In October of last year, we wrote an article on how laborious – and often impossible – it is for companies in the UAE to open bank accounts. This article was met with a great response.
A little more than half a year later, unfortunately, the situation has not improved; on the contrary, RAKICC, an authority that is known to have a large number of companies registered, spent months trying to cooperate with various banks in the UAE. In order to give its registered companies access to business accounts. However, since these cooperations did not seem to work, on the one hand because these banks were also extremely restrictive with the allocation of accounts and on the other hand because they were linked to partly absurd conditions (permanent high minimum deposits, high monthly charges if the minimum deposit is not reached and the like), RAKICC itself has apparently apparently giving in and now recommends banks in Mauritius. Unfortunately, this is a poor testimony for the retail banks established in the UAE.
From our practice, we have seen many examples in recent months of the odysseys that companies today have to go through to “enjoy” a commercial bank account or to avoid losing an already established bank account:
- Most banks – despite their power of attorney and all KYC documents – continue to insist that the authorised signatory of the account or the UBO (beneficial owner) of the company applying for the account, must appear in person, to sign the application to open the account. UBOs/signatories, who are not in the UAE must therefore travel for a single signature. To date, no bank employee has been able to give us a satisfactory answer to the question of why the application cannot be signed by video conference or a foreign correspondent bank. Answer: Regulation is regulation.
- The vast majority of banks that still “condescend” to open an account, e.g. newly founded Free Zone companies, sometimes demand exorbitant minimum amounts – sometimes even in the high six-figure range – which must always be in the account, without interest of course. And should this minimum amount be undercut once – and even if only slightly and only for a short time – the banks impose high penalties immediately.
- For example, a bank with which a company has an account and which was in the process of being taken over by a new owner persistently refused to issue any KYC requirements (documents, information, etc. about the new owner) before the transfer had been completed. “Information only if you bring the new license”, was briefly and unkindly communicated. This is one of many cases in which the banks consider themselves to be petitioners rather than customers. Unfortunately, the customer is often not king at the banks, but rather beggar.
- The best you can get as a dialogue partner at the banks is the branch manager, to have a conversation with an employee in the compliance and/or legal department is hopeless. Really well-founded bankers are rarely encountered – at a large private bank in Dubai only from a deposit sum of USD 5 million. Then some more doors open and you even get coffee served.
- The employees working in customer service at a major bank in Dubai simply did not understand the legal form of a trust and insisted on leading the trustee as a UBO. All explanations about the legal nature of a trust were useless. The attempt to penetrate to the legal department failed completely. The employees blocked every attempt and said that they knew exactly who the UBO was in that case and that he should probably present his utility bills and private bank statements – which a trustee naturally refused.
Every newly founded company that wants to gain a foothold in business needs a business account. However, as the opening – if at all possible – can take up to six months at UAE banks (and then possibly be rejected) and requires immense bureaucracy (not to mention the full investigation of business owners and UBOs), some investors are now reluctant to invest in the UAE or start businesses.
Unfortunately, it is unlikely that the situation will improve in the near future. The pressure on low-tax countries like the UAE from the USA, the EU and the OECD, in particular the threat of various tax heaven lists or other “black lists” is not diminishing and the UAE central bank passes this pressure on, directly to the banks, which then, for fear of penalties or as the banks always say “for compliance reasons”, prefer to forego new business and new customers in order to take no risk. But the hope dies at last. Maybe in the near future the opening of a business bank account – as it was a few years ago – will again become a simple formality.
In the meantime, we continue to support our clients through our numerous contacts to banks in the UAE. If this does not help, it is still possible to switch to banks in Mauritius or other third countries, as well as to trusts in Singapore (including problem-free account opening), with which we work constantly.
If you have any questions on this subject or need help with any other legal issues, please contact us at tel: +971 7 236 4530 or firstname.lastname@example.org.