Challenges and Solutions for Overseas Bank Accounts: Top 10 Frequent Issues

Foreign bank accounts come with a host of benefits, including protection against potential inflation, ease of making payments on international websites, and the convenience of receiving overseas salaries. Despite these advantages, users may face certain issues with them. The article below delves into the 10 most common challenges associated with foreign bank accounts.

Failed payments from counterparties

Incorrectly specified details are often cited as a common issue with counterparty payments. Should the recipient bank’s information or the recipient’s details be incorrect or incomplete, the bank may reject the payment.

Besides, payment issues tend to arise from several more factors:

• Insufficient funds in the sender’s account may be the reason why the bank rejects the transaction.
• International payment restrictions set by the recipient’s bank are likely to lead to declined transactions if exceeded.
• Suspicious activity flagged by the recipient’s bank might trigger an automatic transaction block as a precaution.
• Lack of access to international payment systems for some organizations renders payments unfeasible.
• Additional information may be requested by banks regarding the counterparty and its finances before they process a payment.
• Technical issues at the recipient’s bank happen to lead to payment rejections or delays.
• Misalignment of the counterparty’s business activities with the foreign account holder’s might pose challenges.

At times, the sender withdraws their payment, which happens for a variety of reasons.

Recommended Solution: Consult the bank’s manager, who is well-equipped to offer comprehensive explanations for the issue. FYI: It is only the foreign account holder themselves who has the right to file a corresponding request to the bank.

Rejection of account opening requests by foreign banks

Currently, legislative changes in the international banking system are creating hurdles for foreigners to open bank accounts, with new documentation requirements for applicants.

Global banking compliance is dictated by the 2012 FATF Recommendations, an important document that underpins KYC/AML procedures in banks. Rejections may occur if these guidelines are not met. Countries yet to adopt these recommendations are Ethiopia, Iraq, Yemen, Kosovo, Syria, Tunisia, Sri Lanka, Iran, and North Korea.

Banks typically withhold specific reasons for account opening denials. Yet, here’s what potential grounds for this may involve:

• Unreliable information provided by the applicant.
• Negative findings about the company or its beneficiaries discovered by the financial institution.
• No necessary licensing for the company’s business operations.
• Fraudulence in the submitted documents.
• The company engages in any unrelated business activities.

Recommended Solution: In the preparatory stage, make sure to furnish the bank manager with detailed information regarding yourself and your company. In the event of a rejection, thoroughly review the circumstances to pinpoint any errors before you approach a different bank. Using a pre-approval service could be beneficial if you wish to obtain initial approval for account openings in multiple banks at once.

Unusual fees for payment transactions

Account holders may occasionally encounter commissions on payments that are higher than usual. 

The following are potential explanations for such charges:

• Interbank Fees: When payments traverse multiple banks or payment systems, the recipient bank may levy a processing fee.
• Operational Costs: Complex or atypical transactions require extra work and resources, which may increase fees.
• Currency Conversion: Payments in a different currency than the sender’s may accrue additional conversion fees.
• Express Services: Opting for urgent payment processing may result in extra charges.
• Risk Insurance: Additional costs are incurred for processing physical documents or for international transactions.
• Non-Standard or Suspicious Transactions: Payments flagged as unusual or suspicious by the bank may be subject to higher commissions.
• High-Risk Offshore Jurisdictions: Transactions to or from jurisdictions deemed high-risk often come with elevated fees.

Occasionally, unusual commission fees may be associated with payment instructions marked as BEN, OUR, or SHA.

Recommended Solution: We recommend you immediately reach out to your bank manager for clarification. Also, study the bank’s fee structure thoroughly and review the specifics of the transaction in question.

The client is determined to close the account and withdraw funds

Do you have valid reasons to close your account and withdraw funds? In this case, the funds are typically transferred to either supplementary corporate bank accounts or the personal account of the company’s beneficiary. You can also cash them out directly at the company’s cash desk. 

 To close your foreign bank account, please follow these steps:

1. Submit an official request: Contact the bank formally to initiate the closure process.
2. Gather additional documents: Prepare any required documents that may be needed.
3. Follow bank protocols: Comply with the bank’s specific procedures for the account closure.
4. Choose a withdrawal method: Decide on a suitable method to withdraw the remaining funds.
5. Complete and document the process: Confirm the closure actions and keep copies of all related documents and receipts for future reference in case of disputes.

Before finalizing the closure, set up a different account to receive the funds and make sure the transferred amount corresponds to the reported balance. 

Account holder’s desire to provide third-party access 

It is possible to grant joint access to the funds in a foreign bank account at the opening stage. NB: All individuals designated as account holders must meet the corresponding Know Your Customer (KYC) requirements.

To allow third-party access to an account that has been opened by a single owner, the following steps should be undertaken:

1. Contact the bank to inquire about how you can authorize third-party access to the account. 
2. Determine the required access level, which could include viewing account balances, making transactions, or both.
3. Fill in the necessary forms to protect the interests of all involved parties and to set forth explicit guidelines for account use.
4. Provide any supplementary documents that might be requested.
5. Secure confirmation from the bank that third-party access has been officially granted.

At Q Wealth, we recommend you carefully review the account access agreement and seek expert legal advice, if necessary.

If you need help with opening an account with a foreign bank, please get in touch with the Q Wealth team.

Updating the account holder’s personal data

When the account holder’s personal details like an address or phone number change, it’s wise to inform the bank manager. The bank may update the data for you or require you to fill out the necessary forms. This service often comes with a fee based on the bank’s current rates.

Here’s what the steps to update your personal data might include:

1. Ask the bank manager how to update your information.
2. Collect all the necessary documents you need for the update.
3. Go to the bank or use online banking to make the changes.
4. Make sure the changes you’ve made are correct and confirm them.
5. Check that your profile shows the new information.

As your next step, you may have to update your bank cards, checkbook, and any other documents with your personal details.

Bank’s repeated requests for Certificates of Good Standing and Incumbency

To open  a corporate account with a foreign bank, you may require a Certificate of Good Standing and a Certificate of Incumbency. The former is mandatory for companies registered for more than a year. Keep in mind that these certificates typically have a one-year validity. They must be current when you apply to the bank.

Below, you will find the reasons why banks may request these documents:

• Expired documents that need renewal.
• Updating client information and confirming their financial soundness.
• Credit risk management to safeguard the bank’s interests.
• Technical errors that require correction.

Negative information about the company, its beneficiaries, or counterparties discovered by the bank

During the document review for a company, the process may reveal adverse information about the applicant, their beneficiaries, or counterparties from media or online sources. In the current cautious financial environment, such negative information could result in the denial of an application.

Q Wealth experts suggest you thoroughly vet all information when preparing the necessary documents.

Recommended Solution: Any detrimental information found online or in media about the company or its beneficiaries should be disclosed upfront when you apply for a foreign bank account. It’s advisable to have justifiable explanations for it and to steer clear of shady counterparties from the very start.

Emergency account closure by the bank

Occasionally, a company may be surprised to discover its foreign corporate bank account has been suspended. 

This could happen for several reasons:

• Agreement terms have been breached.
• Fraudulent activities have been identified.
• The company is experiencing financial issues.
• There have been policy changes at the bank.
• Legal and regulatory requirements necessitate it.
• Technical issues have arisen.

While the last scenario is relatively uncommon, it remains a plausible cause for a foreign bank to suspend your account with them.

Recommended Solution: To avoid missing any critical information, the account holder should vigilantly monitor notifications from their financial institution. Besides, do your best to avoid dealing with dubious counterparties or participating in any questionable activities.

It is important to investigate any possible causes for the account blockage and address the identified issues. After that, contemplate opening an account with another bank if necessary. Also, promptly notify your bank of any alterations in your business activities, payment volumes, or changes that involve counterparties.

Documents pending with the bank longer than usual

Here’s what possible reasons for the above delays may be:

• The organization is experiencing a heavier workload due to a high volume of inquiries.
• Delays may arise if the client has submitted an incomplete set of documents, or if there are errors in the documents.
• The bank’s security service may conduct additional checks on the applicant to rule out potential violations and fraudulent actions.
• Internal procedures of the financial institution, e.g., certain updates or the implementation of new systems, also contribute to delays.
• When dealing with foreign or high-risk clients, the bank is obliged to follow stringent regulatory requirements, which may necessitate extra verifications and lead to further delays.

The bank might conduct an in-depth assessment of the client’s financial status and historical records. Such a detailed scrutiny has the potential to make things longer.

Recommended Solution: Clients should make sure they do not disregard any requests for additional information from the bank. Hence, thoroughly examine all your documents before submitting them. Besides, never fail to timely pay any associated banking fees that are pending.