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Opening a Foreign Bank Account — If Only It Were That Easy

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Opening a Foreign Bank Account — If Only It Were That Easy

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Sometimes, opening a bank account is quick and easy. In the US and UK, you can do it on your way out of a grocery store.

That’s why many of our clients are surprised by their experience trying to open a business bank account abroad: It can be one of the biggest pain points of an international expansion.

EU citizens will have no problem registering their business in the UK, but often find they’re unable to set up a bank account there. In Brazil, some banks maintain it’s impossible to open a Brazilian bank account from abroad, while others allow customers to do just that. Setting up an account in Dubai was once a breeze, but it attracted money launderers — and the emirate decided it didn’t want the shady reputation — so now it’s a pain. Even in Hong Kong, setting up an account has become a major obstacle for foreign businesses.

It wasn’t always this hard, but regulation of international financial transactions got much tighter after 9/11, as the world’s governments sought to eliminate the flow of money to terrorist organizations. It continues to tighten as governments turn their attention to tax dodging and money laundering.

Both government-mandated and internal “Know Your Customer” rules are getting more stringent. These KYC measures are prompting banks to request far more information about things like business plans and demand in-person meetings with the named account holders. One problem for American companies especially is the issue of disclosing and documenting ownership for venture capital and private equity-backed firms. Banks are generally interested in any shareholder who owns over 20 percent of a business, and they’ll want to see the passports of key stakeholders. We’re finding that the process can now take 6-8 weeks in many jurisdictions and hold up a company’s registration.

But that’s not the worst-case scenario. Many banks will now reject would-be foreign clients outright because they don’t want to deal with the risk or the paperwork. Since new KYC rules went into effect in Hong Kong last year, many banks have been turning away new clients registered in the Cayman Islands and the British Virgin Islands (although other jurisdictions with similarly lax rules haven’t met as much resistance there yet).

And it’s not only business accounts. For Americans expats, just setting up a personal bank account has become harder in recent years. To ensure that American citizens are paying taxes on their overseas earnings, the US government requires foreign banks with US account holders to register with the IRS and annually maintain compliance. Banks that refuse face stiff penalties, so many simply decline to accept American customers at all. It’s definitely an issue American expat workers should be aware of.

You’ll still be able to get a bank account wherever you go. But if you thought it would be as simple as tossing it in the cart along with the milk and bread on your first shopping run, think again. And plan ahead.



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