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?
Banks in Mexico for the most part are subsidiaries of foreign banks. You also have a few big national banks that are not related to foreign banks and a few other smaller banks. In any case all banks are subject to the same federal regulations regarding their permit to operate and compliance regulations.
All banks and especially international banks are aware of the risks their operations entail such as money laundering, so when opening a bank account expect a thorough investigation and “client knowledge” disclosure requests. This also applies when the company in question has foreign capital and stockholders. Generally, expect the same type of requirements of information, documents and disclosures from all banks when opening an account. However, the difference might be that a bigger bank may have different vetting procedures to verify the information gathered, especially from their legal department, which in some cases asks for clarification or additional information when they feel that the information may not be complete. Whenever the information is deemed incomplete or if they feel they require additional clarification, then expect more time for the account to be ready.
Personal accounts on the other hand are much easier when you supply the bank with all documents and disclosures they ask for. In the case of expatriates, if they are going to stay and work in Mexico for 180 days or more a year, then having a bank account to deposit income makes sense, so they can comply with the Income tax obligations.
How accommodating are banks in your jurisdiction for opening a business and personal bank account?
In general, all banks since they are all subject to the same federal regulations should have the same requirements of information when opening bank accounts. What may vary is the way they go about verifying that all of the information is correct. Bigger banks may have different levels of people to scrutinise the information gathered. For instance, when opening a bank account for a corporation with foreign ownership, it may be the case that you start the procedure with the bank’s branch client executive who gathers all documents and information, then it would go to the branch manager to double check that the file is complete. From there it is sent over to the bank’s central legal department electronically, and that is where it may take a few more days to analyse the information.
If all is well the account may typically be opened within 2 weeks. But if during the vetting procedure it turns out that there is a need for clarification and/or additional information, then expect another two weeks for the additional vetting process to be completed since the information has to flow from the bank’s legal department to the bank’s branch. From there it goes to the client, or in this case the company’s duly appointed legal representative for such an endeavour. If the requested information is already available it can be supplied at that time, but if it is something that was not requested previously it may take additional time to gather it from the foreign owners.
The information needed to open a business account are the following:
• Official photo ID of the appointed legal representative who will be the holder of the bank account;
• Incorporation papers;
• Notarised power of attorney granted to the legal representative;
• Fiscal address of company;
• Viable proof of address;
• Tax ID number and document;
• Electronic signature proof or query in the tax authority website as proof.
Should you join an internationally reputable or established bank rather than a local bank?
It doesn’t really matter if you go with a local bank or an international bank, all banks are subject to the same regulations and savings protections insurance. It is more a question of what bank can provide the services you need, which will depend on the type of operations and transactions you would engage in. For example, if you need national coverage in all of Mexico or if you are just going to operate in a given region of the country or city. If for instance, you are going to regularly make international transactions, it makes more sense to use a foreign bank since they will be more used to this type of transactions. On the other hand using a smaller bank you may get a more personal service and have a better experience overall. But in the end it’s all going to come down to selecting a bank that is better suited to your operation and also that you agree with the costs related to the transactions you would incur.