If you applied for a business account in Hong Kong five or six years ago, the procedures were rather simple: set up a company and then go to any bank to apply for an business account. The bank would simply ask you a few questions about the company’s business nature and if everything went well, the account would probably be opened on the same day.
However, in recent years, due to the increasingly strict regulations on Anti-money laundering and counter-financing of terrorism in countries around the world, many major banks have failed to do their due diligence and gate-keeping work, thus allowing criminals to take advantage of money laundering through bank accounts, resulting in banks having to pay out hundreds of millions in fines to the government. In order to avoid being fined, the process of opening accounts has become more complicated and stringent.
Know Your Customer
Nowadays, banks have adopted a “Know Your Customer” (KYC) process, which means that banks need to know who their customers are, and if they are corporate customers, the banks need to know the company’s business nature, where it operates, where the money comes from, etc. By knowing the customer, the bank will determine whether the potential customer is trustworthy or a high-risk financial criminals, so that it can decide whether to accept the potential customer as a customer. For many banks, there are times when potential customers must be sent away simply for compliance reasons.
In addition to the due diligence required to approve a bank account, banks are also required to monitor transactions on an ongoing basis after the account has been successfully opened. If a suspicious transaction is identified, the bank is obliged to request details or documents from the customer to confirm the legitimacy of the transaction. If the information provided by the customer does not meet the bank’s requirements, the bank has the right to reject the transaction or even cancel the bank account.
With all the requirements for KYC procedures and ongoing monitoring, we can imagine that the operating costs of banks are getting increasingly high. In order to utilize resources more effectively, banks are becoming progressively more selective in their customers. Banks certainly do not want customers with high risks; small companies with small deposits and little or no profit from them are also unwanted by banks, making it increasingly difficult to open bank accounts.
So does it mean that there is no hope for small companies or entrepreneurs who want to open a business bank account? No, there are other ways to go, we will offer some practical tips in next article to help your companies open bank accounts.