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Why do banks refuse to open accounts?

10 Jun
Why do banks refuse to open accounts? CYWORLD WEALTH Advocate Cyprus

Why do banks refuse to open accounts?

Why do banks refuse to open accounts?

Opening a bank account has become a tricky business today. It is much faster to open an account in payment systems, but this is not a full-fledged replacement for a bank account.

Now you will not find a bank that will open an account without asking who is the real owner, where does he get the money, what kind of business the company is engaged in, who are the main counterparties of the company, where the real control center of the company is located. And this is not all the information that may be requested.

Let’s take a look at all the points that can be a barrier to opening an account.

Country of incorporation of the company
International organizations and individual states have published and periodically amend the so-called. “Black” lists of offshore countries. Often the legislation explicitly prohibits banks from opening accounts for companies from these countries. But even if there is no direct prohibition, they rarely open accounts for such companies. Only a serious deposit, say a million or more, can convince them.

Large banks do not accept offshore companies at all. They have a lot of simpler clients and offshore for them an unjustified risk. At the same time, your business can be absolutely legal, and your reputation can be impeccable.

Ultimate Beneficiary Citizenship
Most banks have lists of countries with citizens of which the bank does not enter into business relations. The position of large and small banks may differ significantly. Smaller banks, especially those located in offshore jurisdictions, are less picky about the citizenship of the beneficiaries. And again, an impressive deposit can soften the bank’s position.

Beneficiary information
There is no confirmation of legal income (bank statements, tax returns, deeds of ownership);

  • No work experience in business in general and in the business of the company (see below) in particular;
  • No references from another bank and / or business partners;
  • There is information that the beneficiary is a public figure (politician or civil servant) or is closely related to a public figure.
  • If the bank asks for the above information but you cannot / do not want to provide it, you can forget about the account.

The Legal and Compliance Department always endeavors to verify the information provided. At the slightest discrepancy, a refusal follows.

Business type
All banks have their own ideas about the riskiness of certain types of business. But this also has a lot in common. In addition to the well-known and obvious (gambling, sale of medications, adult, MLM, etc.), the following are considered risky:

  • Marketing;
  • Consulting;
  • FOREX and other services related to the management of third party funds;
  • Software development;
  • Operations with cryptocurrencies.

For these types of businesses, it is better to contact smaller banks. Experienced consultants will help in choosing the possible options

The nature of account transactions

Banks are under constant pressure from the regulator and correspondent banks. They are forced to maintain expensive financial monitoring departments that monitor all cash flows. Too many transactions overload the bank’s financial monitoring. Often, banks simply do not want to deal with such a business.

Internet presence
Banks often refuse to open an account just because:

  • The company does not have a website;
  • The site is unprofessional;
  • The site lacks key information about the company;
  • There are bad reviews about the company or its owners.

We draw your attention to the fact that this article is for informational purposes only. For more advice, contact us at the contacts listed on the site.

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