Banking Challenges When Expanding Abroad

For many entrepreneurs, starting a business or expanding abroad is a logical next step and an exciting experience. However, it brings with it a number of challenges, one of the most common being opening a business bank account abroad. A process that should take a week or two often turns into weeks or months of questions, additional documentation, and sometimes even rejection without a clear explanation, even though the company is operating completely legally. For foreign companies, this often leads to multiple additions to the documentation, prolonging the process for several weeks and creating a feeling that the process is going round in circles.

Below are the most common challenges that economic operators (hereinafter referred to as the company/client) face when opening a bank account abroad. It also includes practical tips on how to avoid these challenges in advance.

Most common challenges when opening a business bank account abroad

• Administration and documentation
• AML/KYC requirements and different bank policies
• Local jurisdiction and representation
• Procedure costs

Administration and documentation

Opening a business bank account abroad requires the company to submit extensive documentation:

• from an extract from the commercial register and the company’s articles of association to information on beneficial owners,
• tax numbers,
• business addresses,
• and a description of the business model.

Requirements vary depending on the country and the bank. The submitted documents often need to be officially translated, usually by a certified court interpreter, and notarized. In some countries, an additional certification of the document on which the signature is notarized is also required, known as an apostille.

Incomplete documentation and its consequences

The most common reason for rejection is incomplete or incorrect documentation. The bank may subsequently request the company to obtain and submit additional documents:

• contracts with key customers,
• a more detailed description of the business model or the source of income
• or simply reject the application.

A typical example is the certificate of beneficial owners (UBO). For most banks, this document must not be older than three months. If the company submits an older statement, the bank may request additional documentation and start a new round of supplementation. This can prolong the procedure. In the worst case, the bank may reject the application if it assesses that the risk arising from inadequate documentation is too high under its AML/KYC obligations.

Inadequate and poorly prepared documentation causes delays and additional costs for translations and administrative procedures. Some of these problems can be avoided by planning the preparation of documentation in a timely manner. It is also helpful to involve an advisor who is familiar with the legal requirements and specific criteria of individual banks. Such an advisor can help the company prepare a clear and coordinated set of documents. This reduces the number of amendments, shortens the duration of the procedure, and allows the company to focus on its actual business more quickly.

AML/KYC requirements and various bank policies

As part of the bank account opening process, the bank conducts a due diligence review of the company and its potential customers in accordance with anti-money laundering (AML) and counter-terrorist financing rules. In doing so, the bank must comply with EU and national customer due diligence (KYC) rules. This includes verifying the company’s ownership structure, business model, and source of funds. For non-residents and clients with a higher risk of money laundering or terrorist financing, banks usually require additional documentation. They also carry out a more detailed due diligence review. This is an extremely important stage of the process in which banks verify all circumstances relevant to the customer’s risk assessment.

Complex ownership structures and risk assessment

The biggest problem is posed by complex ownership structures with multiple levels of ownership, holding companies, and subsidiaries in different countries, which make it difficult for banks to identify the ultimate beneficial owners – natural persons. An additional risk is posed by companies in the ownership structure that are registered in so-called offshore jurisdictions or countries with favorable tax regimes.

In the context of money laundering prevention, such structures pose an increased risk, which is why banks require additional explanations and a willingness to provide evidence, and in extreme cases, reject the application. Banks have the right to reject a customer they deem too risky if the decision is based on compliance with regulations.

The company can avoid complications by presenting its ownership structure, cash flows, and nature of business in a timely and transparent manner. It should prepare statements on the legality of its business, references from other banks with which it does business, and, if necessary, provide local business contacts.

Although all banks are bound by uniform EU AML/KYC standards, their practical requirements for doing business with foreign companies can vary considerably. Without knowledge of the internal rules of individual banks, it is difficult for a company to determine where it has a realistic chance of opening an account. It is therefore very important to compare the requirements of several banks. This should be done before the company selects a banking partner. The analysis can be carried out internally or with professional support. The company should give priority to banks with experience in working with international clients. It should also consider banks with specialized departments for foreign companies.

Local jurisdiction and representation

Companies that are registered abroad or do not have an actual business presence in the country where they are applying to open a bank account often encounter additional difficulties. This applies both to international companies entering a new market and to companies without a physical presence in the country. Banks consider such clients to be more risky because they often have little or only limited economic substance in the country. They may also present a higher risk of non-compliance with local regulations and an uncertain long-term economic commitment.

The company can avoid complications by establishing at least a minimal local presence, either by:

• setting up a business address,
• renting business premises,
• establishing a local partnership,
• or setting up a branch, which generally reduces the perceived risk in the customer assessment.

The most appropriate form of local presence depends on:

• the specific business model,
• activities, and
• planned market entry,

so it is advisable to involve a local expert in this field in the decision-making process.

Procedure costs

The process of opening a bank account abroad is a lengthy and demanding procedure, which may involve numerous additions, adjustments, personal visits to bank branches, etc., which takes up the company’s time and money. The relatively high initial costs are also significant, which may include, among other things:

• account maintenance fees,
• payment transaction fees, c
• onsulting services,
• and the translation and certification of the required documentation.

In order to minimize the cost and time involved in the process, it is advisable to:

• start preparations early,
• enable representation by proxy, and, where possible,
• use digital means of communication with the bank.

In addition, it is necessary to compare the tariffs and service packages of different banks. If necessary, the company should also negotiate the terms and conditions of business. It should also consider alternative banking or fintech solutions that can help reduce initial costs and optimize banking costs in the long term.

A comprehensive solution to the challenges of opening a business bank account abroad

Choosing the right banking partner and implementing the process effectively is essential for the smooth operation of the company. By understanding the specific requirements of the country in which the company wishes to operate, thoroughly preparing the documentation, and involving a local advisor, it is possible to effectively overcome these challenges. UNIJA ETL Consulting offers companies comprehensive professional support. From choosing the right bank and preparing complete documentation to managing the entire process of opening a bank account abroad. Our goal is to:

• simplify the process,
• reduce delays,
• and ensure successful account opening so that companies can focus on their business.