Opening a bank account for a non-UK owned entity can be a frustrating and time-consuming process. However, people in the UK will expect you to have one, as transfers to overseas banks cost on average £26 a time.

You also need a UK account to pay the pension costs of staff, to become VAT registered or to sponsor employees to come into the UK to work. It also gives you credibility.

Why has the process become more complex in recent years?

The process did used to be easier, however, in the last 35 years the landscape has changed dramatically. In 1989 the Financial Action Task Force was formed by the G7 with the aim of improving controls and systems to detect Money Laundering across the globe. 

After 9/11, the objective of combatting the financing of terrorism was added and many governments toughened their sanction regimes. In the UK we have seen 5 EU Anti-Money Laundering (AML) directives introduced into UK law over the period, each time looking to improve their effectiveness.

If an overseas business is not asking for credit, what’s the risk to the bank in setting up an account for a UK subsidiary?

Penalties for noncompliance in AML can be both civil and criminal, including imprisonment. Fines can run into billions, especially in cross-border banking cases including Goldman Sachs $5.4B, HSBC USA $1.256B and Credit Suisse $1.8B.

Subsquently, neither the banks nor their employees have an appetite for getting it wrong. So to avoid penalties, banks need to know:

• who the owners and controllers of the business are
• where their funds come from and how they were accumulated
• what the business does, and
• who its counterparties are in terms of industries and countries.

What steps can an overseas business expect to go through?

Step 1 Be prepared to prove your own ownership structure.

The bank needs to be able to prove the structure up to the Ultimate Beneficial Owners (UBOs). Proving the structure can sometimes be done through official registers, but often structures are not in the public domain. This means the bank needs to collect the governing documents of each entity in the chain as well as proof of ownership, which might be a share register or share certificates.

This is the type of work a lawyer would have to do if an entity were being sold to ensure the buyer obtained a good title. The simpler the structure, the better.

If there are trusts involved, the work multiplies as you must treat the Settlors, Trustees and Beneficiaries as UBOs. If a fund was a significant investor and unregulated, then the bank would need to know how they, in turn, ensure they know their clients’ funds are legitimate and have the requisite policies and procedures in place. The same for family offices.

Step 2 Understand who are the UBOs.

Usually this means a person owning 25%. However, sometimes this can drop to 10% where there are higher risk factors.

Higher risk factors might include being in an industry where sanction evasion is a known risk such as oil and gas trading, or perhaps where there is trade with countries who maintain close trading links with sanctioned countries.

Each bank will have its own policy and view on the risk they feel they can safely manage.

Having established the threshold, each UBO will be asked to complete a form stating their name, address, tax residency and nationality. To verify the information, they will be asked to share a copy passport and a utility bill or bank statement.

If the bank isn’t meeting the UBO in person it will require a professional to verify them on their behalf, usually a lawyer, accountant or notary.

Step 3 Be able to answer where the business’ and UBO’s wealth come from.

Banks recognise this is a sensitive and highly confidential subject. It is common for the UBO to supply this information independently of the management team of the UK subsidiary looking for the bank account, or even of any of the corporate entities they exercise ownership through. A bank should not share this information with its direct client.

Understanding the Source of Wealth means gathering an idea of where professionally someone started to where they are now, capturing significant milestones in between.

For example, from graduating to their first job, to starting a business with an amount of capital, then growing it organically, then maybe selling it for £1m and starting another. It might be that they received an inheritance or outside investors’ capital. In all cases, it should be plausible. Sometimes the UBO might be required to verify their wealth by having it verified by their accountant or by providing tax returns.

Step 4 Expect to share plans, details of key account persons and directors.

This is the nitty-gritty of the operation and so be prepared to share with the bank:

• Details of expected sales and purchases; the who and where.
• Business plans and financial projections.
• Who will be the signatories on the bank mandate and in turn be able to operate the account. The more people on the mandate the more identification has to be done so often best to start with the necessary few and build if needed.

What advice would you give to overseas businesses when trying to select a bank for their UK subsidiary?

It always helps to look for a bank with an Inward Investment team that specialises in this type of business. If you have a structure which will not be easily verified, then make sure your bank knows how to deal with the type of entities in your business structure.

You also will want to have a bank which has the sensitivity needed when dealing with your UBOs (who may never have been asked about their source of wealth before).

Some of the largest banks have the expertise but might not even consider you unless you have an annual turnover of £15m or more. Do check their criteria. Often, unless you are large, many banks will be hard to talk to as they don’t offer personal service to smaller customers. In this instance they will be dealing with you through centralised call centres, which can be annoying if you have anything but standard requirements.

At Metro Bank, we have been servicing Inward Investment clients for over 10 years and have a dedicated team with decades of international banking experience. The service is personal and tailored to clients’ needs with a dedicated Relationship Manager assigned to project manage your account opening and make the entire process as seamless as possible.

A final recommendation

Given the level of information banks need to set up a UK bank account for a non-UK owned entity, businesses should allow more time in their plans when looking to establish a UK subsidiary. The earlier you can start the process, and the more prepared you are to satisfy the information requirements banks have, the more likely you’ll achieve your plans.

A big thank you to Abi Bowden, Director of Metro Bank Guildford for taking the time to answer our questions.

Specific advice should be obtained before taking action, or refraining from taking action, on any of the subjects covered above.  If you would like advice or further information, please speak to your usual Shipleys contact.

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