7 Major Hurdles while Opening a Bank Account in the UAE

20Apr, 21

7 Major Hurdles while Opening a Bank Account in the UAE

Opening a bank account is an essential step for individuals and corporations in the United Arab Emirates (UAE). However, the process can be challenging due to regulatory and practical considerations. You must fulfil several severe standards before opening a corporate bank account in the UAE. Starting a bank account is time-consuming for business owners who want to launch a new venture in the UAE due to severe international rules and demanding criteria.

Thus, in this blog, Dhanguard will extensively discuss the major obstacles you might face while starting a Bank Account in the UAE so that you can prepare beforehand and create your bank account without any difficulties. So, without any further ado, let’s learn!

UAE Bank Account For Residents 

One can open a bank account whether they are citizens or not. Current income and a savings account are feasible in the first scenario. The banks will only open the call, deposit, or cumulative accounts in the second scenario. In reality, banks frequently decline to open current accounts in the United Arab Emirates, even for locals. This is because banks are attempting to steer clear of clients from nations with high levels of risk. Every bank rates the nationalities within its system. It will, therefore, be beneficial to submit your paperwork to multiple banks at once if you choose to create a bank account in the United Arab Emirates.

UAE-Based Corporate Bank Account

You can open bank accounts for many kinds of businesses in the Emirates. These could be mainland, free trade zones, or offshore businesses. In actuality, businesses are refused the opportunity to register a corporate bank account in the Emirates in 50% of situations. Whether you get in touch with an international or local bank is irrelevant.

There are multiple solutions available to address the issue expeditiously. They all have advantages and disadvantages.

  • Purchase an already-formed business with a bank account.

  • Carefully prepare the necessary paperwork for the bank to ensure all requirements are met and problems are minimal.

If you verify in the first scenario, you will be examined in the second scenario.

Which Thing Does Negotiation With UAE Banks Impact The Most?

The fact that banks in the Emirates are reticent when interacting with clients is the most annoying—and, in our opinion, the most challenging—thing to deal with during discussions. This is because banks are prohibited from advising customers on the most effective ways to offer information by internal policies. Bankers can request a typical list of documents. On these documents, you will never receive comments. You will never know the rationale behind the denial to open a UAE bank account.

Major Obstacles which can hinder your Bank Account Opening in the UAE

Below are the significant obstacles which an applicant can face while initiating the process of bank account opening in the UAE. Our experts have elucidated them so you can start your bank account quickly in the UAE.

They are the following-

Absence of an Actual Office

UAE banks require that a company have a physical address. To confirm that your company has a physical presence at the address listed in the documentation, some banks will send an inspection officer there. Banks must verify whether or not this person is genuinely conducting business. Banks will only accept a client if they discover that work has been completed. The bank uses a third party to verify this, a process known as contact point verification (CPV). For banks, this is more reliable. The banks get the Field Visit Report (FVR) from the CPV for review.

The Shareholder's Profiles

You must persuade the bank of your integrity before they approve your request for a bank account. The founder of the business must show that they have an in-depth understanding of the sector in which the business will operate. The procedure can be sped up by prior business experience, establishing a person's or business's reputation and debt history. When a person is involved in a business account, the banks always check to see if that individual is qualified to run the enterprise they have established. The person's profile should always reflect the organization's structure. Banks examine clients' income to determine whether they can legally operate a business in the United Arab Emirates.

Poor Business Plan or Insufficient Information

It's crucial to have a strong business strategy when beginning a business in Dubai or the UAE. The financial stability of your company is required information by banks in the United Arab Emirates. Background of the founders, a financial plan for a business opening a bank account, a list of potential suppliers and customers, and other information are all things that banks are pleased to review. Opening a business bank account in the UAE may be further delayed if a solid business plan and other financial information are not provided to show the company's financial integrity. Make a business plan in the UAE by contacting us.

Resident of the United Arab Emirates

The majority of banks in the UAE demand a residency visa. Additionally, you could be asked to furnish a local address by some banks in the UAE. It's also a good idea to find out if the bank requires you to provide documentation proving the stockholders in your firm have current residency permits. Some banks require proof of this from at least one shareholder.

The Importance of Nationality

It will be challenging to open an account in the UAE if you are a citizen of a high-risk nation. Governments from all around the world have the authority to apply sanctions against a single person. Banks forbid money transfers from and to Specifically Designated Nationals (SDNs). SDNs are individuals who can exist anywhere on the earth. SDNs may be connected to human rights abuses, nuclear proliferation, terrorism, drug trafficking, international criminal organizations, and sanctioned governments.

Russians who are not residents of the UAE are not permitted to send money to Russia. Syrians who do not reside in the country cannot open USD accounts with the banks. Non-resident Chinese are now prohibited from conducting import and export, general trade, and textile business in the UAE.

Trading with High-Risk Countries

It may be challenging to register a bank account for your business in the UAE if you conduct business with sanctioned or high-risk nations. When working in business with high-risk countries, financial institutions (FIs) in the UAE must abide by rules that address the dangers of money laundering and terrorism funding.

As determined by the National Committee for Combating Money Laundering, Terrorism Financing, and Illegal Organizations, FIs must enforce all pertinent policies and procedures about high-risk nations, including implementing the Financial Action Task Force and UN Security Council resolutions (FATF).

  • This calls for a higher level of examination, including careful oversight of the Business Relationship, increased internal reporting and management approval, more frequent review/updating of customer due diligence information, and regular transaction monitoring. 

  • Financial institutions should think about putting in place the proper internal policies, processes, and controls when dealing with high-risk nations.

  • Cuba, Myanmar, Iran, North Korea, Ukraine (Crimea), Sudan, and Syria are among the nations on the list of sanctioned countries.

  •  Anguilla, Malta, Cyprus, Zimbabwe, China, Nigeria, Somalia, Ethiopia, Serbia, Yemen, Kenya, Uganda, Saint Kitts and Nevis, and Libya are prominent high-risk nations when opening a company bank account in the UAE.

Minimum Balance Requirement:

Many UAE banks require customers to maintain a minimum balance in their accounts. Falling below this balance can result in penalties and account closure. The minimum balance requirement varies between banks and can be a barrier for individuals with limited funds.

Challenges Faced While Starting  Bank Account

Here are a few significant challenges that a candidate may encounter when starting the bank account creation procedure in the United Arab Emirates:

Documentation:

To open a current account in Dubai or any other emirate in the UAE, extensive documentation is necessary. Typically, you'll need to provide your passport, UAE residence visa, Emirates ID, proof of address, and a No Objection Certificate (NOC) from your employer if you're an expatriate. The rigorous document verification process can be a significant hurdle, especially for newcomers.

Regulatory Compliance:

The UAE's strict financial regulations can be another hurdle when opening a current account. Banks in the country follow Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines. If you meet the regulatory standards, your application may be accepted or completed.

No-Interest Current Accounts:

Islamic banking principles are significant in the UAE, and many banks offer no-interest current accounts in compliance with Sharia law. Non-Muslims may need help accessing conventional, interest-bearing accounts, which can limit their options when choosing a bank.

What Do UAE Banks Ask?

As previously stated, banks verify the economic substance, or actuality, of a firm. The bank verifies that your business has a physical location and operating expenses. Certain banks dispatch a staff member to confirm whether the office is open at the address mentioned in the paperwork. The bank has the right to seek personnel data. The size of the rent and salary costs gives you a rapid understanding of the company's financial structure. A financial strategy for a company opening an account, audited reports, the biographies of the founders, prospective suppliers, expected clients, and other materials will also be welcomed by the bank.

Conclusion

While opening a current account in the UAE can be a daunting task due to various hurdles, it's not impossible. It's essential to choose the right bank and prepare your documentation carefully. Seeking guidance from a business consultancy firm with expertise in the UAE's banking sector can be a valuable resource in navigating these challenges and ensuring a smooth account opening process. As the UAE's banking landscape evolves, being well-prepared and informed is the key to overcoming these hurdles and enjoying the benefits of a current account in this dynamic business hub.