Clues to Offshore Banking: an Account for an Offshore Entity (Part 2)

In Part 1 of this article, we discussed why offshore entities, as well as companies registered in onshore or midshore jurisdictions, choose offshore financial institutions. Offshore banking offers many benefits.  However, there are also many risks when applicants take the application process and relationship with the bank officers too easy. We have explained the importance of making a detailed analysis of jurisdictions, banks, and their requirements. We summed up the things all bankers want to be sure of when selecting their clients. In Part 2, let us study the typical pitfalls that may doom your application for an offshore company account opening. The hereby recommendations include professional prompts on how to shape and present your most trustworthy, unfailing profile, to avoid being flagged as ‘high risk’ applicants.

Know your Client Profile as a potential offshore company account holder

So far we have covered only those common mistakes of applicants for offshore company accounts that are rooted in their ignorance about the bankers’ vested interests, fears, and requirements. Many of such errors trigger additional inquiries from compliance officers. This often voids any chance of achieving your goals.

What can you do to make the most of your strengths? First, try to see your own strengths and weaknesses from the banks’ standpoint. Second, convince the bank of your compliance with its requirements.

Why do you have to make an effort to convince the bank of your worthiness as an offshore company account holder?

It is becoming increasingly difficult to open an offshore account. This is because foreign banks are under growing pressure from international organizations and national regulators, compared to the situation in offshore banking 5-10 years ago.

As of today, if a bank takes the risk of opening a company account for a suspicious client, this financial institution may become subject to serious penalties and the wrath of the regulatory authorities. If such a risk is ignored, it can bring about all kinds of regulatory, financial, and reputational issues and end up in anything, up to the revocation of the license. Therefore, to be on the safe side, banks prefer to reject new “difficult” candidates.

To take advantage of offshore banking benefits and successfully open an offshore company account, you need to take a balanced, well-informed approach. This means you should make a justified choice of the right bank, establish and cultivate the right contacts, and pursue the right strategy.

One of the main skills an applicant for an offshore company account needs is the ability to favorably present one’s offshore entity and oneself to the bankers. 

What is your Customer Risk Profile as seen by the banks opening an account for your offshore company?

When it comes to opening an offshore company account, one of the most important things is to know your Customer Risk Profile. 

Customer risk is the term defining the risk that the potential customer may conduct money laundering activity or other financial crimes through the account. When such an offense is eventually discovered, the institution may suffer any kind of adverse consequence. 

A risk profile implies risks and threats faced by the client in case the risks are not properly mitigated. A failure to manage risks can expose the company to a falling stock price, lower revenues, a negative public image, and potential bankruptcy. The most feasible and proactive solution is to recognize and manage the risks, rather than eliminate, them.

Understanding how the bank sees you can significantly impact your chances of opening an offshore account for your offshore entity without having to submit additional papers, answer questions, and take interviews. Otherwise, you may waste thousands of dollars and much time and yet be flagged as an unwanted client.

The first step is to learn if your business field is acceptable from the bank’s point of view. 

Risk profiles can be of different types. But before we discuss some ‘high-risk’ business categories, let’s look at the clients’ features that often distract banks.

What makes your Risk Score grow in the eyes of banks opening an account for your offshore entity? 

By drawing a customer risk rating, banks screen, spot, and monitor applicants who are likely to present a higher risk of money laundering or illegal activity. It would not be feasible to monitor every single customer in-depth, of course. So, only those customers who present a higher potential risk are scrutinized. 

No matter how complex the risk scoring model is, banks are seldom satisfied with the data on new customers with no prior history with the bank. The information on them seems incomplete and insufficiently reliable. That is why financial institutions score the customer’s risk profile for the actual risk exposure in an ongoing manner. 

Please note that any banker is alarmed in the following situations:

• The clients fail to explain the origin of their income. 
• The clients fail to explain the origin of their wealth or assets.
• The client’s full name is similar to the full name of a public figure (politician, a sanctioned business owner, criminal, or high-risk person). 
• Google and Facebook searches on the client yield no results, there is no mention of the client’s company at all on Internet search engines. 
• The client’s business is absolutely brand new, without any history altogether.

It will also try to identify the types of products and services you sell, as well as your current and even potential customers. This is supposed to help banks define if the clients are prone to financial failure.

If the bank’s research results are alarming, the services are not always immediately denied to the supposedly high-risk clients. However, the opening of an offshore company account may take much longer because of the more sophisticated customer compliance procedure This process usually involves requests for additional documents and advanced authentication requirements, more detailed questioning, and enhanced due diligence on the submitted information. It’s expensive and time-consuming. Unfortunately, oftentimes, the application is still rejected.

What activities/fields can be perceived as ‘high risk’ business, illegible for offshore banking services?  

If you or your business operates in any of the following industries, you may be considered high risk depending on which country you are in and which bank you would like to open your offshore company account with.

Moreover, it may also be relevant if you serve clients or companies associated with these high-risk industries, even if you’re not involved in them.

So, if you come across any high-risk industry, you should prepare your application carefully, understand the keywords and phrases that alarm bankers, and be prepared to articulate your position clearly, i.e., help bankers understand why you, no matter what, are not a high-risk client.

The industries often considered high-risk areas of business are:

• cultivation, production, or sale of medical marijuana
• e-commerce 
• companies dealing with physical products 
• digital marketing 
• consulting or digital services 
• production or sale of health, medical, pharmaceutical products 
• production or sale of services and goods related to cryptocurrency 
• gambling, online gaming 
• production or sale of all adult products and services (adult entertainment, etc.) 
• other regulated industries (financial services, alcohol, firearms, tobacco, etc.).

What does it take to become a successful offshore banking client? 

Not all offshore bank accounts are created equal. Though this is a truism, before you apply for an offshore company bank account, you should ask yourself if you are aware of what you’re really looking for in offshore banking. Instead of hopping on the bandwagon and choosing the bank everyone chooses, you need to analyze your specific needs. After all, offshore banking priorities and pain points are always individual.

To focus on your needs, you should answer some straightforward questions about yourself and clarify your criteria for the bank selection. 

Questions you should answer before you open an offshore company account in 2022

• Do you prefer to open an offshore company account remotely or in person? 
• Where to/from will you be sending/receiving money? 
• Who will you be sending/receiving the money to? For what purpose? 
• From/to what countries will your incoming/outgoing transfers be? 
• What type of bank account (personal, corporate, investment, and other types) are you looking for? 
• How much money and for how long can you deposit in your offshore company account?
• What monthly balance will you be able to maintain on the average? For example, how much money do you plan to keep in your account each month for the next 12 months? 
• How many incoming/outgoing transactions will you have per month? 
• What is the average amount of each transaction? 
• What percentage of the funds transferred into your account do you plan to transfer to other banks? For example, if you receive 20,000 USD at the beginning of each month, how much of it will remain on your account at the end of the month? 
• What maintenance fee are you willing to pay for an offshore account annually? 
• Do you need to connect a payment system to your account or make it a merchant account? 
• Will you need to send or receive money to/from fintech companies and EMIs (electronic money institutions)? 
• What are your top offshore banking priorities and needs? What services should your offshore bank be able to provide? 
• According to the bank, what are the biggest risks and vulnerabilities associated with you, your business, and the overall customer profile?

Most people start thinking about the above issues too late. In fact, they just don’t give them a thought until they are turned down or find out they have a costly bank account they can’t even use.

Your key to opening an offshore company account

To get the best offshore company account open for you and your business, you need to be pragmatic. Try to understand the offshore banking system and its players. Interact in a friendly manner with bank officers and try to simplify things for their compliance team. Make it easy and comfortable for them to ‘check the green boxes’ on their forms. After all, they’re not the enemy. They’re just trying to do what regulators tell them to do to avoid punishment.

In other words, don’t hope that you are entitled to getting a bank account. When you are asked questions, you should not suspect that everyone is just trying to deprive you of this ‘right’. Just acknowledge that times (and laws) are changing. It used to be easy to open offshore bank accounts, but now it’s much more complicated because of the KYC, AML, CFT regulations.

How do you choose the bank for opening an account for your offshore entity?

We’ve discussed how to prepare for dealing with a potential bank and its staff when opening an account. Now let’s talk about choosing a bank and how to do it right.

Our experts are ready to provide you with valid information about as many banks in different countries as you need, including analytical information, offshore account opening strategies, customer reviews, risks, potential problems, etc. 

In fact, our analysts constantly monitor hundreds of offshore banks and payment systems around the world. So even if you don’t find on your own the bank that suits your needs, our analysts and experts are fully prepared to help you overcome the toughest offshore banking challenges.

Of course, if you’re willing to contribute countless hours to your research, you can try. You will have to call and email banks, search for contact information, communicate with customers, analyze the lists you receive, review banks’ financial statements, determine which banks can actually accept your customer profile, and so on.

Some foreign banks are money pits of sorts, bleeding you dry with exorbitant fees and run by people with minimal banking experience. That is why you should be very careful when selecting the bank. The way you choose the bank is utterly important: even the best banks in the world are not suitable for any type of business, much less – for any customer.

Here’s an example: maybe you like the idea of old-style private offshore banking and think that UBS (a leading universal bank in Switzerland) would be the perfect place to grow your fortune.

But if you can’t maintain the minimum deposit, afford the fees or buy the products they offer, that’s too bad.

You need to find a bank that really fits you, your money, and your profile.

Otherwise, if you choose a bank that is not in your league or your weight class, you will have to pay expensive yet unnecessary fees for services that you do not really need.

Besides, closing such an account may involve additional fees, lengthy correspondence, or worse, a personal visit to the bank.

The moral of the story is: you can afford to contribute your time and money, cope with all the paperwork, answer endless questions, take an in-person international trip to the bank, and make other inevitable arrangements when applying for an offshore company account only if you know for sure that your application can be accepted and the bank agrees to work with your offshore company on a long and mutually beneficial basis.

Let’s take another example. You’re planning to open an account with one of the banks in Panama. But given your needs, your capital, and your customer profile, you could really open an account at a much better bank than the one located in Panama.

So, while a Panamanian bank will be happy to onboard you, there are better options for you to explore.

No bank can be recommended as equally good for everyone. How can you identify the best offshore banks meeting your specific needs, wealth, and concerns? 

Here are the 4 simple steps.

Step 1. Define your needs in an offshore company account

You should answer the following questions:

• Does the bank accept non-resident individuals and/or non-resident foreign companies? 
• Does the bank provide online banking tools for receiving/making international transfers? 
• Can you open multi-currency accounts for international deals? 
• Are credit and debit cards issued? Will they be accepted abroad? 
• Can you open time deposits? Are there investment products that can yield you an income from your savings?
• Are the fees (rates) competitive? 
• Are the requirements for the initial deposit and minimum balance reasonable?
• Are there loans for capital projects, co-financing of real estate acquisitions, collateral, or support for a government contract / large purchases?
• Are capital management services available?

The above-listed questions will help you focus on what you require from a bank. That is why, before you go to step 2, you should make a list of what you may need now or in the future.

Step 2. Select suitable banks for opening your offshore company account

Now that you know what you are after, your task is to find an offshore bank that provides all those services that will be critical to your business over the long term.

The twofold goal at this stage is quite challenging: 

• find banks that can meet your ‘must have’ list of services and requirements 
• find banks that will accept you. 

As an outcome of step 2, you should have a draft list of banks that are potentially suitable for opening your offshore company account.

Step 3. Make sure your bank opens offshore company accounts for clients like you

At this point, you will need to analyze the banks’ account opening requirements, features, vulnerabilities, and how they see applicants of your category.

Our experts are involved in an ongoing analysis of past applicants’ account opening experiences at many banks around the world. This expert analysis is important because in almost all cases the bank’s requirements vary greatly. Therefore, we can predict with almost 100% probability the results of this or that client’s application to this or that offshore bank. You are welcome to rely on our competence and experience. 

Whether you need an offshore company account or an account for your personal offshore banking needs, please send us your inquiry.  You can write about your needs and expectations by contacting us at in**@***********rt.com or using our experts’ contact details.

We will come back to you as soon as possible to discuss all the details of your order and will guarantee the privacy of your information.