Bank accounts for offshore companies: viable alternatives

Opening a bank account for an offshore-registered company has become rather challenging over the recent years. European banks are especially reluctant to take onboard non-resident companies. The client identification procedure now takes between one and three months but even after waiting for a long time, you do not have any guarantee: service may well be denied to you. In this article, we discuss a couple of healthy alternatives so setting up a corporate bank account in a traditional bank. In particular, we describe the advantages of EMIs and PSPs that provide financial services similar to those provided by the banks.  

Obstacles on the way to opening a foreign bank account

There are several factors that complicate the process of establishing a corporate bank account in a foreign country. The main problem is the constantly changing banking landscape. Such a thing as a Compliance Department appeared only a few years ago. No university student majors in compliance this far. Banks’ Compliance Department officers are still learning while having very little academic background behind them.  

Since 2014, banks all over the world have to meet the KYC (Know Your Client) requirements. This is a consequence of the toughened anti-money laundering and terrorism financing policies implemented by the international financial regulators and national Governments of the well-developed countries.  

The KYC principles make the banks study the prospective clients’ profiles meticulously before they agree to provide services to them. It is especially true when it comes to opening an account for a foreign company. The bank officers want to know the company standings, the ownership structure, the business partners, the spheres of business activities, and so on and so forth. They seek to make themselves very well acquainted with the applicant company because they have to assess the risks of working with this company.

While previously the applicant company had to submit only the corporate documents, the personal documents of the company directors, and recent financial reports, today the list of the required application documents is much longer. What is more, in certain cases it is hard to predict what kinds of documents the bank may request when processing an application for services. When helping clients set up foreign bank accounts, we have faced the following requests, for example:

• A confirmation of the payment of taxes;
• A bank statement from the bank currently servicing the company;
• Three latest invoices.

This shows that to be successful in opening a foreign bank account for your offshore company you have to prepare the application rigorously, you have to understand the banking policies and processes, you have to be ready to supply any sort of documents, and so on. The sad truth is, however, that banking services can be denied to you even if you manage to meet all the requirements that the bank puts forward when considering your application.

What happens while you are waiting for the bank to make a decision on your application for services over an extended period? There is a good chance that you are losing clients, missing on lucrative contracts, and making losses. There is a way to avoid these misfortunes, however. Turn your back on traditional banks and open a corporate account with an Electronic Money Institution (EMI) or a Payment Service Provider (PSP).

EMIs and PSPs as alternatives to traditional banks

Money Institutions and Payment Service Providers (also referred to as payments systems) are organizations that are licensed to provide financial services to the clients – individual and corporate. Being flexible and fast, they can be considered wonderful alternatives to traditional banks.

EMIs and PSPs allow opening a corporate account for your offshore company with a minimal number of application documents and without paying a personal visit to their offices: everything can be done online with the use of a videoconferencing application.

Advantages of opening an account with a payment system

High level of security

Even though payment systems are not regulated as strictly as banks are, they are obliged to follow the international AML policies. EMIs and PSPs have the necessary instruments to ensure the financial security of their clients and provide for a high level of transboundary payments protection.

Progress and flexibility

Many IT companies, freelancers, importers/ exporters, logistic companies, retail companies, etc. love using payment system services. These are very fast at introducing the state-of-the-art electronic instruments and new software thus making their use easy, convenient, and safe. 

Availability of services to high-risk businesses

If your company classifies as a high-risk company, do not even think of applying for services to a traditional foreign bank. At the same time, payment systems are quite relaxed about high-risk businesses – they simply charge them more for the services. We should add here that some payment systems specialize in servicing high-risk clients providing financial assistance to no other category of clients.

Some drawbacks that payment systems have

• Some EMIs and PSPs offer the opportunity to make payments within SEPA and, consequently, the only currency that can be used for payments is the euro. A payment system of this kind will not suit you if you have to make dollar, pound, yuan, etc. transfers.  
• The accounts with payment systems are not insured.
• Some payment systems will open an IBAN account for your offshore company but not all of them.
• Most payment systems do not give loans.

Requirements to the application documents

When applying for services to a payment system, you will also have to submit quite a number of documents. However, there are going to be electronic documents or scanned copies of paper documents. Besides, the payment system administrator is going to be less demanding when assessing the documents if compared to the officer of the Compliance Department of a traditional bank. Below please find a general list of the documents that are required to apply for services to an EMI or a PSP:

• KYC form;
• A bank statement
• A letter of recommendation from a bank;
• Company director and UBO’s résumés;
• Company business plan;
• Detailed information about the company partners, clients, and suppliers;
• Company website, UBO and director’s social network profiles;
• A detailed description of the business processes that the company is engaged in;
• Recent financial reports;
• Company statutory documents.

If you require more information about the possibility of setting up an account with a payment system, please do not hesitate to email us, call us, or use the online chat. We guarantee that your personal information will remain confidential.