How to Pass Compliance Procedures and Secure Sustainable Work of the Company`s Bank Account?

3rd of September, 2012

This article is meantfor entrepreneurs who are engaged in international business and employa non-resident company as an optimization tool.

Obviously, offshore is the main business tool for tax optimization. The assets circulating in the offshore tax havens in 2016 were estimated at more than 10 trillion dollars.

The reason for the widespread use of offshore companies is simple. Over the years of its existence, this financial instrument has proved to be reliable and highly efficient.

Unfortunately, the popularityof offshore companies in international business disturbs tax authorities of the world leading economies. Therefore, since 2013-2014 an active hunt for offshore funds has begun. The initiators of deoffshorization were large states that had leverage in the international arena. After all, one should bear in mind that the state budget is mainly replenished thanks to tax fees.

The tending deoffshorization has led to the emergence of such authoritative anti-money laundering organizations as:

  • FATF
  • IMoLIN
  • ESRB
  • OECD.

Their task is to identify and eliminateshadow assets. It is not worth hoping that the global community will abandon deoffshorization. The world of tax havens will never be as simple, confidential, and cheap as it was 5 years ago.

As a result, commercial banks took into account the recommendations of the above-mentioned international organizations and have developed methods for identifying, assessing, and preventing risks. This methodology is known as “compliance”. It is important to understand that the bank’s activities must go along with present regulations. Otherwise, any bank risks facing huge financial fines, reputational risks, closure of correspondent accounts, revocation of a banking license, and even criminal liability for bank managers.

Thus, the main task of compliance is to identify potentially risky clients and transactions. Such are the clients who evade taxes, engage in financial intermediation, conduct artificialtransactions or transactions involving corrupt money, use fake beneficiaries, try to “launder” illegal profits, work with companies or individuals under sanctions, etc.

It may seem that these problems concern only large funds or assets of a questionable origin. However, this is not so. In our everyday practice with banks, we see that each client, without exception and concessions, faces banking compliance. It doesn’t matter if you have been working with the bank for 10 years or just planning to open an account. The compliance department will ask you to prove transparency of both the received funds and the planned revenues.

Besides, banks more often ask for information about the actual location of company management, availability of a tax number, and economic relations with the country where a bank account is to be opened or already exists. In European countries, it is next to impossible to open a bank account if the company does not have substance (actual presence) in the country of registration. The statement is true even for the former foremost states in international banking, such as Cyprus and Latvia.


KYC (know your client) is another similar banking procedure aimed at identifying a client and determining its reliability before performing a financial transaction.

Both compliance and KYC may include verification of the legal source of funds.

In case of problems with compliance control and KYC, the bank may initiate an additional audit of the company or individual. Therefore, it is worth treating these procedures with maximum responsibility already at the initial stage and entrusting it to experienced specialists.

Thus, today the fate of a client depends on the compliance department. In case of non-compliance with the rules, the bank has the right to:

  • suspend cooperation without giving reasons;
  • freeze funds in the account;
  • return the money to the sender;
  • close incoming/outgoing payments;
  • raise fees for the account maintenance;
  • block accounts and transfer the case to the public control authorities.

As a result, the client’s contracts are ruined, agreements with partners are broken, penalties are imposed, etc.

Our company has been working in the international tax consulting since 2011. Our employees are specialists in the banking sector, with work experience in different banks. Since we helped a large number of clients in handling bank requests, we have accumulated valuable experience and a large number of practical compliance cases. We well understand the requirements of banks and help clients avoid the situations described above. We also help to resolve the existing difficulties.

By Intelligent Solution Group team