Drama around the banks in the UAE – or how the banks are diligently helping to drive companies/expats out of the country

 

Account opening within 10 min for people, (free zone) companies and offshore companies without much trouble, customer-friendly and excellent solution-oriented service – wishful thinking! What may sound like an unbelievable fairy tale to expats, who are currently trying to open a bank account in the UAE for their UAE company, was indeed a pleasant everyday experience until a few years back in the UAE.

 

Today, however, reality is different and most expats can tell you a thing or two about it: In addition to filling out countless forms and providing numerous documents – especially when applying for corporate accounts – the account applicants (or the owners of companies) are literally screened from head to toe. And then, after months of correspondence with the bank and the submission of numerous documents, the application to open a bank account is increasingly rejected. Reason? – Non! Or the succinct reference to the “Compliance Department” (to which the customer has no access and may not even know the name of the employee responsible for rejecting the application).

This applies not only to offshore companies with apparently dubious financial backer, but increasingly also to reputable entrepreneurs and investors with an impeccable reputation and many years of business activity in the UAE. Some banks are now even rejecting (the opening of) bank accounts for free zone companies in general – on suspicion, so to speak.

And if a bank, after months of painstaking (sometimes more than half a year) procedures, still lets itself down to grant an account to a company, further annoyance occurs, such as penalties for non-compliance with the sometimes very high minimum deposit amounts. Even a newly opened or long-standing bank account is no guarantee that the owner will retain this account for a long time. More and more often, accounts of renowned and long-standing companies are closed. Reasoning of the banks – see above.

But what is the cause behind these procedure?

The banks claim, that it’s due to strict rules laid out by the UAE central bank. The UAE central bank on her behalf claims, she only invokes the strict FATCA regime imposed by the United States.

FATCA (Foreign Account Tax Compliance Act) is a US law enacted in 2010 that aims to track down US citizens who have accounts outside the US – as US taxation is based on citizenship (and not residence based as it is in Europe). For this purpose, the US has “urged” many countries in the world (including Germany and the UAE) to enter into agreements with the US, requiring banks in those countries to automatically transfer data of US citizens to the US government. But this also affects non-Americans: Almost everyone in the UAE and other countries has already been required by their bank to complete numerous FATCA forms to confirm that they are not a US taxpayer.

The OECD’s CRS (Common Reporting Standard), which will come into effect in the UAE on 1 January 2018 (and has already been in existence in Germany since the beginning of this year), is based on the model of FATCA: In future, banks all over the world will transmit data on their respective account holders to their home countries: This will be done automatically and practically without any control. We have learned that anyone wishing to open an account in the UAE right now (whether a personal account or one for a company) must complete CRS forms in addition to the FATCA forms. The transparent human becomes more and more real.

If the UAE wants to continue attracting investors, companies and expats from all over the world, then there soon should be a rethinking on part of the banks and the customers should once again come first, otherwise not only the banks but also the Emirates themselves could lose in the medium term.

Our clients, who are currently not able to open accounts in the UAE, are increasingly being referred to banks in other countries. For example, banks of Mauritius are still open to new clients, as are trusts in Singapore with easy access for opening an account. Our partner firm itself representing the major bank, with which the trust invests its money.

If you have any questions on this subject or need help with other legal problems, please contact us at tel: +971 7 236 4530 or at office@slglaw.cc.