Opening Bank Accounts
The opening of a bank account is one of the biggest problems in Cyprus after the formation of a new company. Cyprus get a lot of pressure from EU as well as the USA regarding compliance issues. Historically, compliance was not a big matter and so the banks have no big pool of experienced experts. This leads to a wide variability in terms of required documentation, not only depending on the bank but sometime even of the employee handling the case.
The best case is, you walk into the bank and leave with the account one hour later, The worst is you comply with multiple different requests for documents, wait some months – and get no account in the end.
Further down we will get into the typical documentation needed, but let’s start with the mindset and the thought process you have to face when opening a bank account.
Understand that the employee you meet has a free way out of risk: If he gives you no account because of compliance reasons, for him, all is ok. If he gives you an account and you are a money-launderer – his job can be lost. So everything he does not understand is fishy. You need to be precise in your numbers and in your story.
- Explain your business model in detail and in words your secretary can easyly understand. Most bankers never worked in a company and they have no idea about business. Spin a story easy to understand.
- The key numbers of your projections should be realistic. These people are no fools. The relations of revenue and profit and the expected growth of these numbers are especially sensitive.
- The countries from where you expect your revenue and where you plan to send mony to, will be scrutinized. If you have too much contact with high-risk countries, you become a high risk yourself – and no account. The numbers also should be realistic. If you later have significant higher numbers, or lower, alarm bells start ringing in the bank.
- Your company should have a working website when you apply for an account. If the banker cannot find your company, it does not exist. How your company paid for the website if it has no bank account yet? They don’t care.
- The owner or UBO (Ultimate Beneficial Owner) should be present in LinkedIn. Not all banks check this, but it is good to mention it in your CV.
- Avoid any US-connections and politically exposed persons, if possible. They are additional work for the bank and lower your chances. Also avoid shareholders or directors from high risk countries.
- Show without doubt where the capital you plan to invest comes from. If you invest a six digit amount and your yearly gross income is only five digits, you lost. Provide contracts for loans and income, where possible. Translate them into English.
- Keep your company structure lean and easy. Businesses with multiple companies and multiple directors or multiple shareholders are automatically dubious, and also burdensome for the banker, since he has to do due diligence on everyone involved.
- Have enough substance. You can explain missing staff because the company was just founded, but you should have an office rent contract and a phone line.
- The bank will check you regularly after you have got your account. The frequency of these checks is dependent on the risk-level the bank assigned to your company. They will compare with your application. If the countries you deal with or the amounts you move over your account are not matching the application, this can lead to a cancellation of the account. Better to inform the bank proactively. Also the substance your company has should match the activities. At some point employees have to be hired etc.
These are the typical documents necessary for opening a bank account:
Individual Beneficial Owner:
- Passport copy verified by an endorser (like a notary)
- Utility bill no older than 3 months proving residential address
- Original bank reference letter
Ownership of Legal Entity:
- Verified copy of Certificate of Incorporation and in the case of a change of name, a legal certificate
- Verified copy of the Memorandum and Articles of Association
- Evidence of the registered office address of the legal entity
- Verified Register of Directors and Secretaries of the legal entity
- Verified Register of Members of the legal entity
- Verified copies of the share certificates (i.e. Bearer/in the name of nominees/registered shares)
- Certificate / Evidence of ownership of the legal entity
- Description of the entity’s structure and an endorsement of it
- Passport copy and original bank reference of each owner of the legal entity
Ownership of a Listed Company:
- Same procedure as for the legal entities along with:
- Documents listing the shareholders owning more than 10%.
- Verified copy of the Stock Exchange listing of the company in the relevant country
- Statement by the Board of Directors on the seniority of individuals in the company
- Latest audited accounts information
Ownership of a Trust or Company owned by a Trust:
- All required documents of the Trust verified
- All required documents of the Settlor verified
- All required documents of the Beneficiaries
- Declaration and evidence of ownership of the trust