Transformations of banking services for non-residents in the EU

20/ 06/ 2018

Over the past two years, the European banking sector in servicing non-resident clients has undergone drastic changes. Tougher international legislation to combat money laundering, US and EU sanctions, increased control by regulators, deoffshorization, increased bank compliance1. And this is not a complete list of the prerequisites, which led to irreversible changes in the work of non-resident business. A striking example of this is the events of the first quarter of 2018 in the banking sector of the Baltic region, as well as the May innovations from the banking regulator of Cyprus. Many clients are at a dead end, the work of companies is paralyzed. After all, a legal entity without a corporate bank account is just a pile of registration documents. Banking compliance We will discuss briefly the most current requests of most banks, both during the next clients compliance with the bank, and in the process of switching to another bank. So, the bank checks: legal documents of the company; information on the ultimate beneficiary; business activities of the company. It should be noted that the banking compliance of the vast majority of financial institutions is based on the document The FATF Recommendations2, aimed at countering money laundering and the financing of terrorism. Legal documents of the company The package of legal documents is drawn up accordingly. The originals or notarized copies are provided, apostilled or legalized for the country of destination and issued in the form of several separate documents or one (for example, an extract from the register). It all depends on the country of registration. The document (s) indicates: name, ownership of the company, registration number, date of registration; legal address; the memorandum of association, the charter, on the basis of which the enterprise carries out its activities; information on the appointment, authority of the representative of the company; information about the founders / ultimate beneficiaries (beneficiaries) of the company. Also it is necessary to attach documents confirming the current state of the company (Certificate of good standing, extract from the register of juridical persons). Information about the final beneficiary The bank is obliged to identify the ultimate beneficiary (beneficiary) of the company. As a rule, information disclosure is carried out before the final physical person / persons. If the company does not have a person with a significant share of ownership, the bank identifies a person that has a significant impact on its activities. In addition to documenting this information, the bank is obliged to verify that the declared individual is the true beneficiary, and not the representative (nominal), and to ascertain the legality of the origin of funds directed to doing business. The bank will necessarily request the documents of the beneficiary, confirming its suitability (bank references, letters of recommendation of the bank, documents evidencing the presence of movable/immovable property, securities, etc.), work experience in the companys stated activities (resume, employment record, education, certificates etc.). In addition, the bank will closely examine the existing business of the beneficiary – financial reports, contracts, contracts, letters of recommendation of partners, etc. Business activities of the company The bank should understand not only the business of the client, but also its feasibility. Therefore, the more complex and confusing the scheme, the more questions will arise. A well-written letter on the companys activities, its contractors, as well as a schematic depiction of the movement of funds, goods (services) make it much easier for the bank manager to study a package of documents. Thus, for companies with a history, existing contracts with counterparties are provided, documents confirming the reality of these transactions, an extract from the servicing bank, the latest reporting (if filed). The newly created companies will be asked to draft contracts with counterparts and letters of intent on cooperation. Serious consideration also follows the choice of counterparties and does not cooperate with those about which there is no public information and which are registered in high-risk low-tax zones. A good counterparty is transparent and understandable. Remember, the trust of the bank directly depends on the number of documents confirming the reality of the companys activities (licenses, permits, certificates of conformity, transport documents). In summary Summarizing the above, we draw attention to the fact that all the information you provide the bank will check and analyze in all possible ways, including open sources and the Internet. Incomplete information, as well as inaccuracies in the data provided, while collecting and submitting documents independently, often lead to the refusal of the bank in cooperation. Even following the generally accepted rules, without knowing the nuances of working with foreign banks, it is impossible to foresee a positive outcome. Law Agency Absolute has been providing services in the sphere of cooperation with foreign banks for more than 10 years. Our clients trust the maintenance of existing and opening of new accounts, as well as full legal support for work with foreign banks. It is not necessary to delve into all the subtleties of interaction with a non-resident bank - the specialists of LA Absolute guarantee the quality and prompt support of your case. We value your time and save your finances. 1 Compliance - compliance with any internal or external requirements or standards 2 The full text of the document is available at http://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html

Over the past two years, the European banking sector in servicing non-resident clients has undergone drastic changes.

Tougher international legislation to combat money laundering, US and EU sanctions, increased control by regulators, deoffshorization, increased bank compliance¹.

And this is not a complete list of the prerequisites, which led to irreversible changes in the work of non-resident business.

A striking example of this is the events of the first quarter of 2018 in the banking sector of the Baltic region, as well as the May innovations from the banking regulator of Cyprus. Many clients are at a dead end, the work of companies is paralyzed. After all, a legal entity without a corporate bank account is just a pile of registration documents.

Banking compliance

We will discuss briefly the most current requests of most banks, both during the next client’s compliance with the bank, and in the process of switching to another bank.

So, the bank checks:

legal documents of the company;
information on the ultimate beneficiary;
business activities of the company.

It should be noted that the banking compliance of the vast majority of financial institutions is based on the document “The FATF Recommendations”², aimed at countering money laundering and the financing of terrorism.

Legal documents of the company

The package of legal documents is drawn up accordingly. The originals or notarized copies are provided, apostilled or legalized for the country of destination and issued in the form of several separate documents or one (for example, an extract from the register). It all depends on the country of registration.

The document (s) indicates:

name, ownership of the company, registration number, date of registration;
legal address;
the memorandum of association, the charter, on the basis of which the enterprise carries out its activities;
information on the appointment, authority of the representative of the company;
information about the founders / ultimate beneficiaries (beneficiaries) of the company.

Also it is necessary to attach documents confirming the current state of the company (Certificate of good standing, extract from the register of juridical persons).

Information about the final beneficiary

The bank is obliged to identify the ultimate beneficiary (beneficiary) of the company.

As a rule, information disclosure is carried out before the final physical person / persons.

If the company does not have a person with a significant share of ownership, the bank identifies a person that has a significant impact on its activities.

In addition to documenting this information, the bank is obliged to verify that the declared individual is the true beneficiary, and not the representative (nominal), and to ascertain the legality of the origin of funds directed to doing business.

The bank will necessarily request the documents of the beneficiary, confirming its suitability (bank references, letters of recommendation of the bank, documents evidencing the presence of movable/immovable property, securities, etc.), work experience in the company’s stated activities (resume, employment record, education, certificates etc.).

In addition, the bank will closely examine the existing business of the beneficiary – financial reports, contracts, contracts, letters of recommendation of partners, etc.

Business activities of the company

The bank should understand not only the business of the client, but also its feasibility. Therefore, the more complex and confusing the scheme, the more questions will arise. A well-written letter on the company’s activities, its contractors, as well as a schematic depiction of the movement of funds, goods (services) make it much easier for the bank manager to study a package of documents.

Thus, for companies with a history, existing contracts with counterparties are provided, documents confirming the reality of these transactions, an extract from the servicing bank, the latest reporting (if filed). The newly created companies will be asked to draft contracts with counterparts and letters of intent on cooperation.

Serious consideration also follows the choice of counterparties and does not cooperate with those about which there is no public information and which are registered in high-risk low-tax zones. A good counterparty is transparent and understandable.

Remember, the trust of the bank directly depends on the number of documents confirming the reality of the company’s activities (licenses, permits, certificates of conformity, transport documents).

In summary

Summarizing the above, we draw attention to the fact that all the information you provide the bank will check and analyze in all possible ways, including open sources and the Internet.

Incomplete information, as well as inaccuracies in the data provided, while collecting and submitting documents independently, often lead to the refusal of the bank in cooperation.

Even following the generally accepted rules, without knowing the nuances of working with foreign banks, it is impossible to foresee a positive outcome.

Law Agency “Absolute” has been providing services in the sphere of cooperation with foreign banks for more than 10 years.

Our clients trust the maintenance of existing and opening of new accounts, as well as full legal support for work with foreign banks.

It is not necessary to delve into all the subtleties of interaction with a non-resident bank – the specialists of LA “Absolute” guarantee the quality and prompt support of your case.

We value your time and save your finances.

¹Compliance – compliance with any internal or external requirements or standards

²The full text of the document is available at
http://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html