Foreward by Andrew Chilvers
For companies and individuals looking to move into new jurisdictions for business opportunities, setting up a bank account is a crucial part of the process. But this is never as straightforward as it seems.
In all countries, banks are obliged to crack down on fraud and any potential financial scullduggery. As a result, they tend to be very risk averse. Regardless of where a business establishes an office in the world, local banks will generally have the newly arrived expatriates jumping through various hoops, pulling their hair out in frustration.
The new arrival will need the relevant paperwork, including personal identity papers, a personal and business address, personal references and other numerous documents. And that’s just the beginning.
Every jurisdiction has its own banks and banking rules, which are often complex and bureaucratic. Consequently, seeking advice from local legal and financial experts before setting up a bank account is imperative if a company is it get the right account for its particular business objectives. This is why it’s so important to use local advisers who are experts in the jurisdiction to provide information about the local banking rules.
What is the general risk appetite of banks in your jurisdiction and how does that affect setting up a new business bank account?
I consider the real risk for new clients regarding banks in Slovakia as not high due to strict AML and KYC rules adopted into Slovak law during the past two years. However, despite this, the banks behave as if the actual risk is extremely high. This is mirrored in the situation when from year to year it is more difficult and takes more time to open a bank account, not only for the foreign entities but also for the Slovak entrepreneurs. When in the past it was possible to open a bank account within a couple of days, now it may take a couple of weeks and without guarantees that the bank accepts the client and actually opens the bank account. This applies mainly to foreign entities, but my experience with the banks in Slovakia is that Slovak companies have to ask the bank in advance whether it accepts them as a client and opens the account. Slovak companies with solely Slovak citizens as shareholders and directors are accepted by banks in Slovakia, but once there is a foreign element involved (e.g. foreign entity or citizen as shareholder or director of the company, even from another EU country), the banks look at such cases carefully and require more information and documents from the client to verify them prior to a decision whether the client should be accepted to open the bank account or not.
When the bank refuses to open the bank account for the client it does not have to give any reasons to the client. There are a couple of “problematic” jurisdictions that are not accepted by banks in Slovakia – for instance, it is almost impossible to open a bank account for US and Russian entities and citizens, also entities and citizens from offshore jurisdictions are seldom accepted. From EU jurisdictions mainly entities from Cyprus are not accepted.
As for personal accounts, EU citizens are allowed to open personal bank accounts in Slovak banks, while other jurisdictions are considered individually as in the case of legal entities.
How accommodating are banks in your jurisdiction for opening a business and personal bank account?
The banks’ vetting procedures are similar because the banks have to follow AML and KYC rules stipulated by the law and Slovak Central Bank regulations.
For opening business bank accounts the basic documents required are:
• an extract from the commercial/business registry;
• the corporate documents of the company (not applied on the Slovak entity);
• the documents regarding the directors of the company (the ID cards or passports as proof of ID and the utility bills as the proof of address);
• a business plan by the company (not applied in the Slovak entity) ;
• a questionnaire of the bank regarding the identification of UBO, PEP, the source of money used by the company for doing the business and the transactions via the bank account. Additionally, the estimation of the amount of transactions planned to be done via bank account, the business structure of the client from the client to natural persons who are UBOs of the client.
Opening a personal bank account is much easier and requires only the ID card or passport of the client (EU resident) and the proof of address of the client’s permanent residence in the EU country. For non-EU residents also a residence permit in Slovakia is required.
The time of the procedure of opening the bank account depends on the type of the client – the more complicated structure the client has and the more foreign elements are involved in the client’s structure, the longer it takes to obtain the decision of the compliance department of the bank. After that the opening of the bank account is a formality, but the personal presence of the directors is usually required.
Should you join an internationally reputable or established bank rather than a local bank?
There are mostly banks with the foreign capital in Slovakia and less than 5% of Slovak capital in the banks in Slovakia. Thus, which bank to join depends on the preferences of clients and the needs of their business. Foreign clients with subsidiaries in Slovakia usually use a bank that is used by their parent company in their home country.
As for the difficulty of opening a bank account and the banks’ vetting procedures, I would not distinguish between the local banks and the foreign banks. I find it similar in all banks in Slovakia as all banks have to follow the same AML and KYC rules required by Slovak laws and by the regulations of the Slovak Central Bank. Each bank may have its own rules and procedures which differentiate it from others, but all banks follow the same laws and rules regarding AML and KYC policy.