Do you also get the feeling that international banking, as you used to know it, is now dead and buried? Not only it seems that banks don't really want you as a client anymore but also the ones you are banking with don't seem to like your cash anymore!
We have to acknowledge that it is not easy to run a bank today. People blame banks for the recent credit crunch, they read about the sizes of bonuses paid and of course the numerous scandals that have surfaced. The reputation could not be lower, which of course results in extreme actions to avert bad publicity and 'fix' situations. And as if this was not enough, the banks have to perform well in stress tests, maintain a strong credit rating, reduce non-performing loans, reserve for hefty penalties, present strong ratios (capital, liquidity, leverage, etc) and increase their profitability.
It is fair to say that banks are under a lot of pressure and of course this is, unavoidably, passed on to their clients.
When you land a rejection for account opening from a bank, does it mean the bank does not want to work with you or have you just never made it to be fully on-boarded? Understanding the details of the process a bank follows when it considers your application for a bank account is key to success. Or, at least if you are rejected, you know you have been rejected for some reason and not because you were, say, dealing with the wrong person.
Below we consider the possible rejection stages during the account opening process. Understanding these stages gives invaluable information on how these can be overcome and an account landed.
When approaching the bank, usually the first point of contact is a Relationship Manager (also known as the Banker). There are just too many Relationship Managers working at different types of banks (investment, private, retail, etc), looking after different lines of business (private, financial institutions, corporates, etc), size of clients and countries. Talking to the right Relationship Manager in the right part of the bank is the fundamental first step.
When talking to the right individual there is alignment of interest, you want an account and they want revenues. This is, however, not enough. You need to be transparent when presenting the case and make the Relationship Manager feel comfortable with any risks. Make it easy for them to estimate the revenue potential. At the end of the day bankers, like the rest of us, work towards remuneration maximisation.
Solution - Talk to the right person, working in the right bank and the correct department. Make sure you show them the money so they can translate it into bonus!
Although you never get to speak to them directly, a key individual in the process is the compliance officer. They need to feel comfortable with the ultimate beneficial owner, type of business, transactions (nature, countries of dealings), cross-border policies and source of wealth. Source of wealth is a big issue these days and has taken on ever greater importance. Banks are looking at both current and historical source of wealth and they look for evidence to support the wealth creation over the years.
Solution - It is vital to address each and every show-stopper before this results in a No. Be transparent and talk first about the possible risks and offer reasonable risk mitigation. At the end of the day, nobody knows your case better than you do. Don't let them feel you are hiding by not telling them that you are a Politically Exposed Person (PEP) or you had a court case 6 years back. Tell them this first and explain why they should not worry about it today. Empower your Relationship Manager to have those difficult discussions with the Compliance Officer on your behalf.
Hopefully the case that the Relationship Manager put together and the Compliance Officer signed, makes sense for the business, presents a good risk-reward balance and by signing it, the Head of the Business does not endanger their position.
Solution - Hopefully your hard work on Stage 1 and Stage 2 would result in obtaining the signature of the Head of the Business.
High risk accounts will go through some committees. Here you need to empower your Relationship Manager to face extended due diligence questions. Make sure you provide them with supporting documents and assist them to address any new risks identified during the committee meeting. Remember, when addressing a risk, think like a bank would do.
Solution - Following the committee meeting, numerous questions pop-up. A lot of them can be surprising and make you wonder how on earth they have found about certain things. Be prepared to address all new risks identified and be patient, the due diligence process undertaken can vary across banks and a good Relationship Manager should manage your expectations in this regard. Help your Relationship Manager to help you get an account.
This is the stage at which you can get an account number. If you don't manage to get an account and you are rejected, at least you know that you have gone through all stages.
Solution - If having gone through the full on-boarding process you have received a rejection, it is time to speak to the next bank. Remember, there is a bank out there for each and every client.
Understanding the process a bank follows for getting you an account gives you invaluable intelligence on how to approach the application process. Employing the right consultants in this process will do wonders for you.
There are just too many reasons why you should consider employing consultants to assist you with bank account opening. Let's look into some of them:
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
Citius Trust Limited
Citius Trust is an independent boutique services firm, which provides bespoke solutions to clients. Our aim is to deliver top quality end-to-end solutions for our clients, optimize costs, streamline operations and processes and drive value. Our directors take the lead role in managing our relationships with our clients, they are always available and provide ad hoc advice. We offer world-class intellectual capital through a transparent, tailored and client friendly approach.
Greek citizen setting up in Cyprus - The checklist! We get a lot of queries from our Greek clients and associates on how Greek citizens can become Cyprus tax residents and what the process of obtaining a tax residency certificate is. As such, we have prepared the below checklist to assist everyone interested in this.Read more