find that clients and practitioners will spend a great deal of time and effort in selecting the right offshore jurisdiction for them. They must take into account the jurisdiction’s legal framework and regulations and assess whether it meets their individual requirements in areas such as asset protection, privacy, and strength of regulator.
Once a jurisdiction is under consideration, a review of its available banking partners is the next key determinant of selecting that jurisdiction. Considerations will include how strong a bank is in terms of balance sheet, capital ratios, staff experience and skills, and the consideration of the products and services provided by the bank in terms of the requirements of clients.
Needless to say, by the time the preferred banking partner has been selected the account opening procedure should ideally be as quick and as simple as possible. However, there is the potential for the process to become more difficult than it should be. Below I have examined the areas where confusion can arise, and explained how uncertainty can be avoided and a smooth start to the banking relationship achieved.
The application form
The application form is the fundamental building block of a bank’s relationship with a client. Banks put together their application forms as a means to collect the information they need to ensure the account is complete and meets their legal obligations. Incomplete application forms lead to more time spent on follow-up correspondence. Practitioners should ensure they and their client read and fill out the bank’s application form in its entirety. Some application forms may not be the easiest to follow, or there may be translation errors: where you have any questions contact the bank directly to confirm the information they are requesting. Not completing parts of the form will lead to more queries.
Source of wealth
This is an area that can cause confusion and anxiety. The bank needs to know how a client has accumulated their wealth. Globally all banks have legal obligations to ensure they have an understanding of where clients' wealth has been generated and accumulated. It is key information a bank takes into consideration when assessing potential clients. Clients should have a very good idea of how their wealth was accumulated and be able elucidate this with enough detail to satisfy the bank’s query.
Source of funds
The bank will need to know the origin of the client's initial deposit, which should be a relatively easy question to answer. Is it in the client’s local bank account, or are securities being sold? Perhaps a property is being sold. Clients should be clear with the bank so they can check the veracity of this deposit. If the origin changes through the account application process for whatever reason, the bank must be advised that the funds will be coming from elsewhere.
Purpose of account
The bank will need to know why the potential client is setting up this account and where any payments will be going. This is a key part of the bank’s obligation to understand what the account is being used for, so clients need to have a good understanding of where funds will be deposited from and where they will be going. Key areas the bank will be looking at in this instance will be the industry and the countries involved.
Some countries, are definitive ‘no-goes’, but each bank has its own view on its appetite to make payments or receive funds from different countries. Just as importantly, their correspondent bank will also have a view on what jurisdictions they are happy to service. Banks may be willing to share this information with clients, but if not then looking at the websites of companies that specialise in anti-money laundering or counter terrorist financing information will assist, as will official sites such as that of the Financial Action Task Force (FATF).
‘Restricted’ industries will be more dependent on each bank’s appetite: a restricted industry for one bank may be no issue to another. If a client feels they are in an industry that may be considered difficult, they should address this to the bank at the beginning of the process.
Politically Exposed Persons (PEPs)
Another area that can cause concerns is that of PEPs. FATF offers guidance on what constitutes a PEP and the bank’s jurisdiction will also have guidance or legislation specifically detailing the nature of a PEP. Being designated a PEP it will cause the bank to undertake a more thorough due-diligence process and more information on the source of wealth and purpose of account will be required.
As the application is completed, clients should be sure to note where additional information and supporting documentation is required. Ensuring all supporting documentation is provided will greatly accelerate the client review process. Some banks will have an app to verify passports or other valid forms of identification against a self-taken photo on a smart phone, a certification by a notary public or equivalent, or via a video conference call. These are very quick and simple ways to establish your client’s identity.
Risk grading is not something that referrer or the client has direct input into; however, the bank, in collecting all the information sought in the application process, will develop a risk grade for the account. The bank will use various sources of information to check the veracity of information provided, so practitioners should be aware of their client’s history. It is better to be on the front foot and present the bank with background to any cases that may be highlighted in those searches.
It should be a simple procedure to open an offshore bank account, even doing so remotely. The bank is as keen to take new business on board as the client is to invest. Clients can make it easy for themselves by following the key practical tips, reading the application form and providing all the information asked for. They can then enjoy the benefits of international banking.
Written by Gerard Field, CEO of Capital Security Bank, an international private bank based in the Cook Islands.
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