Why is a foreign bank interested in the source of your funds?

At the end of the tenth years, many negative events took place in the banking services market of the CIS countries, which made us think about the need to have a backup account in a foreign bank. Moreover, the legislation of most countries allows this to be done without special permissions.


Opening an account in a foreign bank with a private individual or company, in our time, is not easy, but possible. Moreover, in addition to foreign exchange savings, an account with a foreign bank allows you to start your own foreign credit history. This will be a good start for your international business, obtaining a diploma of a foreign university or a second citizenship, in case any problems arise at home.

Why is it not so easy today to open an account in a foreign bank for a resident of one of the CIS countries?

Because many foreign banks, under pressure from international organizations such as the FATF and the OECD, are introducing more stringent procedures for their compliance services. These services are mainly engaged in verifying the compliance of their customers and their funds with all the requirements of international banking legislation (KYC policy - abbr. From English, meaning know your client).

All banking institutions, without exception, are afraid to get on the so-called black lists, which threatens an investigation by the licensing authority and may lead to revocation of the license. For example, as it happened with the second largest bank in Latvia - ABLV Bank and led to its complete liquidation in 2019.

The main thing that foreign banks get from their customers is the understanding that you do not fall under any of the signs of the following prohibited activities:

And just imagine, you are a large foreign bank with a long-standing reputation and a multi-thousand customer base. For example, in Switzerland and you receive a new client from Russia, which is under US sanctions. Of course, the simplest solution is to initially abandon any such clients so as not to spend time and money on a separate study of the case of each person applying for opening a foreign account. But, fortunately, not all Swiss banks refuse to open accounts for our citizens and companies. And here it is not even a matter of who you are or what amounts you are willing to deposit into a foreign account.

The main thing is how you will formulate the answers and which ones will provide evidence in favor of your words.

That is why it is very important to understand banking risks when opening an account to a non-resident and be prepared to answer the following questions in questionnaires from compliance service specialists:

The lists and wordings of such questions may differ slightly in different banks and countries, but the essence is the same. You need to understand that in these matters there is nothing personal or offensive to you. It’s just that at present the rules of conducting international banking have become just such. Therefore, treat this as a change in the weather. Rain is unpleasant. But what to do ... we take an umbrella and run about our business. Also about here.

How should foreign banks answer questions about the sources of your funds

In the questionnaires, all the above questions should be answered only within the framework of those supporting documents that you have available.

The answers should be simple and not ambiguous. No need to give reasons for other questions in the answers.

And once again, everything should be confirmed in the relevant documents.

That is why the more important question is which documents you need to have as proof of the source of origin of your funds.

So, what documents may be required confirming the sources of origin of your funds

  1. Your tax returns certified by your tax office upon receipt. Somewhere you will need to make a translation and notarize these papers. Some foreign banks have their own support in Russian and there, it may be quite simple to send a well-scanned copy of the accepted declaration. This document is especially relevant for entrepreneurs and self-employed freelancers. Otherwise, you may have problems. Especially if you receive payment in an envelope or only in cash.
  2. An extract from your current bank account for a period of at least 6 last months. It would be better of course in the last few years. It is advisable that there are no large deposits and withdrawals in cash. Otherwise, there may be suspicion from a foreign bank.
  3. Labor contracts, service contracts. All that confirms that you received funds on them. Together with your tax return - this will be an irrefutably proven source of origin of your funds. If such contracts are accompanied by agreements on non-disclosure of the terms of such documents, it is possible that it will be sufficient to submit a certificate from the accounting department of this company in accordance with Form 2 of personal income tax.
  4. The contract of sale of real estate or property for which you received amounts of more than 100 Euro / USD / GBP.
  5. The contract of gift or inheritance of real estate, property, cash.
  6. Contracts for obtaining grants for research, obtaining a foreign education and other documents, from which it follows that you will receive funds for the main purposes of your stay abroad.

It is not necessary that all these documents be required. It all depends on the questions. As indicated above, you must have the maximum number of supporting documents in order to respond briefly, in substance and with the maximum correspondence of the answer to your documentary confirmation.

Some foreign banks may require translation and notarization of certain documents.
A very important note : in the questionnaire, when submitting an application for opening a foreign account, it is advisable not to indicate personal savings as your funds, because this is a suspicious marker for banking compliance and you will immediately be asked to provide additional, explanatory information. Do not tease geese.

How can I prepare in advance for opening an account with a foreign bank?

Of course, a lot depends on the purpose for which you open an account with a foreign bank. If you are a student who will study under a grant at a foreign university, then you will need to provide only your passport and a document stating that you have been granted an educational grant.

If you are an investor, businessman, rare specialist, IT entrepreneur, freelancer-programmer, copywriter or engineer who want to receive / provide investments, get a job, start a startup, place honestly earned funds for storage in foreign financial instruments or just travel around the world, and at the same time submit documents for a second citizenship, then you need to prepare in advance for opening a foreign account.

To do this, try, for some time, to do simple but constant things, namely:

  1. Collect and store documents confirming your receipt of funds for the sale of real estate and property.
  2. Submit tax returns.
  3. To conclude and not lose, over time, labor contracts, contracts, agreements.
  4. Keep documents on ownership of securities. For example, an agreement to establish one or an enterprise where you have a property share, or an agreement on the ownership of a brokerage / investment account, etc.
  5. If possible, keep all cash transactions to a minimum.
  6. Set up a separate bank account where only non-cash banking operations will be conducted.
  7. Once a year, order from the bank a confirmed, annual statement of account.
  8. Order an extract from your credit history at the Credit History Bureau, unless of course you have it and is positive. Try not to have past due loans. This can help a foreign bank in drawing up your profile and positively resolving the issue of opening an account for you. At least, the intention to provide such an extract will be perceived as a positive sign on your part.

If you follow the order in legal documents and financial matters with your money and assets, then you should not have problems with opening foreign accounts. You just need to think about it and get a little prepared. And everything will work out. And there are benefits from owning foreign accounts, and they are very significant, both for a comfortable life and for the development of your business and personal condition.

Source: https://habr.com/ru/post/463815/

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