Bank Account Opening in UAE – The Real Challenges
One of the biggest challenges faced by businesses in the UAE is the opening of a bank account. There are a number of severe standards to be fulfilled by an entity before opening a corporate bank account in UAE. In order to ensure the reality of the business i.e. the economic substance, banks make various background verification to authenticate the validity of the information presented.
Major Obstacles in opening a new bank account
1. Physical Office
UAE banks require that a company must have a physical address. A process called Contact Point Verification (CPV) is carried out by the banks through third party agents wherein a third party physically goes and verify the actual presence of the address mentioned in the documents. A field visit report submitted in relation to the CPV helps banks to validate the information.
The Nationality of the key persons of the company has a vital role while applying for a bank account. Citizens from high risk countries, countries falling in the sanction list, politically instable nations generally face difficulties in opening a bank account as well as carrying out bank transfers.
3. Trading with high risk nations:
Similarly if your business primarily has transactions with high risk countries or sanction list countries, it may be challenging to register a bank account. Financial institutions (FIs) are expected to abide by the relevant rules and regulations including the anti-money laundering laws to address the risk of money laundering and terrorism financing. As determined by the National Committee for Combating Money Laundering, Terrorism Financing, and Illegal Organizations, FIs must also enforce all pertinent policies and procedures pertaining to high risk nations, including those pertaining to the implementation of Financial Action Task Force and UN Security Council resolutions (FATF).
Cuba, Myanmar, Iran, North Korea, the Ukraine (Crimea), Sudan, and Syria are among the list of sanctioned nations. Nigeria, Somalia, Ethiopia, Serbia, Yemen, Kenya, Uganda, Saint Kitts and Nevis, Anguilla, Malta, Cyprus, Zimbabwe, China, and Libya are prominent high-risk nations when opening a company bank account in the UAE.
4. Company Website:
The absence of an official company website is also a key concern for banks. A website that gives the basic information about the business, the services/products it offers, the key stakeholders, contact details helps the bank to do a reality check of the business.
5. Closure of an existing bank account:
In case any existing bank account was closed, the new bank to which the application is made investigates the reasons for the closure of the previous account. The banks want to establish whether the previous account closure was a forced closure from the banks end due to the non-compliance by the holder in relations to carrying out transactions as well as adhering to various bank policies.
Non-compliant transactions: Following transactions are considered to be non-compliant based on which banks can take actions on the account holder including rejection of transactions and forced account closure:
- The transactions reflected in the account does not equate to the nature of the business.
- Adhoc transfers of Huge amount of money from and to the account.
- Payments or receipts without supporting documents.
6. Residency Visa:
The majority of the banks in UAE demand a residency visa. Some banks also require the proof of local address in the UAE. Having a residency permit for the owners enhances the credibility of the business and its intention to do the actual business in UAE.
7. Stakeholder Profiles:
When a person applies for a business account, the banks always check if the person has an in-depth understanding of the business he intends to operate. Prior business experience, qualification, previous debt history are all factors considered with this regards.
8. Licensing from uncompetitive free zones:
In case of companies with free zone licenses, banks also consider the reputation of the free zone authority under which the company is registered. Due to the low barrier in entering the market, banks may regard owners of free zone business with more suspicion. Free zones which are highly regulated and whose licenses are expensive always have an easy walk through over the ones that operate on a low profile. The licensing authority that the entity has chosen also shows how genuinely it intends to conduct its business.
Strict and evolving regulatory requirements implemented by the UAE government has its own advantages and disadvantages. While it ensures a safe, secure and stable environment for companies to invest and operate, business owners who are new or not used to the UAE market takes some time to launch and establish the business.
However, as professional service providers, we will assist you to register a bank account hassle free. We do not have tie ups with any banks in the UAE. Based on the client requirement, our assessment of the business and the authority under which it is registered, we support in preparing the required reports and apply with the most feasible bank for your business.