This article is kindly contributed by Simon Drew, the senior partner of World-Wide Solutions. World-wide Solutions specialises in pre- banking client due diligence advice to both individuals and corporations. Simon’s contact details can be found at the end of this article.
How easy is it to open a bank account in the UK?
Since the beginning of this century, international and national bodies have increased legislation in the banking sector, as a response to criminal activity, terrorism and the failure of a number of banks in the global financial crisis.
In the UK, a new piece of legislation called the Financial Services (Banking Reform) Act 2013 is due to come into effect in 2015. Amongst other things, this will create new criminal offences for reckless misconduct in the management of a bank, which will be punishable by up to seven years in prison and/or an unlimited fines. In addition to this new statute, bankers will have to demonstrate that they have complied with a range of existing regulations including:
- The Money Laundering Regulations 2007
- The Proceeds of Crime Act 2008
- Terrorism Act 2001 and counter Terrorism Act 2008
- The Immigration Act 2014
- H M Treasury Sanctions
- Financial Conduct Authority rules
Each bank manager has a protocol to follow when opening new bank accounts. These are called “know your client” (KYC) and “client due diligence” procedures.
It is increasingly important when opening accounts, to ensure the bank manager is made to feel comfortable with you, the person or organisation opening the account, by providing them with all the relevant information to satisfy them at the earliest opportunity. In my experience, it is advisable to prepare for any meeting and provide as much information as possible, in order to make their job easy, and to allow them to work with you. It is safer and easier for them to say no, rather than yes.
What is the process and information required?
1. It is always advantageous to meet directly with the bank. However, you need to be prepared and have all the information to hand. This first meeting will allow the bank to “assess the risk” by delving into:
- your background as the potential customer
- the purpose and nature of the intended account (business / personal etc)
2. You will need to provide proof of identity, full name, address and date of birth –
- Valid Passport, Photo card ID, Copy Bank Statement.
3. You will need to provide information as to the source of the funds being deposited and estimated yearly turnover,
4. An asset and liability statement, if available, will enhance the process. This should be verified by an accountant or other banking official.
5. A full “curriculum vitae” (CV) for any individual involved in the account is useful.
Other information required for business accounts
1. Name and address of any corporate entity (e.g. company)
2. Date of incorporation and certificate of incorporation or equivalent document
3. Background to the structure and nature of the business (business plan or executive summary)
How long will it take to open the account?
This will depend on the amount of funds to be held in the account, and the scale and frequency of ongoing transactions.
The general rule is the higher the amount of cash movement, the more due diligence the banks will want to carry out. If all the information is provided at the initial meeting, and in the format the bank requires, the whole process should take approximately two weeks. If the right information is not provided at the outset, the process can take considerably longer
What if the information I have provided changes?
If the information you provide the bank, at the point of opening an account, changes, perhaps due to an upturn in business, you should inform your bank manager immediately. Keep him happy and comfortable doing business with you. In these days of heavy regulation, it is very helpful to develop a relationship with your bank manager and ensure you keep him informed of any changes of circumstances, which can impact upon your banking pattern.
What happens if I do not inform the bank manager of changes?
Each account is reviewed annually, against the information received at the outset. If the trading remains in line with expectations, generally the review is light. However, if changes are noted without prior explanation, the bank will question this and may block the account. This may happen if, for example, you advise the bank at the outset to expect a turnover of £500,000 per year, and that suddenly increases to £1million, without warning.
There are also instances when an account or individual may be “flagged” by the bank. We have seen this happen when large sums of money are attempted to be deposited within a bank account from an unknown source, and no prior notification to the bank has been given.
This results in an immediate “cause for concern” flag, which could prevent the individual or organisation from opening any further accounts and freeze the funds until the matter is resolved. This information is also shared with other financial organisations, which can be embarrassing and can take several months, or even years to resolve.
This is not a path to go down. To avoid this, be clear at the start what your account will be used for and ensure it stays within those parameters. Once you have an established account with the bank, you will be able to expand your facilities in line with the growth of your business or your personal wealth.
The author of this article, Simon Drew, can be contacted by email at firstname.lastname@example.org.