Setting up a bank account in the UK if you’re a director of an overseas business can be a tricky and confusing process. That’s one of the reasons why Paul Beare has always prioritised its banking expertise. The team has several former senior bankers now helping clients navigate the various areas of bank products, services and rules.
Monica Tong heads up banking services at Paul Beare, leading a team of company specialists who work with clients to ensure their business operations are efficient and compliant. She has lived and worked across Australia, New Zealand, China, the US and the UK, which are the main regions where she now services clients.
Her understanding of how banking works and differs in each of these regions, so speaking their “banking language” is important and crucial to the client’s success in their expansion and operation. Having guided many clients through the process, she gives us the low down on what companies can do to ensure they get the application right first time.
Q: So what’s the easiest way to set up a bank account in the UK if you’re a foreign director?
MT: There is no such thing as an “easy” UK bank account for foreign directors—only more accommodating ones. Each banking provider has their own policies and risk appetite.
That’s because the UK’s main financial regulators the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) both have regulations that require all financial service providers to comply with AML, KYC, and sanctions rules.
Q: Why are there limits on foreign directors, and what are banks cautious about?
MT: There are a few reasons banks are cautious. The first is that identity verification is harder given the different countries and systems involved. Then, the important source-of-funds checks are more complex and can take more time.
Then, in case there are any issues, enforcement across borders is limited. And finally, banks maintain their view that it is harder to understand how the UK business runs if the new foreign applicant has no ‘troops on the ground’.
Q: Given all that, what are the most common roadblocks that Foreign Directors face when opening a bank account?
MT: The first one is where there is no UK Resident Director. We’re finding that many traditional banks quietly deprioritise applications without one.
However, there are ways to mitigate that. For instance, if they have a sales team here and the products are supplied by its parent company or established supply chain or business model, this could work.
Then, the bank may have an issue if the company has virtual offices only. We’ve found that companies that are using a mass-market virtual address can trigger enhanced due diligence or decline of application. Again, there are things you can do: a home office and 3rd party warehouse may be eligible if the business model allows it.
The third common roadblock is where the company has a complex ownership structure. We find that red flags include:
- Multiple layers of holding companies
- Offshore jurisdictions and tax havens
- Trusts or nominee shareholders
As a result – and to satisfy the bank – as advisers and accountants, we need to be able to clearly identify who the controlling persons and beneficiaries are down to the individuals.
Lastly, directors need to know where they stand when it comes to nationality vs residency, which is an issue that does cause confusion. In essence, some applicants assume nationality is the problem when in fact the real issues to be addressed are where they live, and/or the jurisdiction where funds originate
Q: What about Industry Risk? Does that still make a difference to banks?
MT: Yes, it does. There’s no doubt that when it comes to banking applications, foreign directors in higher-risk sectors face extra scrutiny. Those sectors include (but aren’t limited to)
- Crypto / Web3
- FX payments to unrelated jurisdictions or parties
- Import-export without clear trace of supply chain
- Gambling, adult, CBD, etc.
Q: Finally, what would your advice be to foreign directors beginning the journey to setting up banking services in the UK?
MT: There are a few things.
First, make sure your documentation is all in order at the outset. Banks will expect you to have the right information in the right format to hand when they ask for it, so take time to get all of that together before you start.
Then, think about how best to present your business, and whether you can simplify and clarify anything that might catch the bank’s attention. Are there directors listed that no longer work at the company? Are there old dormant accounts or arrangements that could be closed and tidied up? Doing some housecleaning can save time and trouble down the road.
Finally, find a good accountant who can help you navigate the sometimes confusing UK banking system. Many firms will offer this service, but they may not actually have staff who have direct experience of working in banking. Knowing how the system works, and what the potential unknowns and obstacles might be, can make a huge difference to completing a successful application.
At Paul Beare, we’ve built the team around a core of ex-banking specialists who know the system back to front and as such, we can offer a full range of accounting services, from tax and payroll to accounting and banking.
