Top 5 main reasons why banks shut down or reject business accounts

A big red light for high-street banks reviewing business account proposals is foreign ownership or directorship. Banks tend to see domestic business owners and directors as lower risk and as such use national passports and IDs are used almost as a sign of credibility. Given that banks try to operate as risk-aversely as possible when businesses have foreign directors, UBOs or shareholders it is often a “no” for them

High-street banks operate with a risk-averse outlook; they are able to rely on larger enterprises for the majority of their business and as a result are predominantly focused on these clients. Banks typically will not spend time understanding smaller companies who have complex business structures. This includes things like having multiple UBOs (Ultimate Beneficiary Owners), shareholders or involved parties (investors etc.). Although these structures are common in large companies, banks do not think it is worth the time and effort of checking and onboarding smaller companies that have these structures. Banks will often flat-out refuse even to start digging and will deny applicants without further investigation

One such complex business activity might be cross-border trading – which represents a larger risk to banks. With international trade, banks must be more proactive in monitoring financial crime and putting in place anti-money laundering measures as money comes in from foreign counterparties. 

Traditional banks normally divide domestic/international operations. But modern economy is mixed, and everyone are acting globally. Banks are not ready for that flow, so even if they accept cross-border payments, in future they delay or even block those payments for different reasons and it eventually may result in blocking the account

Banks have a blanket view of business in certain countries as being “high-risk”. In fact, an overwhelming number of countries outside of the EU and America are often viewed this way: Russia, China, the Middle East and South East Asia in particular are large business hubs that carry this perception. When businesses interact with them, whether that is via investment or trading, they run the risk of banks closing their account

Albeit a temporary situation, Brexit and COVID restrictions have brought about immense uncertainty for business. Banks are currently overstretched, and many have put a pause on opening any new business bank accounts as a result of these tricky circumstance