How to open an offshore
company bank account

Need a bank account for your new offshore company? Come prepared if you want your chosen bank to accept your money.

What you face today

The vast majority of those who incorporate offshore naturally wish to open a bank account for their company sooner or later.

Once a simple task, arranging your company's banking today requires more thought and preparation than the act of incorporation itself.

Banks that would in the past compete for your business might well have you think that they are doing you a favour today. Getting your offshore company accepted as a client is no longer guaranteed.

Why? All because of two simple words that have entered into everyday speech in recent years. In isolation, each of the words is pretty ordinary -- but when put together, they become immensely powerful. They have been used to justify numerous infringements of human liberty. They provoke fear and mistrust in banks worldwide. Those two words are "money" and "laundering".

Are you a money launderer?

Because of the difficulty in distinguishing the acts of a money launderer from the acts of a law-abiding customer, bank personnel have been given little choice but to treat every prospective customer as a potential suspect.

Former U.S. Secretary of the Treasury Robert Rubin pointed out in a 1995 speech:

"The acts through which laundering occurs are, in isolation, often not only legal but commonplace -- opening bank accounts, wiring funds, and exchanging currencies in international trade. The funds employed and the launderer's motives make the activity criminal, so sorting out the launderers from the others in the bank line is not easy."

That was in 1995. Since then, bankers have seen the arrival of "Recommendations to Combat Money Laundering", internal "know your customer" guidelines, due diligence procedures, "suspicious activity indicators" and even technology that attempts to detect "unusual" account activity.

A few high-profile money laundering scandals and a glut of poorly written, sensationalist books have added to the atmosphere of what has been called "banking paranoia".

It has long been forgotten that -- as Rubin once pointed out -- it is the motive, and not the action with one's money, that defines the crime.

This state of affairs creates problems for the honest, prudent privacy seeker.

Opening closed doors

Many are perplexed to discover that the opening of a bank account for their offshore company -- an act they believed to be both legal and straightforward -- proves full of obstacles. It remains legal, but it is no longer straightforward.

However unwarranted and duplicitous the hysteria of recent times, you have to remember that the stringent requirements are here to stay -- so learn to live with them.

Money launderers come prepared for scrutiny. It is those who approach a bank in good faith that will get offended and angry upon realising that they must first prove their honest intentions.

A few simply give up and let their offshore company -- and their freedom -- gather dust on a shelf. Do not be one of them.

Choice of offshore bank

Bankers are in a difficult position. On the one hand, they have to consider their obligations under local money laundering law; on the other, they wish to serve their customers' needs.

These two diametrically opposing forces have created a number of competing teams on the offshore field. We might go as far as to say that there is a league table with three major divisions:

Some banks are so paranoid and slavish that they are best avoided by all save those with a keen interest in interrogation techniques.
A fair number of banks view the pressure brought to bear on them with a healthy degree of scepticism.
A yet smaller number of banks openly flaunt the law in a bid to attract deposits.

The last group, not surprisingly, also attracts trouble -- not from major money launderers (they go elsewhere), but from opportunistic rogues who can bring banks into disrepute when their schemes end.

Choose a bank that treads the middle road; responsible scepticism is the quality that you need to find.

Purpose of your offshore company
and its bank account

Whichever bank you choose, it is of vital importance that you fully explain the purpose of your offshore company and the use to which its account will be put.

"Know Your Customer" means exactly that : your banker needs to know who you are and, more specifically, what you intend to do with your other legal persona -- your offshore company. What is its bank account purpose? What is the source of funds deposited?

Understand your banker's position, and come prepared to explain your intentions. If you do not, you will be politely shown the door; banks have a long list of convenient excuses ready to use with "undesirable" clients.

Looking surprised and unsure when quizzed is suspect. It is, however, very common, as offshore incorporation agents do not care to tutor their clients in this form of diplomacy. In short, be honest and direct, but choose your words with care. Think of it as a courtship: the words that you use are of paramount importance if you are to enjoy a mutually happy relationship.

Many clients are quite uneasy at discussing tax avoidance with a bank official. Do not be; remember, your offshore banker has no wish nor any legal obligation to act as a collector of revenue for overseas governments.

Your account application

Many banks these days require a physical interview but by no means all. It is still largely posible to open your offshore account by mail, even without the assistance of a local agent.

However, your account opening paperwork should be in perfect order, conforming to standards used by major legal firms; remember that the documents you submit will likely be reviewed by the bank's compliance officer.

If you just hastily send whatever pieces of your company documentation you find, in a bundle with the bank's application form, you will be saying one thing: that you are unaware of protocols concerning the operation of companies. This may indicate that your company is itself a sham, and hence it could be used for something that the bank would rather not be involved in.

Conducting yourself as a professional, responsible and therefore valued client starts at the account opening.

Your bank will always be happy to find the following documents included in your account-opening package:

Bank Account Purpose. Draw up a letter describing the purpose of your offshore company and the use to which its offshore account will be put, including intended annual turnover and information regarding the origin of the funds deposited in the account.

You should provide this information even if your bank has not asked; an upfront explanation might help avoid tiresome scrutiny later on.
Company Existence. Provide evidence of your offshore company's legal existence. This can take the form of a Certificate of Incorporation or -- if the company was incorporated over a year ago -- a Certificate of Good Standing.

Make the effort to have these documents either apostilled or legalised by consular authentication -- unless, of course, you are opening an account in the same country where your company is registered.
Company Charter. Include a copy of your company's Memorandum and Articles of Association, By-Laws or another form of your company's charter.
Directors' Mandate. Include a resolution by the company's board of directors to open the bank account. Some banks provide their own resolutions for the directors to sign; if not, be sure to draw up a resolution clearly authorising the bank to act as depository for the company's funds, and delegate signing powers over the account.
Directors' Legal Capacity. Provide firm evidence of the current directorships. Non-anonymous companies (those that place their directors on public file) can provide an officially certified copy of the relevant register for this purpose. Anonymous companies (those that only maintain a private, internal register of directors) must sometimes provide other evidence.

If your bank does not accept the internal register alone, you can supply incorporators' resolution that originally appointed the first director(s) of the company -- if they are still acting. If directors have changed since, be sure to also provide further documents evidencing any changes (letters of resignation, resolutions to appoint new directors, etc.) It is wise to have all such documents notarised and apostilled.

You are advised to understand and accept the bank's position in this matter; you probably would not want anybody who might get hold of your company's paperwork by chance to be able to go around opening accounts for it.
Shareholders. Many banks require information about the shareholders of any company seeking a banking relationship with them. Most often, this can take the form of a copy of the company's register of shareholders.

Some banks provide their own-format declaration regarding ownership; if they do, you have to complete and sign that, too. In an increasing number of jurisdictions, banks have legal responsibility to have this information.

It is up to you to decide whether or not you see demands for ownership information as unnecessary scrutiny or not.
Confirmation of identity. Virtually all banks want to receive some form of evidence of the account signatories' identity. This is can be a copy of a passport or a driving licence.

Depending on the bank, photocopies might have to be notarised. In addition, there are banks that request proofs of identity not only for the actual account signatories, but for all directors and owners of the company as well (if different).

Again, you might or might not deem this to be unreasonably intrusive; if you do, take your business to a more welcoming institution.
Bank references. Many banks -- but not all -- request that letters of reference from another bank be provided by account signatories.

Some banks go even further: they demand that a bank reference each be given by all directors and shareholders of the company. There even are a few that will contact the issuing bank to verify references.

References are sometimes needed instead of, and sometimes in addition to, the confirmation of identity. There are jurisdictions where banks are under legal obligations to seek references, and there are banks that request references despite any legal obligation to do so.

Sometimes an introduction by a party known to the bank (such as an existing customer) is accepted instead of a reference. A fair number of banks still happily open company accounts without any references at all -- including some in Switzerland.

Policies vary greatly across banks and jurisdictions, so make a choice that is acceptable to you. Judge if providing a bank reference -- and so revealing an existing banking relationship -- compromises your privacy or gives rise to other implications.

How to open an offshore company bank account