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The vast majority of clients that choose to form
offshore structures will need to open a bank account. This is, therefore,
one of the most important parts of my offshore consulting and advice
practice. Opening bank accounts has become a very complicated procedure.
Making the right banking choice from day one is extremely important.
I'm going to tell you here how I do it for my personal consulting clients.
In the end, it's up to you whether you go directly to a bank, or employ
the services of an intermediary like myself. If you decide to go to the
bank directly, after reading this article, you will understand why not
every bank is suitable for every type of business. Either way, the
process is the same and it is important for you, as the client, to
have a full understanding of the decision-making process.
What you should look for in an offshore bank
As a matter of personal preference, I typically work with several
internationally-recognised and highly-respected banks with branches in
Europe, the Caribbean and Latin America. In the majority of cases, we can
recommend one of these banks as being the most suitable. All of these
banks have the following features in common:
-
accounts can be opened in all major currencies
-
all have secure and comprehensive internet banking
facilities (including the possibility to send international payments in
various currencies through the online interface)
-
all offer credit and/or debit cards to offshore
clients
-
all are familiar with our documents and the
jurisdictions we work with
-
all are familiar with offshore and international
business in general
-
all routinely offer service in multiple
languages
It is normally possible to open accounts without
visiting the bank.
Our advice, however, is that clients should visit their banks when they
have the opportunity. Regular Q Wealth Report readers will know
that I call this the "KYB" policy (Know Your Banker) Good KYB
makes for an easier and smoother long term banking relationship. If you
can't visit your bank, you may find it is possible to arrange for bank
officers to visit you, or to meet you when they are in a convenient city
nearby.
Three Distinct Types of Offshore Bank
In general the banks we work with specialise in some or all of these
three distinct offshore markets:
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Private banking clients (including their personal
investment companies, foundations, etc.)
-
Small commercial business (such as personal service
invoicing companies)
-
International commercial activities, such as trading.
Private Banking Clients
Although private banking is not a simple business, there is a very simple
model to keep in mind here: "keeping rich people happy". The definition
of private banking varies but is generally understood as investment
management offered on a personal basis by a bank to an individual with
disposable wealth of more than $1,000,000. Private banking is obviously
not synonymous with "offshore", but the costs of a personalised
relationship begin to be worthwhile at the $500,000 level in light of the
superior gains to be realised from offshore investment.
Private bankers normally prefer to be approached and considered as
objective financial advisers rather than as an investment-provider.
Consequently, private banks may not be the most effective
choice for a reasonably sophisticated investor who wants to play an
active role in the management of his investments.
Small Commercial Business
Numerous offshore banks offer services to expatriates as they perceive
such business as being relatively risk free, easy to manage, and
profitable. In essence, expatriate services encompass managing accounts
for people resident outside their home countries who may be employed,
self-employed or retired. The focus of expatriate banking providers is
online banking, call centres, and the provision of "packaged" investment
products. Although the service offered should be professional and online
banking excellent, the relationship between the bank and client could not
be characterised as personal or in any way similar to the relationship
between a client and a top-flight private bank.
International Commercial Activities
Many of my clients utilise companies we form for commercial purposes,
such as trading. In such circumstances, an offshore bank that specialises
in private banking or expatriates will be unsuitable. Our commercial
clients seek similar services to an onshore commercial bank and will
require access to some or all of the following services:
-
Cash management
-
Foreign exchange and treasury services
-
International trade - letters of credit, documentary
collections, cross-border guarantees and global correspondents
-
Risk management tools to cover foreign exchange
risks, interest rate risk, etc.
-
Financing
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Payment, receivables and payroll solutions
-
Selling solutions: e-commerce and merchant services
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Expertise in matters such as energy, aviation,
shipping or real estate.
Once we understand our clients and their business
objectives, we are able to assist clients in choosing a suitable bank (or
in some cases even two or three banks) to work with. Some of the aspects
we consider are:
-
The citizenship, residence and domicile of our
client
-
The proposed business activities
-
Bank charges and interest rates
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Bank's expertise in geographic regions and types of
business
-
Languages spoken by the client
-
Preferences of the client: for example to do most
business online or for a more personal service
-
Amount of funds client expects to deposit with the
bank
In particular cases where non-standard services are
required, or based on preferences of the client, we can also recommend
and make introductions to other banks besides our main preferred banks;
or we can assist in production of specific documents (certified copies,
business plans etc) where the client wishes to open the bank account him
or herself.
We also work with online brokerage houses in Panama and Switzerland,
enabling your offshore corporation to trade on all major world markets in
an offshore environment.
Requirements to Open Accounts
Clients should understand that opening offshore corporate accounts is not
a simple process, and it may appear to be onerous, bureaucratic and time
consuming. All I can say is: don't despair! You'll get there in the end!
Banks are under enormous pressure to conduct detailed and ongoing due
diligence on offshore clients. In most circumstances to open the account
you will need:
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A reference from your existing bankers
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Certified copy of passports of all signatories,
officers and owners
-
Proof of residence of all signatories, officers and
owners (typically a utility bill)
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Business plan and cash flow forecasts, with
supporting documentation, if available
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Documentary evidence of source of funds to be
deposited
The business plan is especially important. The bank
can be expected to verify this and will then monitor the account on an
ongoing basis to ensure that the business activity is consistent with the
profile. Documentary evidence of specific transactions (for example
copies of invoices or contracts) may be requested, especially in the case
of large transactions (such as real estate business). It is always
advisable to notify the bank in advance of unusual transactions or sudden
changes in volume, or of changes to the core business which may occur
over time.
Please understand that due diligence procedures are part of global
business today. If your banker sees a well-administered company and has a
good two-way channel of communication with its management, that will help
build the foundations of an excellent and flexible business relationship
with your bank.
What if you can't provide the documents they ask for?
While we don't wish to work with banks that cut corners in due diligence
procedures, it's worth mentioning that the banks we work with tend to
have highly-qualified staff and this means they can take an overall 'big
picture' view of the proposal in front of them. This means that it is
sometimes possible to open accounts if, for example, your existing bank
won't give you a reference, or you don't have any utilities in your name,
provided you can offer alternative documentation that proves your bona
fides, or a good explanation. Smart bankers realise that your gas bill is
not the be all and end all - sometimes a common sense approach is the
best way to achieve the security they are seeking. Terrorists and drug
dealers, the two groups bankers are most scared of, probably have utility
bills too!
It is sometimes possible to open accounts with drivers' licences or
national ID cards, but it is strongly recommended that if you don't have
a current passport you should immediately order one from the appropriate
authorities in your country of citizenship, as passports can take some
time to obtain. A passport is the preferred identity document for
international transactions.
In case of clients in businesses considered as "high risk" (including
businesses handling third party funds, doing business with certain high
risk countries, credit card merchant accounts, internet gaming…),
enhanced due diligence procedures are necessary and it can become very
difficult to find a bank that will accept the business. Members are
invited to contact me, via the Q Wealth offices, for further information
in this regard, if necessary. Every problem has a solution.
Having chosen your bank, how do you go about approaching them and getting
your account opened? Think of it like a romantic relationship... things
you say at the beginning are of the utmost importance and may work for or
against you later!
Do you want to read more on topics like this? Peter Macfarlane covers
topics like this in greater detail and with specific solutions and
recommended contact persons at banks around the world in each issue of
The Q Wealth Report. Subscribe today
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