Top Challenges When Opening a Business Bank Account

Many businesses run into significant obstacles when attempting to open a business bank account, particularly when operating across international borders. The application process involves verification, countless documents and compliance procedures that can extend timelines and create unexpected barriers.

The question of how long it takes to open a business bank account depends largely on how well businesses navigate these obstacles. Preparation and understanding of regulatory requirements can prevent delays. 

Understanding Business Bank Account Requirements 

Banks operate under strict regulatory frameworks designed to prevent financial crimes and maintain the integrity of the global financial system. This means that banks need to verify the legitimacy of every business seeking to open an account. The verification process examines business structures, ownership details, the nature of business 

Banks must establish clear identification of all individuals who control or benefit from the company. This process becomes more complex when businesses have multiple layers of ownership or operate through holding companies. 

Documentation Challenges 

The documentation required for opening a business bank account includes proof of identity for all directors and beneficial owners, company incorporation papers, proof of business address, and detailed descriptions of business activities. Each document must be authentic and valid.

Requirements vary between countries. European banks may require different documentation formats than institutions in Asia or the US. Some countries ask for notarized documents, while others accept certified copies. The business registration number serves as a critical identifier, but the format and issuing authority differ globally. Banks may also require translation of documents not in the local language, adding more to the stress and prolonging the process. How to open a business bank account abroad fully depends on the bank and local laws.

Compliance and Regulatory Barriers 

Global banks must comply with anti-money laundering (AML) and know-your-customer (KYC) regulations enforced by both local and international authorities. These rules require banks to conduct thorough due diligence on potential clients to assess risk and ensure compliance with financial regulations. 

Some industries are classified as high-risk by banks, including cryptocurrency, gambling, foreign exchange trading, and money services. Companies operating in these sectors often have more intensive review processes. Some banks decline to work with high-risk industries altogether, regardless of the business’s legitimacy or compliance record. 

The corporate bank account opening process for companies in regulated industries typically involves providing detailed business plans, compliance procedures, and proof of licensing if needed. 

Proof of Business Activity and Credibility 

Banks need to verify that their potential client is following the law. They often request contracts with clients or suppliers, invoices, business plans, or other documentation that demonstrates real business activity. 

Startups and newly formed companies often struggle to provide this evidence, as they may not yet have significant transaction history or established client relationships. Holding companies that do not engage in direct commercial activities face similar challenges, because their business model does not have the typical documentation banks need. 

Business expenses records, projected payment volumes, and detailed explanations of revenue sources help establish credibility. Banks assess if the described business activities align with the company’s stated purpose and whether the anticipated account usage appears reasonable for the type of business. 

Jurisdiction and Location Issues 

Entrepreneurs attempting to establish banking relationships in foreign countries face distinct challenges related to cross-border banking regulations. Each jurisdiction maintains its own banking standards, documentation requirements, and risk assessment criteria. What satisfies requirements in one country may be insufficient in another. 

Banking rules in the European Union differ from those in the United States, Asia, or offshore financial centers. Some regions have more restrictive policies regarding non-resident account holders, while others have created frameworks for international business banking. Digital banking solutions have emerged in many markets, offering online account opening processes, though these still require compliance with local regulations. 

Banking Policies and Risk Appetite 

Every bank has its own rules when deciding which clients it accepts. Banks may decline applications based on factors including the applicant’s nationality, business sector, anticipated transaction volume, or geographical focus. The internal policy may lead to rejection of an application even when the business meets all regulatory requirements and presents no legal concerns. 

Account fees and bank charges vary significantly between institutions and depend on the services required. Some banks focus on serving large corporations with substantial turnover, while others cater to small businesses or specific sectors. Before approving the account, banks must run checks to make sure that the potential client isn’t a risk.

Timeframe and Delays 

The process of opening a business bank account typically ranges from several weeks to several months. The timeline depends on the completeness of documentation, the complexity of the business structure, the institution’s internal processes, and the need for international verification. 

Compliance checks and missing paperwork take the most time out of the application process. Banks must complete thorough background checks on all directors and beneficial owners, verify business registration with relevant authorities, assess the business model for compliance with banking policies, and review documentation for completeness and authenticity.

Global Perspective – Not a Local Issue 

The challenges of opening a business bank account exist all across the world, though they manifest differently in each region. This is not a local issue. The global nature of financial regulation means that banks worldwide must comply with similar standards for AML, KYC, and risk assessment. 

International businesses often face more complex challenges than domestic ones. Ascot, a globally recognized firm, provides strategic business consulting solutions to help organizations navigate these complexities with confidence. Cross-border business structures, foreign ownership, and international payment flows often trigger additional compliance checks from banks. The ease of opening an account depends on each bank’s internal policies, as well as the jurisdiction involved. Some regions have streamlined cross-border banking processes, while others enforce stricter requirements. Ascot helps clients understand and overcome these global challenges, ensuring smoother international operations and more efficient business banking. 

FAQs 

What are the main challenges when opening a business bank account? 

The primary obstacles include strict documentation requirements, compliance checks mandated by AML and KYC regulations, and jurisdiction-specific banking rules. Businesses must provide comprehensive proof of ownership, structure, and activity. The application process also requires verification of all directors and beneficial owners, which becomes more complex for international companies. 

Why do banks take so long to approve business bank accounts? 

Banks conduct extensive compliance reviews that can require weeks or months to complete. These reviews involve verifying identities, checking backgrounds against sanctions lists, confirming business registration, and assessing the legitimacy of business activities. International verification adds significant time, as does any missing or incomplete documentation that must be requested and resubmitted. 

Can I open a business bank account abroad easily? 

Opening an account abroad depends on the destination country’s banking regulations and the bank’s policies regarding non-resident clients. Cross-border accounts generally require more extensive documentation and undergo more thorough compliance checks than domestic accounts. Some jurisdictions and banks are more accommodating to international businesses than others. 

How do corporate bank account openings differ from personal accounts? 

Corporate accounts require proof of business structure, ownership information, and documentation of business activities. Banks must identify all beneficial owners and directors, verify business registration, and assess the company’s operations. Personal accounts have simpler requirements focused primarily on individual identity verification. 

What can businesses do to reduce account opening challenges? 

Prepare complete documentation before applying, including all required identification, incorporation papers, and proof of business activity. Research the specific requirements for the target jurisdiction and bank.

References 

CIMB Bank. (n.d.). 5 common mistakes to avoid to successfully open a business bank account. Retrieved from https://www.cimb.com.sg/en/business/cimb-insights/scale-up/5-common-mistakes-to-avoid-to-successfully-open-a-business-bank-account.html 

GoCardless. (n.d.). Common business bank account mistakes. Retrieved from https://gocardless.com/guides/posts/common-business-bank-account-mistakes/ 

MultiPass. (n.d.). Can’t open a business bank account: Main reasons & solutions. Retrieved from https://multipass.co/help-centre/knowledge-base/can-t-open-a-business-bank-account-main-reasons-and-solutions