Opening a business bank account is an important step for entrepreneurs and business owners who are willing to establish their company in the UAE, whether their company operates onshore or offshore. Although the process of opening bank account in the UAE might appear simple and straightforward, business owners frequently face obstacles that can make it more challenging. In this article, we’ll understand the cause of challenges in opening a bank account in the UAE and provide practical and simple tips for overcoming them.
Why is it complicated?
Before thinking that opening a bank account in the UAE is a difficult process, it’s important to understand the underlying reasons for it. The stringent measures in place are designed to safeguard the country’s economy and protect against fraud and illegal financial transactions. These regulations, though sometimes seen as strict and hard to follow, play a major role in maintaining financial security and stability.
As part of its commitment to combating money laundering and terrorism financing, the UAE issued a Decree-Law that imposes additional obligations on banks to conduct thorough due diligence before onboarding customers. As the UAE is putting huge efforts to meet international standards, particularly those set by the European Union.
Even with these strict regulations, if you are a business owner or entrepreneur wishing to invest, setting up your company’s bank account should be manageable, if you understand what are the key obstacles that are affecting your bank account opening, here are five primary factors that can influence your ability to open a bank account:
1- Physical office
It is a common situation that the company will not have an office, because many UAE companies do not have actual office and rely on flexi desks, which may cause the banks to refuse the opening of the account for the client, due to their due diligence procedures, particularly the Contact Point Verification (CPV). As part of this procedure, banks must verify the actual presence of the physical address provided. Following this verification, a field visit report is generated to confirm the validity of the information, ensuring compliance with regulatory standards.
2- Activity
The nature of a company’s activities significantly influences the bank account opening process. Banks tend to favour specific, well-defined activities to reduce risks. By specific, we mean the ability to know the exact activity, and if there is a slight chance that the activity is ambiguous, there’s a higher likelihood that the bank will refuse to open an account. For example, companies engaged in general trading often face more rejections compared to those that focus on trading specific products. Clear and precise activity descriptions can enhance the chances of successfully obtaining a bank account.
3- Proof of the source of funds
Banks in the UAE typically require proof of the source of funds as part of their due diligence and compliance with anti-money laundering (AML) regulations. This ensures that the money involved is coming from legitimate, legal sources. To verify this, banks often request extensive documentation and ask detailed questions to assess the legitimacy of the funds. These measures are designed to reduce the risk of being involved in illegal activities such as money laundering, terrorism financing, and fraud, helping maintain the integrity of the financial system.
4- Nationality
Nationality plays a significant role in the ease of opening a bank account in the UAE. Certain countries are considered high-risk or may fall under international sanctions, leading banks to require additional documentation and verifications. In such cases, the bank may request more details to process the application, and in some instances, the account opening could be rejected altogether. This increased scrutiny is aimed at ensuring compliance with international regulations and reducing potential risks.
5- License
In general, it is easier for mainland companies in the UAE to open a bank account due to the stricter regulations and barriers they must meet to operate, reducing the risk of being seen as suspicious. On the other hand, free zone companies often face more obstacles from banks. Since the process of establishing a free zone company is less regulated than that of a mainland company, banks tend to perceive them as higher risk, requiring additional documentation and special attention during the account opening process.
How CorpLex Can Help?
If you’re planning to open a bank account in the UAE, you’re in the right place! At CorpLex, we offer expert consultation and assistance to ensure a smooth, hassle-free process. Beyond the factors mentioned, there are various other considerations that can influence the ease of bank account opening. Our team will guide you in choosing the right bank and managing the process efficiently. Don’t hesitate to contact us—we’re here to make your bank account opening experience fast, simple, and effective!