How to Choose the Right Bank for Your Offshore Company

How to Choose the Right Bank for Your Offshore Company
By Peter Macfarlane
So you have your offshore company or trust set up. The first thing you need to make it function will probably be a bank account. In this first of two articles exclusively for the Q, Peter Macfarlane explains why making the right banking choice from day one is so important.
The vast majority of clients who choose to form offshore structures will need to open a bank account. This is, therefore, one of the most important parts of our offshore consulting and advice services, and has become more so over the years as opening bank accounts has become a very complicated procedure.
I’m going to tell you in this article how I do it for my personal consulting clients. In the end, it’s up to you whether you go direct to a bank, or employ the services of an intermediary like myself. If you decide to go to the bank directly, after reading this article, you will understand why not every bank is suitable for everyone. Either way, the process is the same and it is important for you, as the client, to have a full understanding of the decision-making process.
The first step is to analyse your requirements. After this, my firm can generally recommend a suitable bank to work with, based on our experience. Then we make the necessary introductions, as well as assisting you through this, sometimes complicated, process.
As a matter of personal preference, I typically work with several internationally-recognised and highly-respected banks with branches in Europe, the Caribbean and Latin America. In the majority of cases, we can recommend one of these banks as being the most suitable. All of these banks have the following features in common:
accounts can be opened in all major currencies
all have secure and comprehensive internet banking facilities (including the possibility to send international payments in various currencies through the online interface)
all offer credit and/or debit cards to offshore clients
all are familiar with our documents and the jurisdictions we work with
all are familiar with offshore and international business in general
all routinely offer service in multiple languages
It is normally possible to open accounts without visiting the bank, and we can arrange for appropriate certified copies of company documents, etc. through our offices.
Our advice, however, is that clients should visit their banks when they have the opportunity. Regular readers will know that I call this the “KYB” policy (Know Your Banker). Good KYB makes for an easier and smoother long-term banking relationship. If you can’t visit your bank, you may find it is possible to arrange for bank officers to visit you, or to meet you when they are in a convenient city nearby.

Three Distinct Types of Offshore Banks
In general the banks we work with specialise in some or all of these three distinct offshore markets:
Private banking clients (including their personal investment companies, foundations, etc.)
Small commercial business (such as personal service invoicing companies)
International commercial activities, such as trading.
Private Banking Clients
Although private banking is not a simple business, there is a very simple model to keep in mind here: “keeping rich people happy”. The definition of private banking varies but is generally understood as investment management offered on a personal basis by a bank to an individual with disposable wealth of more than $1,000,000. Private banking is obviously not synonymous with “offshore”, but the costs of a personalised relationship begin to be worthwhile at the $500,000 level in the light of the superior gains to be realised from offshore investment.
Private bankers normally prefer to be approached and considered as objective financial advisers rather than as an investment-provider. Consequently, private banks may not be the most effective choice for a reasonably sophisticated investor who wants to play an active role in the management of his investments.
Small Commercial Business
Numerous offshore banks offer services to expatriates as they perceive such business as being relatively risk free, easy to manage, and profitable. In essence, expatriate services encompass managing accounts for people resident outside their home countries who may be employed, self-employed or retired. The focus of expatriate banking providers is online banking, call centres, and the provision of “packaged” investment products. Although the service offered should be professional and online banking excellent, the relationship between the bank and client could not be characterised as personal or in any way similar to the relationship between a client and a top-flight private bank.
International Commercial Activities
Many of our clients utilise companies we form for commercial purposes, such as trading. In such circumstances, an offshore bank that specialises in private banking or expatriates will be unsuitable. Our commercial clients seek similar services to an onshore commercial bank and will require access to some or all of the following services:
Cash management.
Foreign exchange and treasury services.
International trade - letters of credit, documentary collections, cross-border guarantees and global correspondents.
Risk management tools to cover foreign exchange risks, interest rate risk, etc.
Financing
Payment, receivables and payroll solutions
Selling solutions: e-commerce and merchant services
Expertise in matters such as energy, aviation, shipping or real estate.

Once we understand our clients and their business objectives, we are able to assist clients in choosing a suitable bank (or in some cases even two or three banks) to work with. Some of the aspects we consider are:
The citizenship, residence and domicile of our client
The proposed business activities
Bank charges and interest rates
Bank’s expertise in geographic regions and types of business
Languages spoken by the client
Preferences of the client: for example, to do most business online or for a more personal service
Amount of funds client expects to deposit with the bank
In particular cases where non-standard services are required, or based on preferences of the client, we can also recommend and make introductions to other banks besides our main preferred banks; or we can assist in production of specific documents (certified copies, business plans, etc.) where the client wishes to open the bank account him or herself.
We also work with online brokerage houses in Panama and Switzerland, enabling your offshore corporation to trade on all major world markets in an offshore environment.
Requirements to Open Accounts
Clients should understand that opening offshore corporate accounts is not a simple process, and it may appear to be onerous, bureaucratic and time consuming. All I can say is: don’t despair! You’ll get there in the end!
Banks are under enormous pressure to conduct detailed and ongoing due diligence on offshore clients. In most circumstances, to open the account, you will need:
A reference from your existing bankers
Certified copy of passports of all signatories, officers and owners
Proof of residence of all signatories, officers and owners (typically a utility bill)
Business plan and cash flow forecasts, with supporting documentation, if available
Documentary evidence of source of funds to be deposited
The business plan is especially important. The bank can be expected to verify this and will then monitor the account on an ongoing basis to ensure that the business activity is consistent with the profile. Documentary evidence of specific transactions (for example copies of invoices or contracts) may be requested, especially in the case of large transactions (such as real estate business). It is always advisable to notify the bank in advance of unusual transactions or sudden changes in volume, or of changes to the core business which may occur over time.
Please understand that due diligence procedures are part of global business today. If your banker sees a well-administered company and has a good two-way channel of communication with its management, that will build the foundations of an excellent and flexible business relationship with your bank.

What if you can’t provide the documents they ask for?
While we don’t wish to work with banks that cut corners in due diligence procedures, it’s worth mentioning that the banks we work with tend to take an overall ‘big picture’ view of the proposal in front of them. This means that it is sometimes possible to open accounts if, for example, your existing bank won’t give you a reference, or you don’t have any utilities in your name, provided you can offer alternative documentation that proves your bona fides, or a good explanation. Smart bankers realise that your gas bill is not the be all and end all - sometimes a common sense approach is the best way to achieve the security they are seeking. Terrorists and drug dealers, the two groups bankers are most scared of, probably have utility bills too!
It is sometimes possible to open accounts with drivers’ licences or national ID cards, but it is strongly recommended that, if you don’t have a current passport, you should immediately order one from the appropriate authorities in your country of citizenship, as passports can take some time to obtain. A passport is the preferred identity document for international transactions.
In case of clients in businesses considered as “high risk” (including businesses handling third party funds, doing business with certain high-risk countries, credit card merchant accounts, internet gaming…) enhanced due diligence procedures are necessary and it can become very difficult to find a bank that will accept the business. Please contact me, via the Q Wealth Report offices, for further information in this regard.
Having chosen your bank, how do you go about approaching them and getting your account opened? Think of it like a romantic relationship… things you say at the beginning are of the utmost importance and may work for or against you later! Peter Macfarlane will explain the account opening process in more detail in the next article in this series.
Editor’s note: Peter Macfarlane is available for email or personal consultations, and may be contacted via the Q Wealth Report office.