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Opening a bank account in Hong Kong, updated situation

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Contributed by hongkongtaxfree.com
17 May, 2016


Opening a bank account in Hong Kong became a little bit more difficult than 3 years ago with the implementation of KYC (Know Your Customer) rules.

Bank strategies and non-resident bank account opening reality

Today the bank strategies are changing monthly, their business appetite is low and the average length of time between the bank interview and the effective bank account opening is nearly a month.

Few banks only are accepting non-resident bank account opening, and if they do it's under very strict conditions.

Inactive accounts and with low levels of transactions are easily considered as dormant and terminated, there are rumors that 20,000 of such accounts will be terminated before the end of the year by one of the main bank.

BVI, Cayman, Panama... exotic corporate accounts are going to be all terminated, if a Hong Kong company is owned by an exotic structure the possibilities to successfully open a bank account are limited as the compliance departments are currently paralyzed with their existing clients having complex structures.

Seychelles companies are still very well accepted but the bank account opening will deeply depends on the risk grading of the ultimate beneficial owner nationality and country of residence.

Immaterial businesses such as consultancy services, travel agency, online businesses without shipment proofs etc. are facing rejection by quite a lot of the Hong Kong banks.

A Hong Kong company with a nominee director? Only one bank is now accepting such structure!

Obviously, the news are bad for the business freedom, most of the corporate services providers are still in a denial phase and only few are ready to adapt to this new situation by hiring and training their own compliance team.

What are the solutions?

Hong Kong is home for more than 1.3 million companies, a lot of them benefiting from an offshore status although the city isn't to be considered as an offshore location neither a tax heaven.

Substance is the main answer... demonstrating the business reality is often complex due to the poor business understanding of most front line bank officers, we have to demonstrate, while simplifying, the business flows and the needs for a Hong Kong offshore bank account.

The preparation of an ad-hoc compliance file to be communicated to the selected bank before the bank interview is the key factor. This lengthy process should be taking care of by professionals.

The compliance file will explain and document the business experience of the ultimate beneficial owner and search on open source and private databases (as example Accuity and World-Check) every element of his current and projected activities.

The compliance team will perform a screening of the ultimate beneficial owner, his directors and partners, suppliers and clients to be satisfied with the client's legitimacy.

Typically the compliance report will on 8 to 12 pages offer an excellent review of the client's profile and will be completed with findings and documents obtained from the client (such as bank reference letter, incorporation documents, copies of invoices and agreements).

We experimented the last 12 months that a proper compliance file prepared by us leaded to a 99% success rate for the Hong Kong bank account opening of our clients.

What about the unsuccessful cases?

The bank requirements are changing fast, typically one well-known bank just announced that non-residents without a foreign business above 10 million USD turnover will not be accepted anymore and this provoked a bit of panic amongst the company services providers.

Typically we believe that because of our position of gatekeepers we should reject clients if we understand from the beginning that the bank will also do it. This position is by far not common in Hong Kong but it's a guarantee of ethical growth.

Furthermore when during the course of our compliance work we discover a voluntary omission from our client about a court case, a reputational problem or a hidden agenda we stop immediately our collaboration.

Why is opening a bank account in Hong Kong becoming costly?

As a matter of fact the average of 15 hours spent on the preparation of the client compliance report is generated by a qualified team, with access to private databases.

Clients have a tendency to believe that the process is costly because the bank account opening was fast and easy few years ago, it was even considered as a right. So the clients are Today in a denial phase and have difficulties to accept to spend more for the bank account opening than for the setup of their new company.

Account rejected or terminated?

We welcome clients whom have been rejected or saw their hong kong bank account terminated, all the times they weren't prepared correctly or they didn't respond in due time to a bank request.

These clients will restart the compliance process with our team and only when definitively ready to attend a new bank interview. Clients should understand that you can't apply anymore for a bank account opening with a bank which rejected or terminated the account.

As there is only few banks accepting non-residents it's taking quite of a risk to apply for a bank account opening without the help of professionals.

How to select a good bank introducer and make sure that you will have your Hong Kong bank account opened?

A simple question is to be asked: do you prepare the compliance file for the bank account opening?

If the provider only gives you a list of documents to comply with you will have limited chances to open your Hong Kong bank account.

If the fees to setup the Hong Kong company and to prepare the bank account opening are below USD 2'000 the provider couldn't afford to prepare the compliance work.

We are working directly with entrepreneurs worldwide and we also offer specific services to professionals as company services providers, tax advisors, lawyers and financial intermediaries.

Our team is managed by a Swiss entrepreneur, Hong Kong permanent resident, Certified Anti-Money laundering Specialist (CAMS) whom benefit from an extensive international banking network.





 

 


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