Why has the bank closed my account? Or how to evaluate risks in international payments.

Many clients ask us a question: why the banker has closed my account? Or can tell the story of how their business or nationality is not accepted by the banker anymore …

To tell the truth, the answer for this question is not that obvious.

First of all, we would like to say that there are different banks (payment systems), different jurisdictions. Financial institution itself can go through different periods of its development and their attitude to different types of businesses and jurisdictions may change as well. It may be caused by external reasons (like sanctions pressure, changes in banking industry regulations), as well as internal reasons of financial institution itself. Thus while answering the question, why the banker has closed my account, we should count all that reasons as well.

Based on these factors, financial institutions dealing international clients fall into different categories itself:

Bankers which can accept middle range risk;
Bankers which can accept low range risk.

We understand the risk as the sum of factors, which banker is evaluating while making a decision of possibility of work of one client. That may be nationality of the director and shareholder, the possibility to arrange online interview, the business nature, countries which are used for incoming and outgoing payments and so on...

Banks, which can accept higher risk is the topic for another conversation. We shall revert to it later. In most cases, this kind of bankers are in the low-quality jurisdictions and have limits on their usage and features.

Banks, which can accept only low risk we won’t regard here as well, because possible ways of cooperation with them are very limited.

First of all, we should consider middle risk banks. Most of international businesses and nationalities of their beneficiaries pose certain risk to the banker by its nature. And there are this kind of financial institutions in Hong Kong and Europe, although they are not many. And as it’s being spoken above, the policy of the banker may change by itself anytime.

И такие финансовые учреждения есть и в Гонконге, и в Европе, хотя их и не так много. Как говорилось выше, политика самого банка в отношении риска очень точечно может изменится в любой момент.

Our professional team will help to understand which kind of banker is the most suitable for your needs and requirements, we also be pleased to help your account work as long as possible. But of cause, there are many things which depend solely on the client.

Let’s say, what the banker needs: normal clear real business with minimum risks.

What banker doesn’t need: non-clear non-transparent not-real business with high risks.

There are hundreds of people working in the bank who’s task to evaluate risks of their clients, and these people and the system itself have certain algorithms how search for the risks and evaluate them. Base on this knowledge, let’s discuss obvious merits and demerits, which increase and decrease risks for the bank.

Pluses (what lowers the risk for the banker)

Real physical office;
Staff and payments on their social taxes;
Payment on taxes;
Accounting and audit;
All the documents submitted to the banker are real;
Quality of your accounting policy is high, it’s easy notice on the documents you submit to the banker;
The number of transactions match the number of staff;
There’s web-site, and marketing efforts of the company are obvious;
The activity of the company is specialized and they are dealing with partners of the same industry;
Partners of the company are trust-worthy suppliers and clients which also have web-sites, and marketing efforts in the industry;
The activity of the company is transparent and acceptable for the banker;
Background of the key management/owner is relevant with business of the company;

Minuses (what increases the risk for the banker)

The absence of real office;
The absence of staff and payments on their social insurance;
The absence of any payments on taxes;
Fake accounting and shipment docs submitted to the banker;
No accounting and audit;
The absence of accounting policy in the company;
The number of transactions doesn’t match the number of staff;
No web-site, no any marketing efforts;
The company’s business is not specialized and doesn’t match their partner’s major activity;
The work with sanctions or high-risk regions or banks;
Your partners are not clear companies, they don’t have web-sites, any marketing efforts;
Change of business model including trading cycle, product;
Frequent change of company structure (directorship and ownership);

The list may be continued, but we don’t mention really obvious things here, like cashing and one-day transactions and so on…

While during analyses, you find more minuses, the possibility of your account to be closed or simply not opened is high.

Obviously, not all the clients are ready to hire a real office and additional staff and so on…That’s true, but there are many aspects which can be followed with minimum efforts and resources, once you air to build the patter of your work smart and lower the risks for the banker to work with you.

We have enough SMEs, which successfully conduct their businesses, minimizing those risks.

We have big clients, who minimize the risks totally, obtaining great advantages of international accounts usage in their business.

We are pleased when our professional services help people build their business. Contact professionals and you will succeed.