7 Major Hurdles while Opening a Bank Account in the UAE

7 Major Hurdles while Opening a Bank Account in the UAE

One of the most daunting challenges that business owners face when starting a business in Dubai and the UAE is opening a business bank account. To open a corporate bank account in the UAE, you must meet a number of strict requirements. For those entrepreneurs planning to start a new business in the UAE, strict criteria and stringent foreign regulations make opening a bank account a time-consuming operation.

What are the Obstacles faced while opening a Bank Account in UAE?

Following are the obstacles faced while opening a Bank Account in UAE-

opening a Bank Account in UAE

Regulatory and Compliance Pressure on the Banks

Banks must adhere to the UAE's commitment to combating financial crimes such as money laundering and terrorist financing.The burden on banks to comply with regulatory initiatives such as Anti-Money Laundering (AML) programs and counter-terrorism financing adds up to the challenge of opening bank accounts in the UAE. This is why banks in the UAE are under a lot of pressure from regulatory and inspection bodies, which forces them to be strict with customers who want to open a company account.

Profile of the Shareholders

When applying for a bank account, you must demonstrate your integrity to the bank. The company's founder must demonstrate that he or she has extensive knowledge of the industry in which the company will operate. Previous business experience aids in expediting the process by establishing a people or company's reputation and debt history. The banks will always look for a person who has applied for the Business Account that whether that person has the knowledge for the business he or she has started there. The profile of the person should always match with that of the business structure. Banks check for the income of the client that whether this person is capable of opening business in UAE.

Lack of Physical Office

Banks in the UAE need the business to have a physical location. Some banks will send an inspection officer to the address mentioned in the documents to verify that your company has a physical presence there.Banks needs to check that whether this person is actually doing business or not. If banks find that there is no work done, bank will reject the Client. Bank also verify this by having a Third Party involved, this can also be known as Contact Point Verification (CPV). This is more reliable to banks. The CPV send the Field Visit Report (FVR) to the banks for examination.

Resident of UAE

A residence visa is required by most banks in the UAE. Furthermore, some banks in the UAE may require you to provide a local address.

It's also a good idea to see if the bank wants you to have proof that your company's shareholders have valid residency permits. Some banks need at least one shareholder to have evidence of this.

Inadequate Information or Weak Business plan

When starting a business in Dubai or the UAE, having a solid business plan is important. Banks in the United Arab Emirates demand to know your company's financial strength.

Banks would be happy to look over biographies of the founders, a financial plan for a company that is opening a bank account, future suppliers and intended clients, and so on.

Failure to provide a strong business plan and other financial details that demonstrates the company's financial integrity can cause the process of opening a business bank account in the UAE to be further delayed. Contact us for Making Business Plan in UAE.

Doing Business with HighRisk Countries

If you do business with sanctioned or high-risk countries, you can have difficulty opening a bank account for your company in the UAE. Financial Institutions (FIs) in the UAE are expected to follow regulations that address the risks of money laundering and terrorism financing that come with doing business with high-risk countries.

FIs must also enforce all relevant measures and countermeasures relating to High-Risk Countries as established by the National Committee for Combating Money Laundering, Terrorism Financing, and Illegal Organizations, including those relating to the implementation of UN Security Council and Financial Action Task Force decisions (FATF).

This necessitates a higher degree of scrutiny, such as thorough oversight of the Business Relationship, higher levels of internal reporting and management approval, more regular transaction monitoring, and more frequent review/updating of customer due diligence details. When dealing with high-risk countries, financial institutions must consider implementing appropriate internal policies, processes, and controls.

The list of sanctioned countries includes Cuba, Myanmar, Iran, North Korea, Ukraine (Crimea), Sudan, and Syria.

In the course of opening a company bank account in the UAE, Nigeria, Somalia, Ethiopia, Serbia, Yemen, Kenya, Uganda, Saint Kitts and Nevis, Anguilla, Malta, Cyprus, Zimbabwe, China, and Libya are considered major high-risk countries.

Nationality is a Big Concern

Being a citizen of a high-risk country will make opening an account in the UAE a difficult task. Sanctions against a single individual may be imposed by governments all over the world.

Transferring funds to and/or from Specifically Designated Nationals is forbidden by banks (SDNs). Individuals can be SDNs, and they can be found anywhere on the planet. Human rights violations, nuclear proliferation, terrorism, drug trafficking, transnational criminal organizations, and sanctioned regimes may all be related to SDNs.

Non-resident Russians in the UAE are officially unable to make transfers to Russia. The banks do not have USD accounts to non-resident Syrians. Meanwhile, non-resident Chinese are temporarily barred from doing business in the UAE in the areas of import and export, general trade, and textiles.

Conclusion

The UAE authorities' strict regulatory reforms ensure that the economy is moving in the right direction. To combat financial crimes such as money laundering and terrorist funding, tough reforms are also needed.

This toughness in the process, however, is due solely to the strict regulations that are required of any country determined to make its system more effective and freer of corruption.

Opening a bank account for a business in the United Arab Emirates is a time-consuming process for entrepreneurs looking to start a business in the country. We will assist you in this situation. Dhanguard is regarded as one of the leading banking consultants in the UAE, providing corporate bank account opening services.

By Om Chaudhary

21-Apr, 2021

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