A Jurisdictional Guide to Opening a Foreign Bank Account - IR Global feature

As companies expand their operations into different jurisdictions, they will need to open up a local bank account, but how difficult is it? Nick Kelly talks about what it's like setting up a bank account in the Isle of Man.

Question one – what is the general risk appetite of banks in your jurisdiction and how does that affect setting up a new business bank account?

I would consider the general risk appetite on the Isle of Man to be medium to low when it comes to banking – the banks on the Island are focussed on stable, well known industries that they have considerable experience in. While the e-Gaming industry is prominent on the Island, it is one of the industries that banks are most cautious about mainly because of the volatility. The banks here are equally, if not more, cautious when it comes to businesses working in the crypto space too as it is considered a high risk area for the facilitation of money laundering. We often find that the banks on the Isle of Man don’t want to open accounts for businesses where the accounts won’t be ran by individuals on Island, however, they do make exceptions if the business is of high value.

The good news is that banks are happier dealing with a business that they know which can make procedures a lot easier. We are an approved introducer with a lot of the banks on the Island which means that we generally have an easier path to open an account than a potential client who “walks in”.

A few years ago the local Government created a new initiative called the “Alternative Banking Regime” which was a framework designed to provide new banking opportunities for businesses on the Isle of Man. The ABR’s aim was to attract banking operations to the Island, in particular Private Banks, Foreign Bank branches and Representative Offices. An example of this would be that in 2019 a South African Bank was granted a Class 1 (3) license under the Regime. The hope has been to help businesses in more risky industries and although it’s still early days, it does seem to be working and we have seen the main high street banks become more open to new business

Question two - how accommodating are banks in your jurisdiction for opening a business and personal bank account?

Opening up a bank account can vary from six weeks to six months. All of the banks have similar vetting procedures due to the regulations imposed upon them by the local regulator. There isn’t a lot of variety so if you’re unhappy with one bank’s vetting procedures, you’re likely to be unhappy with them all!

The types of documentation that the banks require are the usual kind such as ID and proof of address for all of the directors, shareholders and account signatories. Unless of course this information is already held by the bank, i.e. Peregrine, as an eligible introducer doesn’t have to provide due diligence for our directors with every application.

It is possible that the high street banks may go further than we feel they need to when requesting certain documentation but it can often be “Head Office” determining what documents are needed to open up a bank account, meaning their policy may not be based on the local legislation. Some of the not-so-traditional and newer banks can make things easier.

One of the common barriers we find is determining the difference between “Source of Funds” and “Source of Wealth”. Due to the regulatory environment, this is key to any bank application and something we must also fully understand as a CSP business.

Question Three - should you join an internationally reputable or established bank rather than a local bank?

In the Isle of Man, our local banks are all backed by international banks. The closest we have to a “local” bank is the Isle of Man Bank which is backed by RBSI.

The vetting procedures are possibly slightly different but the reality is the bigger banks set their policies at Head Office, having said this, we must point out that all of the banks, local or international, have fully staffed local offices to deal with their day to day business.

The banking industry has seen a toughening of regulations since the financial crisis in 2008 but we’re now seeing a more lenient, common sense and risk based approach being applied as more competitors emerge to service markets otherwise abandoned by the bigger high street banks.

As a small self-governing jurisdiction, the Isle of Man Government has the ability to draft appropriate legislation to encourage more entrants in to the sector and, working closely with the private sector, are finding solutions to ensure the future of the Island’s core financial centre remains as bright as ever.

Top Tips to smooth the opening process in your jurisdiction

  • Don’t leave it too late – maximise your time as it isn’t always a quick process;
  • There’s no such thing as providing too much information – the more you can give them the better;
  • Be upfront about your long term intentions.

To read the rest of the publication, click here.

Peregrine Corporate Services Limited is licensed by the Isle of Man Financial Services Authority.

Sign up to our newsletter