Foreign Bank Account Opening: Bank Reference Matters

Why do you need a Bank Reference to open a foreign bank account? Our article provides a detailed reply to this question. Should you need more information, advice, and assistance, please contact us at the e-address given at the top of this page. 

How difficult or easy is it nowadays to open a non-resident account?

Foreign accounts (also called non-resident bank accounts, international accounts, offshore accounts, overseas accounts) have become quite affordable for any investor and entrepreneur planning to develop business internationally. Many online resources offer encouraging articles explaining that it is not difficult to open a bank account abroad if you comply with the bank’s rules. However, the actual success or failure of applications depends on some critical parameters that applicants often either ignore or misunderstand.

For example, if someone has a residence permit in the country where he/she intends to open a personal or corporate account, it will be quite easy for such a person to pass the due diligence conducted by any bank. The point is, the residence permit is a guarantee that the potential customer has some connections and/or business intentions in the jurisdiction, and has already passed some compliance procedure.

If, on the other hand, the applicant comes from another country with no history of family or business relations in the jurisdiction, most foreign banks will be very scrupulous during the verification of the applicant’s papers, background, and plans.

Any foreign bank pays attention to the country of birth, citizenship, residence address, business profile, income origin, local ties of the potential client. By all means, they will meticulously analyze the person’s possible relation to any venture subject to international sanctions, if the country is on the sanctions list.

Governments and regulators, especially in Europe, have long been fighting against non-resident accounts. European politicians and public officials often believe that accounts opened by non-residents are more likely to be linked to illegal money laundering operations. This confidence has been growing, as some well-known European banks got busted for institutionalized money laundering through non-resident accounts in Latvia, Estonia, Malta, Andorra, and some other jurisdictions. 

All potential clients from such states as Russia, Ukraine, other states of the former Soviet Union are scrutinized with “special attention” by foreign banks, as most of such applicants are non-residents and have no economic ties with the country where they wish to start banking. Besides, they are often mistrusted just because the reputation of their home states has been tainted with money laundering scandals and qualified as ‘high-risk’.

Fortunately, if you are a law-abiding client taking the KYC/AML aims seriously and preparing for the compliance inspection in advance, you can prove to the bank your loyalty, intentions, ties, and open the account.

You just have to respect the bank’s wish to know as much as possible about every potential client before deciding on opening a foreign account. Nowadays, requirements and measures to combat tax evasion, money laundering, and terrorism financing have become much stricter at the global level. Given this, international financial institutions do not want to risk their business reputations for fear of serious penalties.

Considering the above-said, it is clear why the procedure of opening a non-resident account may take from several weeks to several months. 

A preliminary consultation with the Offshore Pro Group experts will help you prepare your documents correctly and decide on the choice of the right bank abroad with which to open an account.

How can your Bank Reference letter help in your application for a foreign bank account? 

One of the important documents that foreign banks request is a Bank Reference, i.e. a recommendation letter from your bank introducing you as a client. Depending on the internal policy, the financial institution may ask for such a document in 1 or 2 copies.

This document is used by banks, credit unions, non-banks, and payment systems as part of the standard due diligence process, to verify the customer when opening an account.

The requirement to submit the Bank Reference is communicated by the bank to the private applicants, as well as authorized representatives of the legal entities (beneficial owners) applying for opening a corporate account.

A Bank Reference is a document confirming that an individual or a legal entity has indeed been a client of a particular institution for a certain period. The legal status of a Bank Reference does not allow it to be used as a bank guarantee or a banking  BPO.

The purpose of a Bank Reference letter is to ensure the safety of the bank’s decision to open an account and to prevent the risks of fraud. Besides, the bank will also want to make sure that the client has a positive credit history.

In the case of the application from a private client, a foreign bank wants to be sure that this individual is not a fictional dummy but a real physical person residing at a particular address.

In the case of the application from a corporate client, the foreign bank wants to make sure that the company is not a shell entity but a real organization that conducts active business and needs to perform regular financial transactions.

What makes a good Bank Reference?

The Bank Reference from the bank where the client has been previously served must be on letterhead paper featuring the contact information of the organization (name of the bank, address, phone numbers, e-mail).

The Reference needs to contain bank details and the date of issue. It should also bear a stamp and signature of the bank officer responsible for issuing bank references.

The information needs to be valid because it can be easily checked. Banks quite often contact each other to verify the authenticity of the applicant’s data.

There is no requirement that the Bank Reference should include confidential information. The document simply informs that the client is the beneficial owner of an account of a particular financial institution.

Unlike the “Bank Statement,” which the bank may also require, the Bank Reference does not contain such details as the account/credit card numbers, account balances, or any amounts of credited debts.

The Bank Reference needs to state the client’s name and status (physical/legal person). It may also mention the client’s residence address with the zip code. 

This document often indicates the validity period of the account and should always characterize the due diligence of the client, his/her business profile, emphasizing the impeccable relationship with the financial institution, and his/her compliance with all requirements. 

When you request your bank to issue the Reference, we recommend to ask for its English-language copy if your national language is different. This will spare you translation expenses later. Besides, when applying for an account abroad, please note that any Bank Reference has a limited validity period, usually expiring in 3 months. 

Though there is no international standard for Bank References, we can recommend the following sample of its outline.

Depending on the quality of the information provided by the client, the bank may request additional documents.

Conclusion

For a non-resident to successfully open an account abroad, it is better to refer to a qualified professional for advice and assistance. Even if you have received a proper Bank Reference, you need to be sure that you have chosen the right bank, know its requirements, and have not missed any important nuances. Otherwise, your application may be rejected, overlooked, refused. 

The right jurisdiction and the right bank account are the ones that will provide reliable protection for your assets, as well as provide a wider range of services than many other banks.

Our experts are highly professional and very experienced in the matters of opening foreign accounts for our clients. They are ready to consult and guide you, as well as help you choose the most appropriate bank with consideration of your plans and interests, and assist in compiling your application portfolio for a non-resident bank account. 

All you have to do is write to us (at the address given at the top of this page) and share your concerns and questions.