A Canadian company recently came to the Netherlands with some help. It had received the red-carpet treatment available to foreign investors and was introduced to a major Dutch bank.
The bank was willing to consider opening an account.
The price quoted was €5,000.
Not for the account, but for the client-acceptance process.
We have heard the same figure from other foreign companies.
This sounds extraordinary until you look around Europe. Swedbank in Estonia charges certain foreign-owned companies €300 for enhanced due diligence before it decides whether to open an account. The money is not returned if the answer is no. SEB charges €500 to handle the application of an EEA company falling into its non-resident category, again without a refund if the account is refused.
Banking has acquired an interesting new product.
The application.
The real issue is not simply the cost of opening a bank account. The same company, organised differently and approaching a bank by another route, can have a very different experience. The outcome often depends on the decisions made earlier in the process.
The route starts before the bank
Opening a bank account often appears near the end of an expansion checklist: Incorporate company. Find address. Appoint director. Hire accountant. Open bank account.
Unfortunately, the bank gets to look at everything that happened before it.
Who owns the company? Who controls it? What will it actually do locally? Why does it need an account here? Who are its customers? Where does the money come from? Who is sitting opposite the bank explaining all this?
Banks themselves are quite explicit about such distinctions. SEB Estonia, for example, asks foreign businesses to demonstrate a connection with Estonia and may request evidence of local customers, suppliers, operations, investments, ownership and source of funds. Its published process can take up to ten banking days once the required material is there.
In reality, the banking process starts well before the application is even submitted.
Choices that looked convenient during incorporation can change the story the bank subsequently has to assess.
A company whose owner is also its director, shows up in person, can explain the business and has local customers and employees presents one kind of picture. A company represented by a professional director who sits on numerous unrelated companies presents another.
The second structure may have been purchased partly to make the company look more established. To a bank, it can instead create another question.
One-stop shops can produce interesting journeys
This is one reason to be careful with the apparently convenient international-expansion package.
Address. Director. Accountant. Bank introduction.
Everything is arranged. Except that these services interact.
A professional or fiduciary director may change how a bank classifies the relationship. Ownership through several entities may require more investigation. An address without much activity may require explanation. The person dealing with the bank may know considerably less about the business than the person who actually owns it.
None of these things necessarily prevent an account from being opened. But adding something because it appears to make the company easier to establish can make the company harder to explain.
Before choosing the structure, it is worth asking whether it works legally and fiscally and what it will look like to the next institution in the chain.
Prepare the story before somebody asks for it
Good preparation is about being able to clearly explain what the company is doing and why.
Why are you entering this country? What will happen there? Who owns the business? Who makes decisions? Who will use the account? What transactions should the bank expect? Where are the contracts, forecasts and supporting documents?
For an ordinary operating company, these questions would normally have ordinary answers.
The difficulty is that companies often approach banking when those answers are scattered across an incorporation agent, headquarters, a tax adviser, an accountant and somebody who vaguely remembers why a particular structure was chosen three months ago.
Then client acceptance begins to resemble archaeology.
You may need a guide more than another provider
International expansion has always required specialists. Lawyers know law. Tax advisers know tax. Accountants know accounts. Banks know banking.
The awkward territory lies between them. A decision that makes sense from a tax and legal perspective may still raise questions with the bank.
This is increasingly important because many institutions no longer sell quite what newcomers think they are buying. A review fee buys a review, not acceptance. An introduction buys an introduction, not an account. Advice may identify risks without telling you which route to take.
The qualifications are often perfectly legitimate. Banks have serious obligations when accepting customers.
But from the company’s perspective, somebody still has to find the route.
That is why local knowledge matters.
Nobody can guarantee that a bank will accept the company. What is useful is to have someone who knows which questions are likely asked by the bank, which structure attract more scrutiny, what should be prepared in advance and when a seemingly convenient shortcut can become a detour.
Sometimes the difference between a difficult bank account and an ordinary one begins several decisions before anyone enters a bank.
The cheapest moment to discover that is usually before you make them.
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