Update on July 5, 2018: Apart from HSBC, we have selected a handful of Hong Kong banks which are favorable to startups to open Hong Kong corporate bank accounts, more details are available on AsiaBC Guaranteed Bank ACcount Opening Service.
Update on July 7, 2016: HSBC Hong Kong has further tightened its commercial account opening requirement, this change makes startups / small businesses / entrepreneur originated from either Hong Kong or overseas extremely hard to open a business bank account there. Details can be found in this post.
Update on June 1, 2016: Our company has launched a guaranteed services regarding Hong Kong bank account opening for businesses. If our clients cannot open their corporate bank account after our arrangement, we refund our service fee (up-to 100%) to the clients. More details of our program: “Refund if no Win!” Hong Kong bank account opening
For entrepreneur with budding business idea, incorporation in Hong Kong is quick and easy. Recently, a lot of expats got caught up in the corporate bank account opening in Hong Kong after company formation.
If you love to source information from internet (everyone do), you’re probably fed by desperate posts and comments about abrupt and rejection by big names in the city e.g. HSBC, Standard Charater Bank.
Those disappointed entrepreneurs concluded somewhat “Hong Kong is no long pro-business”, “Hong Kong hates startups”, “Never come to Hong Kong for banking”, “Other offshore jurisdictions are very welcome expats to do business, except Hong Kong”.
No Pain No Gain
Why does Hong Kong earn its name as international financial hub? Our city is characterized by freedom of doing business, robust regulatory on financial system, effective currency peg of Hong Kong Dollar to US Dollar, and the low and simple tax regime.
Doing a quick online searching, you can find out the success of Hong Kong is highly relying on if we can keep our name as the worldwide financial center: We are one of the freest jurisdiction for business, ranked top as city of pro-business, achieved HKD 295,303 GDP per capita in 2013, and stable Hong Kong Dollar backed by an Exchange Fund’s portfolio valued at HKD3,149 billion, and regulation on financial institutions.
Related Reading: Doing Business – Why Hong Kong?
Whenever our non-Hong Kong clients say that Hong Kong is not a city for business anymore becasue they can’t open the bank account for their local companies or orversea corporations, we would remain them that Hong Kong is a city populating over 7 million people and we live here following the rule of laws. If you want your business to run a long way in this city, you have to follow the local games rule.
Hong Kong is not a jurisdiction whose economy is solely depending on offshore financial services, Hong Kong is a city for doing business. You may find the hardship during your initial stage of Hong Kong business, but you should not retreat. Seek help from experts, tune up your business strategy, and try again.
As bank accounts in Hong Kong banks are generally known as “difficult to open”, it means your customers and suppliers should feel confident to your company if you can successfully open a Hong Kong bank account after all the challenges.
Know-You-Client (KYC) is a Chicken-Egg Problem
No matter which banks in Hong Kong you have approached for account opening, the bankers are responsible to know all the details of your business as well as the owners. It’s because the banks are following the “Know You Client Policy (KYC)” imposed by the regulatory authorities in Hong Kong.
Simply put, the bankers must interview in-person with the business onwers in Hong Kong and the banks need proof from applicants to obtain no-doubt ansnsers the questions as follows:
- What is the nature of the business?
- Where are your suppliers from?
- Where are your customers from?
The whole situation sound ridiculous for startups as it’s the chicken-egg problem: They cannot do business without a Hong Kong business bank account, and they cannot get the Hong Kong business account without doing business
What make the banks’ KYC like a mystery is the the bankers and the banks’ customer services officers never elaborate the reasons why their applications fails. The only feedback received is their applications do not comply with banks KYC.
Banks’ appetite to risk is not clueless
Sometimes, the expats feel angry since they have finished the account opening in their home country by walk-in to a random branch and received clear guidance from the officers there, and then the bank account can be ready in a weeks without any intensive supporting doucments preparation and lengthy explanation. They’re customers, they should be serviced but not questioned from top to bottom.
The reasons behind is the tightening regulatory on bankers against money laundry. As a news roundup, HSBC is currently operating under the Deferred Prosecution Agreement with the US Treasury to raise their standard of administration against financial crimes in addition to FATCA requirement. Hong Kong, as an international financial hub, takes the US movement and thus tightly require the bank in Hong Kong to follow AML enact by HKMA.
Banks incline to reject unknown customers without track record.
Treat KYC as a production line in factory
As you may already know, the operation of banks is somehow similar to a highly modernized factory: Every department in the bank is highly specialized to focus on a few piece of processes. The function of a department is to follow the given instructions from above, process the thing input and pass the finished thing to the following stations.
You understand that the bankers who do the interviewing cannot ensure you that what their officers above will check for in your KYC.
So, are the bankers completely useless? The answer is a NO. Instead, bankers are your only access to successful account opening application, the only changeling is if you can find the right key.
Find a local guide in your journey to bank accounts
Though the bankers you interviewed can neither approve your application nore tell you exactly what the flaws are in your failed application. You should still be nice to them. From what we’ve seen, an expats can go a long way in the city when you can or act like the following:
- be polite, and remain polite
- be smart, think before you talk
- take time and some more time to explain
- friendly and make a little joke (bonus)
In fact, bankers have duties to open bank accounts in order to stay on the bank’s payroll, they hope every client (local or expats) can open the bank account and bring more business to their bank under thier management.
Moreover, Hong Kong has more than 150 banks operating in the town and more new comers are on the way from Mainland China, different banks have their own taste of customer types. Even that a bank can change their taste anytime.
Why not let you bank account application be reviewed the local specialists who are closely in touch with business bank account opening services in those Hong Kong banks?
In the review, the local middleman can screen out the banks that is currently unflavored to you, and arrange the bank opening interview in the most favourable banks. What more, the middleman is experiened to help your preparation of right documents as proof, organization chart, business proposal, etc. and get ready for the questions you will face in the interview.
The middleman will charge the service, but it can lead you from the mist of KYC. If you are not living in Hong Kong, it can maximize your efficiency by arranging bank account opening meeting one after one during your short stay in Hong Kong. Most importantly, you can omit a record of failed application in the bank that is expected to be very difficult to open bank accounts for your case.
Though the result is a bit random, a well-prepared application always means better chance.
Tips for expats startup
Unless you are a business owner of a long-term business with solid proof, startups have to put extra afford in the preparation of business proof to tackle the hard questions – what are your suppliers and customers from – as the only way to pass the KYC system.
After your company is flashy incorporated, you may be advised to get ready of the following:
- A brief and pretty business plans: try to include a lot of charts and financial forecasts in addition to the bulky words.
- Clear business portfolio: a cozy corporate website, smart product brochure, and business name card are helpful.
- For those who have not found real customers yet, test-drive your business with your friends: If you are going to do trading business, use the name of your company to buy in a little stock from suppliers and “sell” to your friends (you can pass the money back to your friend in other way if your friend does not like the stuff.), then you should be given receipt bearing your company name from the suppliers and create invoice and delivery note to your friends. Although all the transaction is recorded in one of your personal account (probably), you have successfully created bank statement and financial record of your business.
Depending on your moral level, you may feel these technique is a bit cheating. However, I’d remind that to nourish a budding business, special attention must be taken. Firstly, you business should get out from the chicken-egg problem of the banks’ KYC as soon as possible, then your business is possible to flower.
All hope is gone
Using local nominee (directors and shareholders) may be your last resort.