Due Diligence Requirements Involved in Opening a Bank Account Abroad

You don’t need a foreign bank account if you are not planning to ever visit a foreign country, buy any foreign property, or sign a business contract with a foreign partner. If this applies to you, having a domestic bank account is enough. If this doesn’t apply to you, however, an offshore bank account can come in handy indeed.

Some people like to look ahead and plan their retirement. Would you like to spend your golden years in a country where summer lasts forever, the sea is warm, and the food is delicious and healthy? Then you should consider buying a house on one of the paradise islands in the Caribbean, for example.

If you do it before you retire, you can return at least part of its cost by renting it out while you still have a job. In this case, you certainly need a bank account in the country where the house is located. This is necessary to handle the financial matters associated with purchasing the house and receiving the rent payments.

Besides, if you have a considerable amount of money in your foreign bank account, you will have access to loans from local banks, as the bankers will see that you are a credible customer. You can take out a mortgage and buy a second house in the Caribbean. Why not?

It is also obvious that you are going to need your foreign bank account when the time comes for you to retire to the Caribbean. You’ll use it to buy groceries and pay utility bills while enjoying the wonderful nature of the region.

If you are a frequent visitor to foreign countries that use currencies different from your home country’s currency, you also would be better off having a foreign bank account. You lose some money every time you exchange one currency for another. Some banks allow opening accounts in different national currencies but they often offer a smaller interest rate on foreign currency accounts. If you have a bank account in a foreign country, you may have a better deal.

Please also note that you can gain some tax benefits if you open an offshore bank account. Many offshore jurisdictions – including those in the Caribbean – do not levy the capital gains tax, for example. This can be an opportunity to save on taxes in some circumstances.

If you are wondering about the best countries to open an offshore bank account, your key objectives have to be considered. Would you like your foreign bank account to be as secure as possible? Then choose Switzerland or Germany. Would you like to pay as little as possible in taxes? Then choose the Cayman Islands, as this jurisdiction is one of the very few tax havens remaining today. Would you like to find attractive interest rates? Then you should consider banking in an Eastern European country such as Georgia, for example.

There is an important point that you should bear in mind if you are interested in setting up a foreign bank account: you don’t have to pay a personal visit to the foreign country where you’d like to open a bank account. It can be done remotely if you have a computer and an Internet connection. You’d better seek professional advice if you want to find out how to open a foreign bank account online. Here we’d like to warn you about the due diligence procedures involved in opening a bank account in a foreign country.

Due diligence procedures involved in opening a foreign bank account

Whether you are opening a bank account in person or online, at home or abroad, you have to pass through the due diligence procedures in all cases. The task may become especially challenging if you want to open a foreign bank account without leaving your home country.

All banks today have to know their customers. The KYC (Know Your Customer) requirement has been imposed on the banks by international financial regulators and any bank that is worth your attention will have a Compliance Department and compliance officers.

Yes, having more people on the staff means increased operational costs but banks dare not ignore the KYC requirements. If a bank happens to take a client on board and this client happens to be involved in some money laundering or tax evasion schemes, the bank is going to be in trouble. The fines are huge, the reputational damages may well be beyond repair, and the Compliance Department head may even face a prison sentence!

So please don’t think that the bank managers are so inquisitive and overly cautious of their own volition. They have to be extremely cautious when it comes to taking a new customer on board. If they are not, the consequences may be dramatic indeed, both for them personally and for their bosses.

What requirements do you have to comply with to pass the due diligence checks successfully? Two things are of utmost importance for the banks. First, every bank – small, medium, or large – will have a list of people connected with terrorists. These lists are compiled by national and international agencies responsible for combating terrorism and they are passed on to all banks. If your name is on such a list, you’d better run for your life instead of trying to set up a foreign bank account.

The second concern that the foreign bank manager will have is the origin of the money that you are planning to deposit. It has to be legal and you have to be able to prove that it’s legal. Yes, this is how things stand for now: if you want to put some money in the bank, you have to conclusively show that it comes from a legal source before the bank can accept it from you.

Times have changed and now banks choose customers, not vice versa. At the same time, it is still possible to open a foreign bank account remotely if you are an honest person and your sources of income are transparent.