17 Dec The Five Stages of Rejection in International Bank Account Opening

Following the credit crunch in general and the banking crisis in a large number of jurisdictions (especially Cyprus),  the banking scene has changed dramatically. A common discussion in social gatherings is that international banking as we knew it is now dead and that banks don’t seem to want our business anymore.

But why is that? What is the mechanism that drives this change and what are the underlying reasons for these practices.

Trying to untangle this knot, www.world.tax, a worldwide taxation information consolidating service and up-to-date news aggregator, has published two very interesting articles. The first one tries to uncover the reasons behind these difficulties. The second one we present verbatim below:

The Five Stages of Rejection
International / Offshore bank account opening

When you land a rejection for account opening from a bank, does it mean the bank does not want to work with you or have you just never made it to be fully on-boarded? Understanding the details of the process a bank follows when it considers your application for a bank account is key to success. Or, at least if you are rejected, you know you have been rejected for some reason and not because you were, say, dealing with the wrong person.

In this article I consider the possible rejection stages during the account opening process. Understanding these stages gives invaluable information on how these can be overcome and an account landed.

Stage 1 – Your Relationship Manager

When approaching the bank, usually the first point of contact is a Relationship Manager (also known as the Banker). There are just too many Relationship Managers working at different types of banks (investment, private, retail, etc), looking after different lines of business (private, financial institutions, corporates, etc), size of clients and countries. Talking to the right Relationship Manager in the right part of the bank is the fundamental first step.

When talking to the right individual there is alignment of interest, you want an account and they want revenues. This is, however, not enough. You need to be transparent when presenting the case and make the Relationship Manager feel comfortable with any risks. Make it easy for them to estimate the revenue potential. At the end of the day bankers, like the rest of us, work towards remuneration maximisation.

Solution – Talk to the right person, working in the right bank and the correct department. Make sure you show them the money so they can translate it into bonus!

Stage 2 – The Compliance Officer

Although you never get to speak to them directly, a key individual in the process is the compliance officer. They need to feel comfortable with the ultimate beneficial owner, type of business, transactions (nature, countries of dealings), cross-border policies and source of wealth. Source of wealth is a big issue these days and has taken on ever greater importance. Banks are looking at both current and historical source of wealth and they look for evidence to support the wealth creation over the years.

Solution – It is vital to address each and every show-stopper before this results in a No. Be transparent and talk first about the possible risks and offer reasonable risk mitigation. At the end of the day, nobody knows your case better than you do. Don’t let them feel you are hiding by not telling them that you are a Politically Exposed Person (PEP) or you had a court case 6 years back. Tell them this first and explain why they should not worry about it today. Empower your Relationship Manager to have those difficult discussions with the Compliance Officer on your behalf.

Stage 3 – The Head of the Business

Hopefully the case that the Relationship Manager put together and the Compliance Officer signed, makes sense for the business, presents a good risk-reward balance and by signing it, the Head of the Business does not endanger their position.

Solution – Hopefully your hard work on Stage 1 and Stage 2 would result in obtaining the signature of the Head of the Business.

Stage 4 – Committees

High risk accounts will go through some committees. Here you need to empower your Relationship Manager to face extended due diligence questions. Make sure you provide them with supporting documents and assist them to address any new risks identified during the committee meeting. Remember, when addressing a risk, think like a bank would do.

Solution – Following the committee meeting, numerous questions pop-up. A lot of them can be surprising and make you wonder how on earth they have found about certain things. Be prepared to address all new risks identified and be patient, the due diligence process undertaken can vary across banks and a good Relationship Manager should manage your expectations in this regard. Help your Relationship Manager to help you get an account.

Stage 5 – The On-boarding Process

This is the stage at which you can get an account number. If you don’t manage to get an account and you are rejected, at least you know that you have gone through all stages.

Solution – If having gone through the full on-boarding process you have received a rejection, it is time to speak to the next bank. Remember, there is a bank out there for each and every client.

Understanding the process a bank follows for getting you an account gives you invaluable intelligence on how to approach the application process. Employing the right consultants in this process will do wonders for you.

There are just too many reasons why you should consider employing consultants to assist you with bank account opening. Let’s look into some of them:

• As mentioned above, they have full understanding of the process and can address show-stoppers before they appear.
• They have access to the right contacts. Going through [email protected] usually results in nothing.
• The matter is often presentational. Two people trying to open the same account at the same bank can have different outcome.
• You can leverage their relationship with the bank. Alone you might be a small client. Through a consultant you are part of a larger revenue potential (made up of many clients).
• They can explicitly show the carrot to the bank, by helping them quantify how much they will make from the account. By telling the bank the number of inward and outward payments that are expected to go through the account, you show them the dollars. Same goes for FX conversion needs, investment requirements, large cash deposits, credit needs, etc.