Opening a business bank account in Hong Kong – maximising your chances of success

The difficulty of opening business bank accounts in Hong Kong has been well documented in recent years. It is still very challenging. Despite media attention, pressure from the Hong Kong Monetary Authority, InvestHK, the Chambers of Commerce and industry groups in Hong Kong, start-ups and SMEs in particular are still having great difficulty in opening bank accounts.

Why is it difficult to open a bank account in Hong Kong?

  • Regulatory pressure – Hong Kong banks have been having to update their internal processes to deal with regulatory changes on an almost continual basis. No sooner had they addressed the US Foreign Account Tax Compliance Act (FATCA), then along came the OECD’s Common Reporting Standard (CRS), the G20 High-Level Principles on Beneficial Ownership Transparency and now they are also having to deal with the OECD’s Base Erosion and Profit Shifting (BEPS) initiative.
  • Geopolitical uncertainty and evolving criminal methodologies – financial institutions have found managing evolving sanctions policies to be a significant challenge, while evolving criminal methodologies are also seen as the biggest future threat. This has been making them understandably concerned about the need to manage and update risk policies, process and controls, and all while they’re still dealing with the fallout from the 2008 global financial crisis.
  • Compliance – to deal with the issues outlined above, banks have invested heavily in their compliance teams. These teams are now more influential than ever in the client ‘onboarding’ process. If you look like a potential risk, the banks won’t do business with you unless the probable benefits outweigh the compliance costs. In this environment there is very little upside for a bank to do business with a start-up.
  • Mismanagement – regardless of how difficult the business environment is, or has been, the banks have not helped themselves. Banks globally have paid $321 billion in fines since 2008 for an abundance of regulatory failings from money laundering to market manipulation and terrorist financing, according to data from Boston Consulting Group. All this means that banks have even less appetite for business risk.

What do Hong Kong banks like?

  • Hong Kong-based trading companies – Hong Kong banks are more likely to open an account for you if you have, or are planning to have, an office in Hong Kong, employ staff in Hong Kong, have customers or suppliers or both in Hong Kong etc. In other words they are looking to see real substance in Hong Kong. This rule of thumb applies to new businesses being set up in Hong Kong, as well as to subsidiaries of international companies being established there.

What do Hong Kong banks dislike?

  • Offshore companies – If your company has been incorporated in a jurisdiction outside of Hong Kong, and unless you have registered as a branch or representative office, it is almost impossible to open an account at a Hong Kong bank at present.
  • Complicated ownership structures – the more shareholders you have, and the more layers of entities (trusts, holding companies etc.) that are involved, the more difficult it will be to pass compliance checks.
  • Holding companies – companies that receive most of their income from passive sources (investments) trigger a higher level of scrutiny for the banks under CRS and FATCA, and are therefore viewed as higher risk than active trading companies.
  • Hong Kong companies whose officers and signatories reside outside of Hong Kong – unless your business has a clear reason to have a bank account in Hong Kong, it will be more difficult to get an account opened.
  • Ecommerce – getting a merchant account set up with a Hong Kong bank is far more difficult that it should be. Hong Kong banks don’t like connecting to payment gateways because they cannot always identify the geographic source of the funds hitting your account.
  • Cash based businesses – Hong Kong banks like to know where the funds being remitted to your account come from. Cash is a major problem for banks from a compliance point of view. The same is true for the new digital currencies.
  • Certain industries and jurisdictions – I won’t go into huge amounts of detail here, but be aware that Hong Kong banks, as elsewhere, have lists of industries, countries and passports that they don’t like. Do your research to avoid wasting your time.
  • Regulated businesses – Hong Kong banks don’t like dealing with companies that are heavily regulated. If your business needs a licence to operate, then the bank will generally want to see authorisation in place before they will consider opening an account for you.
  • Start-ups – Hong Kong banks are generally not going to sell many additional products to start-ups and will therefore not make much (or even any) money from them. Simply put, the risk- reward equation does not work for the banks. The one thing the banks need to justify taking on the risk is ‘business proof’.

What is ‘Business Proof’ and how can I get some?

Business proof is what banks need to help them predict the future activity of an account so they can give you a risk score and monitor account activity on an ongoing basis. Existing businesses have a natural advantage here but the banks expect you to be able to provide some or all of the following information:

  • Business plan – all business plans are different but the most important consideration is to adapt your plan to suit your audience. Banks won’t necessarily read a 20-page document or go through a complicated PowerPoint presentation. They simply need to understand how you will make your money and why you need a bank account in Hong Kong. Provide sufficient information to enable a bank to understand your business and remember that you are not speaking to an expert in your area of business. So keep it simple. The bank will ask you to provide more information if it needs it.
  • Account activity – be prepared to answer the following questions, which can also be incorporated into the business plan.
    • Expected annual turnover?
    • How many monthly inward remittances do you expect?
      What will the average amount be?
    • How many monthly outward remittances do you expect?
      What will the average amount be?
    • What currencies will you need?
    • How will you make/receive payments (cheque, cash, TT, etc.)?
    • In which countries are your customers/suppliers located?
  • Supporting documentation – anything and everything helps here. Mobile phone contracts, consultancy agreements, employment agreements, introducer agreements, invoice templates, insurance policies, supplier invoices, rental agreements (see below) etc. If you don’t have any contracts in place, try to get letters of intent with potential customers. Basically, the bank wants to see some documentary proof to support your business plan. The bank will also want to do due diligence on your counterparties, so provide it with websites and contact details where practical.
  • Rental agreement – this is possibly the single most important supporting document. Some banks prefer a stamped lease, some will accept a virtual office agreement but you need to tick this box. Ideally, your commercial address should not be the same as that of your company secretary or accountant.
  • Marketing Collateral – if you don’t have any, get some. If you don’t have a full website, at least put a landing page in place. If you don’t have a logo, get one immediately; you can always change it later. Get some business cards and create some templates for the documents your business will need. Banks will need to be able to visualise your business. Help them to do so.

What is my best option for opening a bank account in Hong Kong?

  • Talk to a professional services provider – You may only get one chance to open a bank account in Hong Kong. As a professional services provider in Hong Kong, Sovereign has long standing relationships with a broad range of Hong Kong banks. We know the policies and criteria of different banks and can help to determine which one will be the best fit for you. We can then guide and assist you with preparing your application and supporting documentation to maximise your chances of success, before effecting an introduction to your chosen bank.
  • Open an offshore account – there are a number of international banks that will open accounts for Hong Kong and offshore companies. Such banks generally only work with qualified introducers, such as Sovereign. When you have generated at least six months of account activity with an offshore bank, a bank in Hong Kong is more likely to accept your application because they can more accurately assess risk by analysing your account history. You will also have more supporting documentation in place after six months of trading.


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