Establishment of an overseas bank account can usually be very essential to business men who operate all over the world. Yet, although the process can sound quick and easy according to the claims of many websites, it still can take you longer than you hoped. At least, you must be ready to pass through a strict and elaborate verification process that entails questioning your identity, background, and risk exposure because banks need to know who their potential customers are. This is always followed by a formal process termed as due diligence and hardly does one go through it without much difficulty despite being a first time client. In case you would be interested in knowing why due diligence is critical when establishing offshoring accounts, please follow the link to the trusted portal.
You can say that the number of alternatives to offshore banking is high and every institution is eager to receive new visitors. Yet, those days when the banks had to struggle over the customers passed away.
An initial go that you may secure with the financial institution is not anymore sure that you will receive the ultimate clearance. The authorization that proceeds further to admit you on board as a customer takes place on the basis of the Compliance unit of the supporting financial organization that has to thoroughly accomplish all the stages of the due diligence and Know Your Customer (KYC) processes. As long as they are certain that you are a safe customer and appear to be a promising one, you eventually get all their services at the bank.
Due Diligence in the Microscope
In the modern world, the due diligence is a mandatory check implemented by the Financial Crime Compliance. The entire relevant information on the potential client is gathered and closely examined in an orderly manner with the view of determining whether the onboarding of the client might be linked with any risks. The following are the examples of the factors that the financial institution looks at in the procedure:
- Partners and people who are in any kind of relationship with the firm
- The incorporation of the applicant country The country of incorporation of the applicant country The applicant country
- The risk situation of the business industry to which the company of the candidate belongs
- The presence of the sanctions against him/her, his/her relatives, and business partners
- Beneficiary’s identity
General, reliability screenings are an inherent component of the KYC standards that can differ by market or by country.
The Significance of the Due Diligence in Banking
The due diligence procedures serve different purposes in banking institutions:
- They ward off fraud (e.g. the crimes involving false/stolen identities or personal data)
- They ascertained the identity of the customer
- They adhere to the legal provisions of jurisdictions or markets in which they undertake their operations
Risk-Oriented Approach
It is a method that the banks frequently should follow in line with the international KYC requirements. It implies that the riskier prospects will need to complete a deeper Due Diligence check. The level chosen to perform the analysis relies on risk profile together with the number of relations that the applicant has got with the banking institution.
The following is a list of the risks which are usually avoided through due diligence:
- Sanction violation
- Fraud
- Terrorism financing
- Money laundering
Due Diligence to Every Customer
Due diligence is a continuous practice, which appears to have no limit. Risk analysis along with some periodicity of analysis is also applied to the case of customers who have their bank accounts and financial connections fully functioning. It is a very valuable practice since risk profiles could shift significantly due to the actions and activities of individuals and legal entities.
In the concerted process of ongoing Customer Due Diligence, any transaction by the client is monitored and analyzed by the banking institutions.
Due Diligence, The Positive Side
The following are the steps upon which the banking due diligence procedure is pegged:
- Verifying source of the initial money deposited in an account
- Communication of the usage of the account Understanding how the account is/will be used
- Generation of the anticipated profile of account activity
- Defining organizational structure of ownership of the customer
- Writing the details regarding the beneficial owners of the accounts (with reference to accounts)
- Using Customer Identification Program (CIP) to check the identity of the applicants
Business Operations: The Weight of Due Diligence
The due diligence gets to influence other sides of Anti-Money Laundering (AML) program of the banking institution that are Enhanced Due Diligence, the Suspicious activity reports, and the investigation.
With the data obtained as an outcome of the Customer Due Diligence process you can say, as regulatory compliance-related costs are rising, these data are very important concerning account opening. In case information is unavailable or absent, this can lead to violations of regulations and denial of the opening of an account, which will spoil long-term professional and business relations.
Investigation Plans and Information Notification
The banking organization verifies new and current customers, in a bid to minimize alerts on their profiles as well as recognizing profile activity.
In case the amount of predicted transactions that are revealed in the due diligence at the beginning period is rather high, then one can set the profile already at the outset. The things that appear suspicious or otherwise strange just at the glance need not give any warnings. But then again, it is not sufficient that one be aware of the amount of transactions. The banks have options of establishing maximum and minimum limits of transactions and hence it is necessary to know the anticipated values commercial banks may want to establish a viable range.
The Denial of an Account in EU Banks: Money Laundering Blacklist
The European Commission is known to keep all the blacklisted countries which have poor money laundering and terrorism financing systems. In case a customer has originated in the country that is blacklisted, the Commission suggests that the banking institutions should consider their information more carefully. Assessment of each country is carried out with respect to the measures of control, to legal and legal framework and the magnitude of the threat to avert money laundering risks.
What happens when you belong to a black listed nation? Well, here is the escape: you can utilize alternative tax jurisdiction or a foreign residence permit in a bid to make opening an account with an EU bank less difficult.
Do you need assistance in opening a bank account in another country or rather more details to go through all the checks? Use the live chat or read more by clicking the above link. You could book also a free session to receive professional advice. Welcome to a smooth banking!