Major Problems while Opening and Maintaining Corporate Bank Account in UAE!

By Sakshi Srivastava - 29 Oct 2021 Last Updated: 01 Dec 2021
Major Problems while Opening and Maintaining Corporate Bank Account in UAE!

When forming a company in the UAE or anyplace else in the world, you'll need to open a bank account to conduct your business's day-to-day operations. It's possible that the steps for opening a bank account for your company in the UAE aren't entirely obvious. What issues might develop that make opening and maintaining an account difficult? Fortunately, we know exactly what to expect so you don't have any surprises when it comes to jumping on and getting started.

Thus, in this blog we will extensively focus on the difficulties you might face while opening and handling a Company Bank Account in United Arab Emirates. We are sure, by the end of this blog, you will be able to tackle and handle any hurdle which might come in your way while doing the above mentioned activity.

So, without any further ado, let’s learn!

Major Challenges!

One of the most difficult challenges that company owners encounter when starting a business in Dubai and the UAE is creating a business bank account. To open a corporate bank account in the UAE, you must meet a number of strict requirements.

For those entrepreneurs wanting to start a new business in the UAE, strict restrictions and stringent international regulations make obtaining a bank account a time-consuming process.

Tough Regulatory Requirements & Pressure to Comply

Banks must adhere to the UAE's commitment to combating financial crimes such as money laundering and terrorist financing. The pressure on banks to comply with regulatory measures such as anti-money laundering (AML) programmes and counter-terrorist financing (CFT) exacerbates the difficulties of creating bank accounts in the UAE. As a result, banks in the UAE are under a lot of pressure from regulatory and inspection organisations, which forces them to be harsh with consumers who are attempting to create an account for the formation of a corporation.

Client's Business History

While applying for a bank account, you must demonstrate your credibility to the bank. The company's creator must demonstrate that he or she has extensive expertise of the industry in which the company will operate. Previous business history aids in expediting the procedure by establishing a person's or company's trustworthiness and debt history.

Resident Visa in the United Arab Emirates

A resident visa is required by most banks in the UAE. Furthermore, several banks in the UAE may need you to furnish a local address. It's also a good idea to see if the bank requires you to provide proof that your company's shareholders have valid residency permits. Some banks require at least one shareholder to provide confirmation of this.

Physical Office Space Shortage

Banks in the UAE require that your business have a physical location. Some banks will send an inspection officer to the address listed in the documentation to verify that your company has a physical presence there.

Inadequate Information/Inadequate Business Plan

When starting a business in Dubai or the UAE, having a solid business plan is essential. Banks in the United Arab Emirates demand to know your company's financial strength. Banks will be happy to look through biographies of the founders, a financial strategy for a business that is opening a bank account, potential suppliers and planned customers, and so on. Failure to provide a sound business plan and other financial information that demonstrates the company's financial integrity may cause the process of creating a business bank account in the UAE to be further delayed.

Individuals with High-Risk

Being a citizen of a high-risk country might be a major roadblock to obtaining a bank account in the UAE. Sanctions on a certain person 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 located anywhere on the planet. Human rights abuses, nuclear proliferation, terrorism, narcotics trafficking, transnational criminal organisations, and sanctioned regimes may all be linked to SDNs.

Non-resident Russians in the UAE are currently unable to make transfers to Russia. The banks do not provide a USD account 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 trading, and textiles.

Compliance Inspections and Anti-Money Laundering Processes are Stricter

Many regulatory organisations have tightened compliance checks and anti-money laundering technologies, making it difficult for individuals to open bank accounts for their enterprises. Several causes have contributed to the increasing measures.

  • To begin with, previous terror occurrences have extended the scope of money laundering. Banks are taking extreme pains to monitor the movement of money because these events are frequently supported by wealthy unidentified patrons.
  • Furthermore, in the aftermath of the financial crisis, banks were compelled to tighten regulations in order to reduce the risk they were taking.
  • By reducing the risk that these banks were assuming, the financial system's integrity was improved, and the possibility of collapse for both the banks and the banking system as a whole was lowered.

Many financial organizations around the world have created increasingly sophisticated instruments. These technologies are used to validate customer information as well as detect any questionable transactions, allowing money laundering issues to be detected.

Requirement for a Minimum Balance

A minimum amount is required by most banks for all corporate accounts. Depending on the bank you choose to open an account with, the minimum amount ranges from AED 25,000 to AED 500,000. In the case of certain banks that are lenient with the minimum account balance criteria, it is also difficult to obtain the services of a relationship manager.

The UAE government's tough regulatory changes ensure that the economy is on track. Financial crimes such as money laundering and terrorism funding require tough measures as well. This roughness in the process, however, is attributable only to the severe regulations that any government determined to make its system more efficient and free of corruption must abide by.

Cooperation with High - Risk Countries

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

FIs must also implement all specific measures and countermeasures relating to High-Risk Countries as defined 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 level of scrutiny, such as detailed supervision of the Business Relationship, higher levels of internal reporting and management approval, more frequent transaction monitoring, and more regular review/updating of client due diligence information. When dealing with high-risk countries, financial institutions must consider creating suitable internal rules, procedures, and controls.

Sanctioned countries include Cuba, Myanmar, Iran, North Korea, Ukraine (Crimea), Sudan, and Syria. In the process of creating a corporation 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.

Is It Profitable for the Bank or Payment Institution to do Business with you?

When it comes to new firms, banks take a huge risk because they are unfamiliar with the company and do not know the directors. In order to take on this risk, banks and payment institutions conduct a profit and loss analysis to determine whether the consumer will make enough transactions to warrant the risk. Because banks receive thousands of applications, it isn't always worth it for them to take a chance on a new firm when they already have a lot of them queued up.

Conclusion

Finally, you'll want to make sure you have all of the necessary documentation before travelling to the UAE. Non-residents cannot open bank accounts online, and most banks need you to open your account in person. This is especially crucial for non-residents because they will need a letter from a foreign banking business to act as a reference for a client who wants to open an account in the UAE. You'll also need bank statements from one of your accounts for the last six months (but rest assured that it does not have to be from your home country).

The paper trail isn't just for non-resident clients; UAE banks will also require your employer to produce a confirmation letter from the company to the bank when you want to become a client to show your employment status. Because foreigners' residency in the UAE is frequently linked to a job opportunity, this is critical. If you're self-employed, you'll need to show a copy of your business license instead. In this case, the employment verification letter can also be used as proof of residency.

Thus we hope this blog provided you with incite full information. For more information on other related aspects, feel free to checkout our Website as well.

Open business bank account online in Dubai, UAE. Compare and apply for business bank account from leading banks with Dhanguard.

By Sakshi Srivastava

29-Oct, 2021

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