- 1 Why Is It so Difficult to Open a Bank Account in Hong Kong?
- 2 Make the Most Out of Your Hong Kong Business Account.
- 3 How to Overcome Obstacles with Hong Kong Banks.
- 4 The Process for Opening a Hong Kong Bank Account.
- 5 How we can help.
Opening a bank account in a new country is never an easy task. Even in countries like Hong Kong that are known for attracting international business. While Hong Kong boasts one of the strongest and freest economies in the world, it also enforces strict standards and customer due diligence practices. While these practices ensure the highest caliber businesses operate in Hong Kong, the rigorous application process has made the country notorious for being one of the most difficult jurisdictions to open a bank account.
However, as an international business hub and key doorway to the rest of Asia, Hong Kong continues to attract an abundance of foreign investors hoping to establish a business presence in the region. Opening up a business bank account is one of the first and most vital steps. So, we’ve prepared an overview of the process and requirements to simplify what can often be a complex and confusing task.
Why Is It so Difficult to Open a Bank Account in Hong Kong?
All banks aim to mitigate their own risk. Banks in Hong Kong are no different. While Hong Kong was once a haven for business banking with no limits on the transfer of international funds and one of the easiest places to open a business account, all major banks now enforce strict Know Your Customer (KYC) rules. In an effort to crack down on illegal activity, all new customers are rigorously screened to confirm their business operations meet strict anti-money laundering and counter financing of terrorism regulations.
With an industry-wide concern over compliance, banks have often been criticized for being more focused on keeping themselves safe rather than encouraging new businesses to open in Hong Kong. After receiving numerous complaints about the process, the Hong Kong Monetary Authority conducted a survey in 2016 to determine the pain points for potential investors and addressing these concerns with the financial institutions. Eventually, the major banks reviewed and updated their standards to be slightly more welcoming, while still being vigilant for fraud. However, there are still some common struggles for businesses opening corporate accounts in Hong Kong and we explore the main reasons below.
Difficulty in satisfying bank requirements, especially for small businesses and startups.
A common grievance for new investors and businesses is the difficulty in opening a bank account for startups and small and medium-sized enterprises (SMEs). Startups and SME’s face struggles as they were held to the same standards as large, established institutions. This is likely a commercial decision from banks as the strict due diligence and onboarding process for every new customer can be a time consuming and expensive exercise. Banks are often reluctant to begin this process for small businesses or startups where they are unsure of the likelihood of the business’s success and profitability.
The need to physically be in Hong Kong.
Another pain point is that most banks do not offer online services to open an account, thus requiring that all relevant parties be physically present in Hong Kong to submit the application.
Lack of guidance and transparency.
A lack of customer interface follows a lack of transparency during the application process. Little information is made available to customers, so there is a general misunderstanding of the process and the documents required for certain banks. To add to the frustration, once your application is submitted, the banks can often take months with no communication, or simply reject applicants without explaining the reasons why they were not accepted.
To provide an example, a highly reputable merchant bank attempted to open an account with internationally renowned HSBC in Hong Kong. Once the merchant bank completed the paperwork, HSBC didn’t have any communication with them for over six months. HSBC didn’t offer any information regarding the status of their application or whether they required further documentation. Meanwhile, the merchant bank was left waiting to open their business in Hong Kong.
These kinds of experiences that can make opening a corporate bank account in Hong Kong a frustrating and time-consuming endeavor.
Make the Most Out of Your Hong Kong Business Account.
Although the process of opening a Hong Kong corporate bank account might seem like a daunting and time-consuming task, it’s certainly worth the trouble.
Hong Kong remains one of the world’s most vibrant and dynamic economies, guided by principles of free trade, free markets, and free capital movement. There are no foreign exchange controls and no restrictions on the inflow or outflow of capital.
Hong Kong banks also offer convenient ways to hold and collect funds in foreign currencies, providing you a way to moderate the volatility of your home currency. Approved to handle RMB settlements for cross-border trading with Mainland China, a Hong Kong bank account can make it easier for your business to facilitate trade with Chinese customers and suppliers. You will also benefit from no tax on interest earned in a Hong Kong bank account.
Home to many major international banks such as HSBC, Hang Seng Bank, Citibank, Standard Chartered Bank. Hong Kong banks enforce a very high standard of confidentiality. While the strict due diligence requirements make the process of opening an account tiresome in the beginning, they also ensure that banking in Hong Kong is safe and reputable.
How to Overcome Obstacles with Hong Kong Banks.
If you are a small business, startup or foreign investor, don’t be deterred. With proper guidance, you can have a corporate account in Hong Kong, opening the door to a wealth of opportunities in the region.
Often the easiest and most painless way to open a corporate bank account in Hong Kong is to hire an experienced legal professional to navigate the regulatory requirements. Not only are they well-versed in the legal terms and paperwork, but they have established, trusted connections with a variety of Hong Kong banks.
In the above example, after that same merchant bank struggled to open an account, they turned to Origin X for assistance. Once Origin X intervened, HSBC confirmed and opened the account in just one week.
To ensure the best chance for success by any foreign investor, the best thing an applicant can do is to be prepared, understand the requirements and familiarize yourself with the process. To assist you, we’ve prepared a guide to help you open a bank account in Hong Kong.
The Process for Opening a Hong Kong Bank Account.
Opening a business bank account in Hong Kong can be a relatively straightforward procedure – so long as you have all the required documents. The whole process roughly takes two to three weeks and all directors, major shareholders, and nominees will need to visit the Hong Kong bank or its overseas branch in person. The difficulty comes as each bank is different and each has different needs and requirements. To best prepare yourself, you should have the following documents ready and available:
- Bank account opening form accompanied by an extract of the board resolution approving the opening of a corporate bank account.
- A certified copy of the Official Business Registration Certificate issued by the Inland Revenue Department
- A certified copy of the Certificate of Incorporation and Articles of Association of the company issued by the Companies Registry.
- A certified copy of the organization chart, showing the percentage of shareholding and ultimate beneficiaries.
- A Certificate of Good Standing and a Certificate of Incumbency
- Details of beneficial owners and a certified copy of trust deeds where the ultimate beneficiaries are trusts.
Proof of Identity Documents
- Valid Hong Kong identity card or passport along with proof of residence such as a utility bill.
- Valid visa.
Evidence of Business Activity Documents
- Banking history or financial statements
- Business proof business plan
Tip – How to make sure your business plan is business proof’.
While processing your application, banks will need to give you a risk assessment score to enable them to predict the future activity of your account. By making your business plan ‘business proof’ your aim is to reduce your recognized risk in the eyes of the bank.
Banks will want to understand the nature of your business and see your company has good standing, stable cash flow, audited bank accounts, and be actively doing business. To meet these requirements, you should be prepared to provide the following information:
This is your business story. This is your chance to highlight the core of your business and show your understanding of your business and the industry it operates in.
When drafting your business plan, remember to cater to your audience – the bank. The bank primarily wants to understand the nature of your business, how you will make money and the importance of needing a bank account in Hong Kong. It is best to keep your explanations simple and concise as the bank is likely not going to have high tech knowledge of your particular business area.
To maximize your chances of success, you will need to address these important questions:
- What is your expected annual turnover?
- What are your expected monthly inward remittances?
- What are your expected monthly outward remittances?
- Which currencies you will need?
- How you will make and receive payments (cheque, cash, telegraphic transfer)?
- What countries are your customers located in and do they come from areas deemed high risk?
You will need documentary proof to support your business plan. This will come first and foremost from your rental agreements (stamped lease or virtual office agreement). You will also need supplementary documents such as your mobile phone contracts, consultancy, and employment agreements, insurance policies and supplier invoices. The bank will want to do some due diligence on the documents so you should provide names, websites and contact details of your vendors and suppliers where possible.
It is also important to help the banks visualize your business. Provide them with your website, logo, business cards, invoice templates and templates of any other documents you need to carry out your business. If you are yet to set up a website or logo, you should strongly consider, at the very least putting up a landing page. Remember you can always change the landing page and logo down the line.
How we can help.
At Origin X Legal, we are powered by a team of international corporate banking lawyers and compliance specialists, dedicated to helping startups and established enterprises navigate the compliance-laden back office of the banking world.
We have long-standing relationships with a multitude of Hong Kong banks and know all the ins and outs, to best help you determine which bank will meet your needs.
While most service companies charge hefty fees for bank introductions, with no assistance in account openings. We pride ourselves on being a complete service, giving you the maximum chance of success and with minimal fuss. For a competitive fee, our service includes, around the clock consultation on due diligence requirements, compilation and preparation of documents for review, direct assistance in completing account application forms, submission of the application to the bank and assistance in follow-up negotiations with the bank.
If you’d like to know more, contact us on [email protected] or call +852 3905 3618 and let us help you with expanding into Asia.