RISKS & TIPS FOR OPENING A BANK ACCOUNT FOR START-UPS IN HONG KONG

The difficulty of obtaining commercial bank accounts in Hong Kong has been well – recognized in recent years. It is also really complicated. Despite media attention and pressure from the Hong Kong Monetary Authority, InvestHK, Chambers of Commerce, and Hong Kong business organizations, opening bank accounts remains difficult for start-ups and small and medium-sized firms in particular. 

1.Common Difficulties in Opening a Hong Kong Bank Account

We can inform start-ups and SMEs that forming a Hong Kong company is quick and easy, since anyone can do it remotely in a week. But what are the challenges that start-ups have to face? 

The Hong Kong Bank’s due diligence is not transparent. 

This is referred to by banks as an internal aspect of their procedures. And because the bankers you encounter do not know the bank’s labeling approach, consumers are unable to judge the ability to open.

Need proof of company’s work to verify

Hong Kong bankers, you will be required to check your company’s running records as well as your reason as proof. As a result, you must gain their faith that your organization is legitimate.

Need an interview of company’s key individual

Hong Kong banks need practically any key individual in your company to visit Hong Kong for an account opening interview with their bankers as part of their “Know-Your-Customer” regulation.

Needs of business operational documents

Hong Kong banks may randomly seek more papers from you throughout their research.

Keeping file for years including rejection

In the event of rejection, Hong Kong banks will keep your application on file for years. Clients would have a tough time opening accounts at the same institutions in the future.

Unpredicted adjustment

After you submit your application, the Hong Kong bank’s compliance condition will be modified (i.e. it will be tightened) without notice.

Long appraisal time

As part of the due diligence obligation, Hong Kong banks’ compliance departments spend weeks, if not months, doing backstage due diligence reviews.

2. Things that are welcomed

Hong Kong-based Trading Companies

Hong Kong banks are more likely to create an account for you if you have or plan to have an office in Hong Kong, recruit staff in Hong Kong, have clients or vendors, or both, in Hong Kong, and so on. In other words, they’re seeking for actual substance in Hong Kong. This provision applies to both the foundation of new businesses in Hong Kong and the establishment of international corporations’ branches there.

3. Things that can be disliked

Start-ups

In general, Hong Kong banks will not provide many extra things to start-ups, and so will not make much (if any) money from them. Simply put, the risk-reward equation does not apply to banks. The banks want ‘business evidence’ to justify taking on the risk.

Ecommerce

Setting up a merchant account with a Hong Kong bank is far more difficult than it should be. Hong Kong banks dislike connecting to payment gateways because the regional origins of monies entering the account are not always known.

Companies incorporated in Hong Kong whose members and signatories reside outside of Hong Kong

It will be more difficult to register a Hong Kong bank account if the organization does not have a clear rationale.

Businesses that rely on cash

Banks in Hong Kong want to know where the cash paid to your account comes from. From a compliance aspect, cash is a major worry for banks. The same holds true for the most recent digital money.

Businesses that are regulated

Hong Kong banks dislike collaborating with tightly managed enterprises. If the employer requires authorization to work, the bank will often require authorization before creating an account for you.

4. Things you should know and guides to open a bank account in Hong Kong

Should Open An Offshore Account

Several international banks are opening accounts for Hong Kong and offshore businesses. In general, such institutions only work with qualified implementers. A Hong Kong bank is more likely to approve your application if you have at least six months of account operation with an offshore bank since they can more reliably identify risk by reviewing your account history. You will now have more supporting paperwork in place after six months of dealing.

There are three note-issuing banks in Hong Kong that have  responsibility to help early-stage company

HSBC, Standard Chartered Bank, and Bank of China (Hong Kong) are among them. These three banks are well aware of the problem and have been working hard to lower their startup rejection rate. One of the three banks stated above, in instance, has lowered their total business banking application rejection rate from 13% to less than 1%, and every denial now requires personal approval by the Head of Business Banking.

Honesty is the key to your application’s success.

Because of the high rejection rates, companies have started exaggerating in their applications, resulting in banks detecting irregularities and rejecting them during the due diligence step. For example, claiming to run a high-level consultancy with typical project fees of $20,000 but getting several payments of $20 will raise red flags.

Conclusion

Opening a bank account for Start-ups and SMEs is not that easy in Hong Kong, but if your business does it the right way, it might become easier. And for more information about Hong Kong Banks or need more consulting for Offshore Banking, please don’t hesitate to contact CorpAgent Global!

CorpAgent is also a long-time provider of corporate services including payment gateway setup and underwriting. Send us an inquiry to admin@corpagent.asia, or contact us here.

See more HONG KONG content here:

https://corpagent.asia/paypal-pro-for-hong-kong-company/

https://corpagent.asia/hong-kong-offshore-company-101-all-the-information-you-may-need/