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While some entrepreneurs are lucky and get their bank accounts set up in a few days, many others have had to wait for months and could only open a bank account after numerous rejections. At Benefit Business Solutions we assist businesses to open corporate accounts both locally and overseas and can reveal some of the common ‘behind the scenes’ reasons why you may have a hard time opening a bank account, and how we can help solve that:

1) You’re not profitable for a bank

First and foremost a bank looks for profit. Sounds logical, but it’s an often-overlooked factor in the discussion on opening bank accounts. While many people think – and banks claim – that the reason it’s difficult to open bank account is because of strict risk management policies, this is only part of the story. Banks will be reluctant to go through their expensive due diligence process for a customer that is starting up and of which it’s unsure they will be successful and profitable. Therefore, often it’s a commercial decision not to onboard a start-up, rather than a decision that is related to risk.

In order to overcome this, we assist businesses in preparing a set of financial projections, clearly showing how the business will be profitable and its expected growth potential in the coming years.

2) You’re not physically in the jurisdiction

Many banks have not yet adapted to the 21st century where almost anything can be done online. There are tons of entrepreneurs and digital nomads that have incorporated a company in Gibraltar, but they may not be based in Gibraltar as it’s not necessary when, for example, running an e-commerce business that can be run from anywhere in the world. This makes it harder for the banks to determine the tax residency of the business and banks may therefore be reluctant to onboard the company in order not to be perceived as aiding tax avoidance.

Some banks allow you to appoint a local representative, and this is where we step into the picture and act as approved local representatives, providing the required level of ‘substance’ to assure the bank that there is a legitimate business rationale for the company to be operating from Gibraltar.

3) You have a complicated ownership structure

To open a bank account, a bank performs a so-called ‘know-your-customer’ process (KYC). During this process, the bank needs to verify different elements. For example, it needs to understand what the business does and conduct checks on the shareholders and directors. If you own a business together with one business partner and both of you own 50% of the company, the structure is simple and conducting all necessary checks will be straightforward. Some companies, however, may have multiple companies as their shareholders and the bank will need to check who the owners of those companies are (which may be other companies etc.) and the process is more complicated. So, for companies with more complicated structures, it will take longer to perform all necessary checks.

We can speed up this process by doing the initial compliance review in-house, collect all the necessary documents we know the bank will ask for, and present the bank with a completed KYC pack that meets their requirements.

Automatic rejection is often the case.

4) You have an innovative business model or high-tech products

Regrettably, many traditional banks do not understand new business models very well. Because of an anti-risk mentality, paired with the uncertainty about whether the company will be profitable for the bank, they would rather automatically reject an application than spend time to investigate and better understand it. Recently, the cryptocurrencies sector has been known to suffer rejections from banks and while in Gibraltar the situation has been fairly good, with a number of crypto-friendly banks, in other jurisdictions an automatic rejection is often the case.

We assist crypto and other ‘problematic’ sectors in finding new age banks around the world that are happy to onboard them as clients and facilitate the account application process. 

5) You are not meeting the requirements required by the compliance departments

The compliance departments check all the applications received to determine if they have fulfilled all the requirements. For your application to be approved, you are required to provide a business license with the business name and the owner’s details, along with other permits and authorisations. Most entrepreneurs and small business owners do not provide all these requirements, and thus, they are not able to open bank accounts for their businesses.

We assist entrepreneurs in obtaining the necessary licences and permits from the relevant authorities in order to facilitate the opening of the bank accounts.

Worldwide, numerous regulatory bodies have increased checks on compliance and anti-money laundering, making it hard for individuals to open bank accounts for their businesses. We expect this trend to continue in the wake of the economic crisis brought about by COVID19 and are working with the banks and with our clients to make the onboarding process a smoother one.

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Eran Shay Managing Director, Benefit Business Solutions Ltd. With over 20 years’ experience in the world of Finance, Eran specialises in helping companies grow in innovative ways. Eran has ample experience in the fields of Corporate Finance, Regulatory Advisory, Business & Strategic Planning, Valuations and Transaction Support and his focus on technology means he keeps in touch with innovative companies in a variety of sectors. Ayelet Mamo Shay Co-Founder & Business Development Director, Benefit Business Solutions Ltd. Ayelet specialises in online and offline marketing, sales, and PR. She is the author of the successful novel “Relocation Darling, Relocation!” and provides relocation consulting and personal coaching. A busy entrepreneur, Ayelet also serves as Chairwoman of the Gibraltar-Israel Chamber of Commerce.