What is going on with Hong Kong banks? Why is it becoming so complicated to open a corporate bank account?

Just got your Certificate of Incorporation and Business Registration Certificate? Congrats, you are now officially able to open a corporate bank account! Unfortunately, this may not be as simple as you might be thinking, particularly if you are not an HK resident, as the requirements for opening such an account in Hong Kong differ greatly from those overseas.

Indeed, the Hong Kong Monetary Authority (HKMA), in charge of monetary and banking stability, puts a lot of pressure on banks to avoid issues with money. Due of course, to the impact such activity could cause on the local economy and worldwide reputation of Hong Kong’s banking system.

That explains why banks are asking so many questions. Regrettably, it also means that if one bank just refused to open an account for your newly incorporated company, the bank right across the street may come to the same conclusion.

However, it is possible to maximize your chances of getting approval by understanding bank expectations and preparing for your meeting with them accordingly. Orbis answers the most commonly asked questions and provides you with a few tips as follows:

A) Who needs to attend the Bank meeting?

1. At least 2 directors of the company, if not all, should attend the meeting in person and even every shareholder (or legal representative for a corporate body) for certain banks
2. For Orbis customers, one of our consultants will assist you during the meeting

B) Where should you make the appointment?

You can open a corporate bank account at any Hong Kong branch office of a Bank. However, Orbis recommends non-HK residents to meet their chosen bank in its Hong Kong Central branch as the handling staff are often more qualified and have a better understanding of businesses not just locally but globally.

C) How will banks assess their risks (Know your customer – KYC)?

During the meeting, you will be asked questions related to the following two main areas of your business in support of your application:

1. Directors and shareholders’ identities and history
2. Business activity and consistency

To better illustrate, here are two example cases that are likely to have different            chances of success:

• A Hong Kong resident is the sole shareholder and director of a Hong Kong limited company whose business nature is trading.
• A Thai resident and a Hong Kong Limited company are shareholders and directors of a Hong Kong limited consulting firm.

It is important to note that the main criteria of banks for assessing risk are (i) directors and shareholders’ country of residence (or that of one of its legal representatives for corporate bodies) as some countries are considered as risky (cf. Corruption Perceptions Index), for instance, Thailand is blacklisted, (ii) business nature, for example, trading is considered as more consistent than tertiary industry, and (iii) number of parties involved – the more complex the corporate structure, the more you will have to explain and justify yourselves to satisfy the bank’s requirements.

Given the information above, first case has a higher chance of obtaining approval while the approval process is likely to be much more complicated for the second case.

D) What will the bank need to complete your application?

1. Main documents required
   • Every director and shareholder’s original passport or a certified true copy in the case of a corporate body legal representative
   • Address proof in English issued no more than 3 months before the date of application (or a certified English translated version) of every director and shareholder
   • The original Business Registration Certificate (they will make a copy)
   • The original Certificate of Incorporation (they will make a copy)
   • A hard copy of the company’s Articles of Association (provided with the Company kit)
2. Business supporting documents

The bank’s aim is to gather data about your business consistency. In the case of control from the HKMA, the bank will be able to show that they’ve conducted a thorough investigation of your business, and they will be able to provide proof of their diligence. Orbis recommends being proactive in the discussion and giving them as much information as possible to reassure the bank compliance committee.

The following is a list of documents you may be required to produce for the meeting. Please note however that each branch and even handler is different, as such, the list provided is only meant as a guide. It is possible you may not be required to produce all of them or you may be requested for other documents not appearing below:

• Business card with name and logo of the new company
• Contract/draft of partnership
• Invoices
• Product samples
• E-mail with current/future suppliers or clients
• Business proof of other shareholders and directors’ activities if any (including but not limited to its website, estimate turnover generated, business card and certificate of incorporation).

E) When will the application result be notified?

In most cases, you will be notified within 1 to 6 weeks (depending on your case and the bank you are applying with) of whether the bank has accepted your request. During the process, your case will be passed to the compliance team who will assess whether there is any risk for the bank.

If your application to open a corporate bank account is denied, there are still alternative solutions. For instance, you can try to open an overseas bank account for your Hong Kong company (e.g. in Singapore). Unfortunately, it is sometimes easier to process this way.

Conclusion: Banks fear anything that raises suspicion. Therefore, your aim should be to make the bank feel as comfortable as possible with your application. The more information and supporting documents you provide whether it be relating to the shareholders and directors, the business scope of the company and its actual capacity to perform, the less doubt the bank will have and so the more likely your application will be approved.

Are you planning to develop your business or set up a company in Asia? Orbis would be pleased to support and share its experience with you to make your project feasible.

By Benjamin DELOISON, Orbis Hong Kong consultant