Opening an International Corporate Bank Account: Why Incorporation Is Only the Beginning

The incorporation certificate is not the finish line

An entrepreneur establishes an overseas company.

The name is approved.

The company is registered.

The certificate of incorporation arrives.

The registered office is active.

The tax registrations are underway.

Everything appears ready.

Then comes the question that can determine whether the structure actually works:

Where will the company bank?

This is where international company formation can become substantially more complicated.

The difficulty is understandable.

A company registry and a bank perform fundamentally different functions.

A registrar asks whether the legal requirements for establishing the company have been satisfied.

A bank asks whether it wants an ongoing financial relationship with that company.

Those are not the same question.

Legal existence does not equal bankability

This distinction should be understood before any international company is incorporated.

A company may be:

perfectly legal;

properly incorporated;

correctly licensed;

and

fully tax compliant

while still being unattractive to a particular bank.

Why?

Because banks operate within their own:

• regulatory obligations;
• financial-crime controls;
• sanctions policies;
• credit policies;
• geographic restrictions;
• sector restrictions;
• correspondent-banking relationships;
• operational capabilities; and
• commercial risk appetite.

The incorporation authority has approved the company.

That does not compel a bank to approve the relationship.

What is the bank actually trying to understand?

Corporate banking onboarding can look document-heavy from the customer's perspective.

But underneath the documentation is a relatively straightforward objective.

The bank is trying to understand:

Who are you, what does this company do, why does it exist, where does its money come from, where will its money go, and does that make sense?

That enquiry can involve several distinct areas.

1. Who owns the company?

Banks need to understand the ownership and control of legal entities.

That generally means identifying the ultimate beneficial owners rather than stopping at the first corporate shareholder.

Imagine:

Operating Company

owned by:

Holding Company A

owned by:

Holding Company B

ultimately owned by:

Individual Shareholder

The bank will generally need to understand the chain through to the relevant natural persons.

Adding companies between the operating business and its ultimate owner does not make the owner disappear.

It creates more ownership to explain.

International standards require financial institutions to identify beneficial owners and take reasonable measures to verify their identities and understand corporate ownership and control structures.

2. What does the company actually do?

This question sounds simple.

It often is not.

Descriptions such as:

consulting

international trade

investment

business services

or

general trading

may be technically correct but commercially inadequate.

A bank may need to understand:

• what is being sold;
• who buys it;
• how customers are obtained;
• who supplies the business;
• where services are performed;
• where goods originate;
• where goods are delivered;
• how the company earns its margin;
• expected turnover;
• average transaction value;
• expected payment frequency; and
• currencies required.

The clearer the business model, the easier it is to explain.

3. Why is the company incorporated there?

This is one of the most underestimated questions in international structuring.

Suppose:

the shareholder lives in Country A;

the customers are in Countries B and C;

the suppliers are in Country D;

the company has been incorporated in Country E;

and the requested bank account is in Country F.

A bank may reasonably ask:

Why?

There may be an excellent answer.

Country E may be the group's regional headquarters.

The directors may be there.

It may be a major logistics centre.

It may provide access to the relevant market.

The company may have employees there.

The owner may be relocating there.

A particular regulatory licence may be required there.

The group may already have substantial operations there.

All of those can potentially create a coherent commercial explanation.

But:

“because somebody told me the tax was low”

may not provide the strongest banking rationale on its own.

4. Who are the customers?

A bank may want to understand who will be paying money into the account.

For an established business, that may be evidenced through:

• contracts;
• invoices;
• existing customer relationships;
• historic accounts;
• previous bank statements;
• purchase orders; or
• correspondence.

For a start-up, some of those documents may not yet exist.

That does not automatically prevent banking.

But the business may need to explain:

• its target market;
• existing commercial relationships;
• proposed customers;
• sales process;
• expected contracts; and
• how revenue forecasts were produced.

The objective is consistency.

If a newly established consultancy predicts £10 million of first-year turnover with no employees, no existing customers and no contracts, the bank may understandably want to know more.

5. Who are the suppliers?

The same principle applies to outgoing payments.

A trading company may need to identify:

• principal suppliers;
• supplier countries;
• goods purchased;
• typical order values;
• logistics arrangements; and
• payment currencies.

A service company may have relatively few suppliers.

A construction company may have many.

A software company may principally pay:

employees;

cloud providers;

contractors;

and professional services.

The banking profile should reflect the real business.

6. Which countries will money move to and from?

Geography is central to banking risk.

Banks may consider:

• customer countries;
• supplier countries;
• shareholder residence;
• director residence;
• incorporation jurisdiction;
• transaction destinations;
• source-of-funds jurisdictions; and
• countries connected with underlying commercial activity.

Different countries can present different:

AML;

sanctions;

corruption;

regulatory;

fraud;

or correspondent-banking risks.

This does not mean that an international company should avoid legitimate cross-border business.

It means that its geographic footprint needs to be understood.

7. What is the source of funds?

This expression is frequently misunderstood.

Source of funds is not simply:

“The money came from my account at another bank.”

That identifies the route.

It does not necessarily explain the origin.

The FCA has expressly distinguished source of funds from the mechanism by which funds were transferred: the relevant question is the activity that generated the money.

Depending upon the circumstances, funds might originate from:

• trading income;
• employment;
• investment proceeds;
• sale of property;
• sale of a business;
• inheritance;
• dividends;
• accumulated savings;
• shareholder capital;
• loan financing; or
• another legitimate source.

Evidence should support the explanation where required.

8. What is the source of wealth?

Source of wealth asks a broader question:

How did the individual ultimately acquire their wealth?

Someone investing £500,000 into a company might demonstrate that the immediate funds came from a personal savings account.

That addresses where the money was immediately held.

The bank may still ask how the individual accumulated the £500,000.

For example:

20 years of business ownership;

sale of a company;

property investment;

employment income;

inheritance;

or

investment returns.

The FCA notes that evidence used to establish source of wealth can include items such as audited accounts, employer evidence, tax returns and bank statements depending upon the circumstances.

The distinction is important:

source of funds = where the particular money came from;

source of wealth = how the person's overall wealth was generated.

9. What transactions should the bank expect?

Opening the account is only the beginning of the banking relationship.

Financial institutions undertake ongoing monitoring.

International FATF standards contemplate scrutiny of transactions throughout the relationship so that activity can be assessed against the bank's understanding of the customer, its business and risk profile.

That is why banks ask questions such as:

Expected annual turnover?

Average monthly credits?

Largest expected transaction?

Main currencies?

Countries sending payments?

Countries receiving payments?

These are not necessarily predictions that must be exact to the pound, euro or dollar.

They establish an expected profile.

A £100,000 company should not suddenly behave like a £100 million company

Suppose an application describes:

annual turnover of £250,000;

European consulting clients;

payments averaging £5,000;

and no activity outside Europe.

Three months later, the account begins receiving:

million-pound transfers;

from unrelated companies;

in jurisdictions never disclosed;

followed immediately by payments to additional third countries.

Even where the underlying transactions are legitimate, the activity bears little resemblance to the profile the bank originally approved.

That can trigger enquiries.

The lesson is not:

keep transactions small.

It is:

describe the business accurately and update the bank when the business materially changes.

KYC is not the same as account approval

Entrepreneurs sometimes say:

“I passed KYC, so why did the bank decline me?”

Because KYC is not the entire decision.

The bank may be satisfied that:

you are who you say you are;

the company exists;

and the beneficial ownership has been established.

It can still decide that the business is outside its risk appetite.

For example, a bank may have limited appetite for:

• certain industries;
• particular countries;
• highly complex ownership;
• cash-intensive businesses;
• certain payment flows;
• particular digital-asset activities;
• newly established companies without sufficient nexus;
• unusual cross-border structures; or
• businesses requiring services the bank does not provide.

A decline therefore does not necessarily mean the bank suspects wrongdoing.

It may simply mean:

this relationship does not fit this institution.

Not every bank is right for every company

This is why asking:

“Which is the easiest bank?”

is usually the wrong question.

The better question is:

Which institution is appropriate for this business?

Consider a company receiving thousands of small international e-commerce payments.

Its banking requirements differ from a holding company receiving four substantial dividends each year.

A commodity trader has different requirements from a software consultancy.

A property business differs from an international payroll company.

A regional operating company differs from a family investment vehicle.

The bank needs to fit:

the transaction profile

as well as:

the company profile.

A bank is not always the only answer

International businesses now have a wider financial-services landscape available to them.

Depending upon the jurisdiction and requirements, this can include:

• traditional commercial banks;
• challenger banks;
• regulated payment institutions;
• electronic-money institutions;
• multi-currency payment platforms;
• merchant-acquiring providers;
• foreign-exchange specialists; and
• treasury/payment infrastructure providers.

These are not interchangeable.

A payment account is not necessarily equivalent to a full corporate banking relationship.

Services can differ in relation to:

• deposit protection;
• lending;
• credit facilities;
• trade finance;
• cash;
• cards;
• direct debits;
• local account details;
• international payments;
• safeguarding;
• investment services; and
• treasury products.

The correct solution may therefore involve more than one provider.

Multi-banking can be sensible — when it has a purpose

A substantial international company may legitimately maintain several banking relationships.

For example:

Bank A — principal operating account.

Bank B — treasury and deposits.

Payment Provider C — international collections.

FX Provider D — currency conversion.

That can improve resilience and functionality.

But opening numerous accounts merely because they are available can create unnecessary:

• reconciliation;
• compliance;
• accounting;
• security; and
• administrative complexity.

As with corporate entities, banking architecture should be:

as simple as possible and as sophisticated as necessary.

Currency requirements should be considered early

International businesses frequently require more than one currency.

Common requirements can include:

GBP;

EUR;

USD;

AED;

CHF;

SGD;

HKD;

and others.

A bank may support some currencies better than others.

Questions to consider include:

• Can the company hold the currency?
• Can it receive local payments?
• Can it send international payments?
• What FX spread applies?
• Are correspondent-bank charges involved?
• Are payment limits suitable?
• Can the company obtain debit or corporate cards?
• Is treasury functionality required?

A cheap account can become expensive if the company converts millions in currency each year at an unsuitable exchange spread.

Banking can influence jurisdiction selection

This is one of the most important lessons for international incorporation.

Imagine two jurisdictions.

Jurisdiction A

offers:

very low tax;

cheap formation;

minimal annual fees.

But the intended business struggles to obtain appropriate banking.

Jurisdiction B

costs more;

has somewhat higher taxation;

but provides:

credible banking;

the currencies required;

access to payment infrastructure;

commercial substance;

and a strong relationship with the markets in which the company operates.

Which is actually the cheaper structure?

For a real business, the answer may easily be Jurisdiction B.

This is why Coutts believes banking analysis should occur before incorporation.

Substance and banking increasingly reinforce each other

A company with genuine commercial substance can often explain itself more easily.

That might include:

• local directors;
• management;
• employees;
• premises;
• customers;
• contracts;
• suppliers;
• accounting records;
• regulatory licences;
• website;
• telephone;
• professional advisers; and
• demonstrable commercial activity.

Not every company needs all of these.

A legitimate holding company may require far less physical infrastructure than a trading operation.

But the structure should make sense for its stated function.

Banks increasingly operate within risk-based frameworks that require them to understand the purpose and intended nature of customer relationships and the ownership and control behind corporate customers.

Your website can matter more than you think

Consider the onboarding analyst reviewing a newly established international company.

The application says:

international management consultancy.

The analyst searches the company online.

There is:

no website;

no LinkedIn presence;

no explanation of services;

no staff;

no commercial address beyond a formation agent;

and no apparent customer-facing activity.

That does not prove the company is illegitimate.

Many genuine start-ups begin with very little.

But it creates more questions.

Now imagine the same company has:

a professional website;

clear service descriptions;

identified management;

appropriate contact details;

customer contracts;

a credible business plan;

and documentation consistent with the banking application.

The second story is easier to understand.

In corporate banking:

consistency creates credibility.

Do not manufacture substance

There is an important distinction.

Businesses should not create artificial websites, fabricated contracts, meaningless local arrangements or sham offices simply to satisfy a bank.

That can create far more serious problems.

The objective is not to manufacture the appearance of a business.

It is to document the business that genuinely exists or is genuinely being established.

A start-up can say it is a start-up.

An investment company can say it is an investment company.

A holding company can say it is a holding company.

The business does not need to pretend to be something larger.

It needs to be coherent.

Complexity can damage bankability

International structuring sometimes suffers from an assumption that more layers equal more sophistication.

Consider:

a BVI company;

owned by a Cyprus company;

owned by a UAE company;

held through a trust;

with directors in two additional countries;

requesting an account in Switzerland;

for a business operating principally in Britain.

There may conceivably be legitimate reasons for every element.

But the obvious banking question is:

Why?

Every additional layer can create:

• another ownership relationship to verify;
• another jurisdiction to assess;
• another document set;
• another tax consideration;
• another explanation;
• another potential risk factor.

Complexity should therefore earn its place.

If an entity serves no genuine purpose, removing it may make the structure both administratively stronger and easier to bank.

Nominees do not make beneficial owners disappear

The same principle applies to nominee arrangements.

There can be legitimate circumstances in which nominee shareholders or directors are used.

But they should never be approached as a mechanism for hiding the true owner from a financial institution.

Banks are expected to identify and verify beneficial ownership behind corporate structures.

A nominee layer can therefore create additional due diligence, rather than less.

If the objective is to conceal ownership from the bank, the structure has a fundamental problem.

High-risk does not necessarily mean impossible

A business can attract enhanced due diligence because of:

geography;

industry;

ownership;

politically exposed persons;

transaction size;

complexity;

or other risk factors.

Enhanced due diligence does not automatically mean rejection.

It means the institution may need more information and evidence.

Risk-based frameworks can require additional information concerning customers, transactions and source of funds or wealth where higher risk is identified.

The appropriate response is therefore usually:

better documentation and clearer explanation

rather than:

trying to conceal the feature that created the additional scrutiny.

What should a strong corporate banking file contain?

Requirements vary by bank and jurisdiction, but an international corporate banking file may need material such as:

Corporate documents

Certificate of incorporation, constitutional documents, registers, licences and ownership records.

Ownership information

Clear corporate structure and ultimate beneficial ownership.

Directors and authorised persons

Identification, addresses and relevant background information.

Business description

A precise explanation of activities and revenue model.

Business plan

Particularly useful for new companies.

Website and corporate profile

Where relevant to the business.

Customer evidence

Contracts, invoices, letters of intent or existing trading history where available.

Supplier evidence

Particularly for trading and distribution businesses.

Expected activity

Turnover, transaction sizes, currencies and countries.

Source of funds

Evidence explaining the origin of money entering the relationship where required.

Source of wealth

Evidence concerning how significant owners accumulated their wealth where required.

Financial information

Accounts, management accounts, tax returns or forecasts depending upon the company's stage.

Group structure

Where the applicant forms part of a wider group.

The exact list should always follow the institution's requirements.

But the principle is universal:

Build the explanation before submitting the application.

The application should tell one story

This is perhaps the most practical advice in this Insight.

Suppose the business plan says:

European software consultancy.

The website says:

global investment and commodity trading.

The application says:

marketing services.

The trade licence says:

general trading.

The forecast says:

£4 million revenue.

The shareholder explains:

the company has not decided what it will do yet.

Individually, each discrepancy might have an explanation.

Together, they create uncertainty.

Now compare:

Licence:

management consultancy.

Website:

management consultancy.

Contracts:

management consultancy.

Customers:

businesses purchasing consultancy.

Forecast:

consistent with those contracts.

Transactions:

consistent with the forecast.

That company is much easier to understand.

Bankability begins with coherence.

Ten questions to answer before approaching a bank

1. Why was the company incorporated in this jurisdiction? There should be a credible commercial answer.
2. Who ultimately owns and controls it? Prepare a clear ownership structure.
3. What exactly does the company do? Avoid vague descriptions.
4. Who will pay money into the account? Identify customer types and principal jurisdictions.
5. Who will receive money from it? Identify suppliers, employees, group companies and other counterparties.
6. What turnover and transaction profile is expected? Use realistic figures.
7. Which currencies are required? This can materially affect provider selection.
8. Where did the initial capital come from? Prepare source-of-funds evidence where appropriate.
9. How did the owners acquire their wealth? Be prepared for source-of-wealth questions.
10. Why is this particular bank appropriate? The application should make commercial sense for both parties.

Five mistakes that can make banking harder

Mistake 1 — Incorporating first and thinking about banking later

The most common structural error.

Mistake 2 — Choosing a jurisdiction solely for tax

A tax-efficient company without workable banking may not be commercially efficient.

Mistake 3 — Applying everywhere simultaneously

Multiple poorly prepared applications do not necessarily improve the probability of success.

Mistake 4 — Providing inconsistent information

Discrepancies create unnecessary questions.

Mistake 5 — Treating due diligence as an obstacle to defeat

The objective should be to demonstrate the legitimate commercial reality clearly.

What happens after the account opens?

The relationship does not become invisible once onboarding is complete.

Banks may continue to:

• monitor transactions;
• refresh KYC information;
• request updated corporate documents;
• reassess beneficial ownership;
• review changes in business activity;
• investigate unusual transactions;
• review sanctions exposure; and
• request further source-of-funds information.

International businesses should therefore maintain banking records as carefully as corporate and tax records.

If:

ownership changes;

directors change;

business activities change;

turnover increases materially;

new markets are entered;

or transaction patterns alter significantly,

the bank may need to be updated.

A bank account is infrastructure

International entrepreneurs sometimes treat banking as though it were a commodity:

company + bank account = formation package.

For a serious business, banking is closer to infrastructure.

The company may depend upon it to:

receive revenue;

pay suppliers;

pay employees;

hold capital;

convert currencies;

process cards;

collect subscriptions;

fund subsidiaries;

receive investment;

make acquisitions;

and distribute profits.

That infrastructure deserves the same planning attention as the corporate structure itself.

Before Incorporating an International Company

Ask:

What banking does the company require?

Which currencies?

Which countries?

What transaction volumes?

Who are the customers?

Who are the suppliers?

Where are the owners resident?

What is the source of initial capital?

What source-of-wealth evidence is available?

Will the company require cards, lending or trade finance?

Does the proposed jurisdiction make commercial sense?

Which financial institutions actually serve businesses of this type?

Only then should the incorporation structure be finalised.

Because the objective is not simply to own an international company.

It is to own an international company that can operate.