In an effort to combat tax evasion and more generally speaking, money laundering, Hong Kong banks will soon have to comply with new standards (OECD’s Common Reporting Standard (CRS)). The CRS requires them to collect a wide range of information in respect of each of their clients and to provide this information to the government. This information will then be automatically shared with other governments around the world. As a result, local banks have introduced new stricter policies to cope with the costs of handling client information.
In anticipation of the implementation of these new standards, HSBC has already enforced new policies in respect of the opening and handling of corporate bank accounts, and other banks, if they have not already done so, will most definitely follow suit.
For you to better understand what to expect, below is a list of the main changes according to the type of applicant from HSBC’s new firmer policy on corporate bank account opening which came into effect on the 21st March 2016.
- Hong Kong Residents Entrepreneurs (individuals or through a company)
If you are only Hong Kong residents shareholders and directors, you should not have any problems opening an account. But of course, you will still be required to provide the necessary information requested by the bank.
- Subsidiaries of foreign companies
If you are an existing corporate HSBC client (i.e. in your country of origin) setting up a subsidiary in Hong Kong or if your business is of a decent size and you can provide a tax report of a foreign holding company, you should have no problems opening an account. Without a tax report, however, it may be more difficult unless you have a reasonable explanation for not being able to produce one. Small businesses, on the other hand, may have more requirements to fulfill than previously.
- Individual foreigners
If your business activity will be in Hong Kong, the individual shareholder of your company has another established company abroad; you can provide a tax report, and ideally, you are an existing HSBC client in your country of origin; your case will likely be considered. Cases where the company does trading and earns a minimum of USD 15 million turnover, will also be considered.
All other cases may be refused consideration, and there is even the possibility that they may not be accepted for an appointment.
Moreover, in order to maintain the information required under the new standards, banks will require regular updates of companies holding an account with them. If a company fails to meet these requirements, their account may be closed.
Plus, because of the new requirements of reporting customer information, higher costs in terms of treatment are implied. As such the price of bank account opening for most banks will likely rise. It is always advisable to confirm prices and procedures with your chosen bank before attempting to make an appointment.
At the heart of all this, banks simply want to know that you are operating a real business that is big enough to make it worth the cost of maintaining your account. Companies set up from scratch by individual foreign shareholders with no proven business records may appear more suspicious to banks as such cases can indicate money laundering and/or limited incomes. It is, therefore, advisable to prepare yourself well before your appointment. We have set out in another article the main documents that are usually required, but in light of the new standards you should also prepare the following information:
- Business Nature – You will need to explain in detail the nature of your business (sector and activity e.g. trading medical device between China and the US)
- Estimated Annual Turnover
- Overseas Connections – Is your company related to any listed companies overseas or in Mainland China? If so, you should provide any information you can relating to the same.
In the end, as long as you can explain well, with supporting documents why your company is being set up the way it is and can show that your business is consistent and promising, opening a corporate bank account may take time but your application should, in the end, be successful.
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