Chinedu Ozor participates in the IR Global Guide – A Jurisdictional Guide to Opening a Foreign Bank Account

Chinedu OzorHead Business Advisor, DCSL Corporate Services Limited

Foreward by Andrew Chilvers

For companies and individuals looking to move into new jurisdictions for business opportunities, setting up a bank account is a crucial part of the process. But this is never as straightforward as it seems.

In all countries, banks are obliged to crack down on fraud and any potential financial scullduggery. As a result, they tend to be very risk averse. Regardless of where a business establishes an office in the world, local banks will generally have the newly arrived expatriates jumping through various hoops, pulling their hair out in frustration.

The new arrival will need the relevant paperwork, including personal identity papers, a personal and business address, personal references and other numerous documents. And that’s just the beginning.

Every jurisdiction has its own banks and banking rules, which are often complex and bureaucratic. Consequently, seeking advice from local legal and financial experts before setting up a bank account is imperative if a company is it get the right account for its particular business objectives. This is why it’s so important to use local advisers who are experts in the jurisdiction to provide information about the local banking rules.

What is the general risk appetite of banks in your jurisdiction and how does that affect setting up a new business bank account?

The Central Bank of Nigeria (CBN) is the apex bank in Nigeria and the principal regulator of banks and financial institutions. Nigeria presently has 22 licensed banks and 940 microfinance banks spread across the geographical landscape and servicing differs individual and corporate interests. Only banks and financial institutions registered by the CBN pursuant to the Banks and Other Financial Institutions Act are authorized to provide the platform for opening and the operation of bank accounts in Nigeria. Opening a bank account in Nigeria largely depends on the applicant, nature of business and the use of the bank account. Corporate entities and individuals are allowed to open and operate bank accounts in Nigeria provided they meet the requisite criteria.

A fundamental requirement for opening and operating a bank account for corporate bodies is the pre-requisite to register a business or body corporate. An incorporated company may either be a private company or a public company and may have limited or unlimited liability status. Only Directors and Officers of a Company (including the Company Secretary) are authorised to open and operate a bank account on behalf of the company. Furthermore, fund Investments by offshore parent companies in Nigeria, can only be made through inflow of funds into pre-approved bank accounts.

Apart from incorporated entities, expatriates employed in either the private or public sector may apply for and operate bank accounts. However, to qualify, such expatriates must provide proof of an approved Expatriate Quota (permit which allows companies to employ foreign nationals) and must have been issued a residency and work permit also referred to as Combined Expatriate Residency Permit and Aliens Card (CERPAC). Citizens from any country that is a party to the Economic Community of West African States (ECOWAS) are, however, exempted from this requirement as they are guaranteed free entry, residency and other accompanying rights. But such citizens must apply for and be issued with a Work Permit to qualify for the opening a bank account.

How accommodating are banks in your jurisdiction for opening a business and personal bank account?

Navigating through the legal and regulatory procedure for opening a bank account in Nigeria is straightforward and less cumbersome. Commercial practice and business exigencies determine to a large extent the nature, purpose and utility of bank accounts available in the various financial institutions in Nigeria; one size never fits all. Whilst general vetting regulations and KnowYour-Customer standards are set by the CBN via regulations, in an effort to gain as much market share as they can, Commercial Banks regularly devise easier and cost-effective strategies for on-boarding customers through easy-to-adapt account opening and operating processes. Irrespective of the nature and use of the account type, certain general rules apply to the opening and operation of bank accounts in Nigeria and they include:

• Completion of Account Opening Forms.

• Specimen Signature Cards.

• Means of Identification – The acceptable means of identification are a data page of international passports for non-resident Directors or International Passport or CERPAC (see above) for resident expatriates.

• Passport-sized photographs of each Signatory to the Account

• Utility Bill of the Business or Residential Address – An applicant is required to provide evidence of business or residential address and a copy of any utility bill (water bill, electricity bill or any other government bill) issued with reference to the address.

• Completed Reference Forms – Applicants would be required to submit two independent and Satisfactorily Completed References signed by existing Account Holders.

• Residence/Work Permit (CERPAC)/ This requirement applies to only resident expatriates employed in Nigeria.

• Biometric Registration – Each applicant would be required to enrol for biometric registration with the bank and obtain the Bank Verification Number (BVN). The BVN is a unique, ten-digit number assigned to each signatory to a bank account and which constitute a distinct identity for the account holder or signatory. It is noteworthy that the CBN and the Bankers’ Committee have nominated some offshore banks as partners to facilitate the biometric registration for directors and expatriates who are outside Nigeria.

In addition to the above, applicants for corporate bank accounts would be required to provide the following:

• Certificate of Company or Business Registration.

• Board Resolution – presentation of a Board Resolution signed by at least two directors approving the opening and operation of the Bank Account.

• SCUML Registration (where applicable) – The SCUML is an abbreviation of the Special Control Unit Against Money Laundering, an arm of the Economic and Financial Crimes Commission, an agency responsible for curtailing financial crimes in Nigeria. Banks are required to obtain an evidence of SCUML registration for certain businesses including dealers in jewelleries, luxury goods, professional service providers and consulting firms, hotels & hospitality, vehicle dealers, real estate, construction companies, supermarkets, etc.

• Tax Identification Number – Applicants for Corporate Accounts are also required to provide the tax identification number issued to the company by the Federal Inland Revenue Service (FIRS).

It takes approximately 12 working days to set up a corporate account and 5 working days to open a private account.

Should you join an internationally reputable or established bank rather than a local bank?

The procedure for setting up bank accounts is generally uniform for both local and international banks, both of which are regulated by the Central Bank of Nigeria. The option to either set up a local bank account or pitching tent with an international bank depends largely on business exigencies. The term “local” hardly fits the top Nigerian banks, most of which provide wide platforms for the conduct of financial businesses beyond the Nigerian geographical space and have built affiliations with reputable global banks. Setting up a local bank account is encouraged considering the bank’s generally acceptable risk tolerance levels and less vigorous vetting and on-boarding processes.

International banks operating in Nigeria have independent account opening and vetting processes often flavoured in the operating standards of the parent companies. Know-Your-Customer processes for international companies are also considered more rigorous. However, without compromising security and the integrity of the financial systems, most local banks provide flexible account opening procedures often tailored to meet specific customer needs. Also, local banks are generally more suitable for retail banking and have a wider geographical reach and presence in Nigeria than international banks.