Why Opening a Business Bank Account in Hong Kong Is So Difficult

Have you tried opening a business bank account in Hong Kong only to be rejected without any clear explanation? While Hong Kong is definitely one of the world’s most business-friendly hubs, for many entrepreneurs, especially startups and SMEs, opening a bank account can feel anything but friendly.

If you’ve found yourself stuck in a cycle of rejections and months-long waiting times, delaying your operations and missing valuable opportunities, you’re not alone.

In this article, we’ll dive into the root causes of these roadblocks and explore why opening a bank account in Hong Kong is so challenging. More importantly, we’ll share practical solutions to help you get your business banking on track.

In short, opening a corporate bank account in Hong Kong is challenging due to 3 key factors: compliance requirements, business considerations, and practical difficulties. While these measures are essential for maintaining a robust and secure financial system, they often create significant hurdles for entrepreneurs.

Let’s take a closer look at each of these reasons. 

Banks in Hong Kong enforce strict compliance measures to meet international standards and combat financial crime. As a global financial hub with a favourable corporate tax regime, Hong Kong attracts businesses from around the world. This makes it essential for banks to carefully evaluate applications to ensure accounts will not be used for illegal activities, such as money laundering or other suspicious transactions.

These compliance measures include:

1. Know Your Customer (KYC): Banks must verify the identity of their clients to understand the nature of their business, assess risks, and ensure they are not involved in illegal activities. This often takes the form of an in-person interview. 
2. Anti-Money Laundering (AML): Procedures are in place to detect and prevent money laundering activities, including monitoring transactions for suspicious patterns.
3. Sanctions Screening: Ensuring that customers or transactions do not involve individuals, entities, or countries under international sanctions.
4. Customer Due Diligence (CDD): A deeper investigation into clients, especially high-risk ones, to confirm the legitimacy of their funds and business operations.

If banks fail to follow these compliance measures, they can face severe penalties, including heavy fines, from relevant authorities. As a result, traditional banks would approach every client as a potential risk, often leading to defensive practices like rejecting applications without explanation, closing accounts, or cancelling transactions. However, while these measures are effective in screening customers, they have also been criticised for a lack of customer understanding. 

How Compliance Impacts Account Opening

You may not realise it, but some aspects of your company’s profile could be suspicious from the bank’s compliance perspective, making the account opening process more challenging. 

Here are some of the potential issues that you can pay attention to to improve your chances of a smoother application.

1. Your Directors and Shareholders

While Hong Kong welcomes entrepreneurs from all over the world to set up a company, some nationalities may face stricter scrutiny when opening a bank account, which can complicate the process. 

For additional clarity, it is best to check on the Hong Kong government's website for details on nationalities subject to financial sanctions, as this may impact your application. Most major banks typically provide information regarding this on their websites as well.

2. Your Industry

Your business’s primary activities and the nature of your company’s industry can significantly impact the outcome of your bank account application. Certain industries are considered high-risk by banks and often face near-automatic rejection. These include sectors such as:

• Cryptocurrency
• Gambling
• Weapons or firearms
• Tobacco products
• Adult industry
• Diamonds and gemstones

Additionally, industries with a reputation for scams, such as telemarketing, multi-level marketing, or timeshare businesses, are often on the blacklist. 

3. Your Company’s Ownership Structure

Banks are also likely to closely examine the complexity of your company’s ownership structure to verify the identities of its directors and shareholders. A straightforward structure, where all shareholders are individuals, usually speeds up the process.

However, if your company’s ownership involves multiple layers of entities, the bank will need to conduct extensive checks to verify each intermediary company and its owners until they identify the ultimate beneficial owners (UBOs, the individuals who indirectly hold an interest in the company.

Meeting Compliance Requirements

The most effective way to open a business account is to meet the compliance requirements, which reassure the bank that your account won’t be used for illegal activities and that it complies with local banking regulations.

To do this, make sure that you can provide all the documents and information the bank requests, which typically include

• Valid company registration documents, such as a Certificate of Incorporation and Business Registration Certificate.
• ID documents for all directors, shareholders, and UBOs, such as HKIDs or passports.
• Proof of address for directors, shareholders, and sometimes the company’s office.
• Details about your company’s business, including where transactions to and from the account will originate.

On top of compliance reasons, banks also assess businesses based on various criteria to ensure they align with their policies, risk appetite, and profitability. 

As commercial companies, banks naturally prioritise clients that bring in higher profits. As the owner of a start-up or SME, your profile will likely be less appealing to banks compared to large corporations that bring in high transaction volumes, significant deposits, and opportunities to sell additional services like insurance products and loans. 

Ultimately, the bank’s decision to approve your business account application also involves this commercial assessment of your company’s profitability potential, in addition to compliance with risk policies. 

Business Factors That Impact Account Opening

Banks often evaluate business account applications based on a company’s viability and profitability, making certain cases more challenging, such as:

1. Start-ups and New Companies

Most banks are very unlikely to go through the costly process of opening accounts for businesses that are just starting out, like start-ups in their first year of operations. They often prioritise proven viability and profitability over potential,  focusing on financial data to determine whether a company can consistently manage its expenses.

Additionally, many banks impose high account opening fees, monthly fees, and minimum balance requirements, which can be difficult for start-ups to meet, further discouraging banks from approving their applications.

2. Unfamiliar Business Models

Even if your company has a solid financial history, banks may struggle to understand your business model, particularly if it relies heavily on online operations. Many banks remain risk-averse, sticking to traditional business models with which they are familiar. If the way you run your business doesn’t align with their expectations, it can significantly increase the difficulty of opening a business account.

Unfortunately, banks tend to reject applications outright rather than invest time in understanding new or unconventional business approaches.

In addition to compliance and business-related challenges, you may encounter additional practical difficulties, such as:

• You have to come to Hong Kong in person when applying for your bank account. Most traditional banks require all company directors to be physically present in Hong Kong for the account opening interview. 
• As banks need to understand your business, they may request documents such as contracts, sales invoices, and business plans. However, if you’ve just started your business and don’t yet have revenue or these documents, the process can become more challenging.
• The process can take anywhere from a few weeks to several months, as banks’ compliance departments conduct due diligence on all submitted documents. This regulatory requirement often delays approvals. The internal compliance procedures are also confidential, making it difficult to predict your chances of success
• Compliance measures are subject to changes without prior warning. This depends on each individual bank. They often become stricter and add unforeseen hurdles during the application process.
• Banks may also unexpectedly ask for additional paperwork during the review period, which can delay the process further if you need time to gather the required documents.
• You may be rejected more than once when opening a bank account in Hong Kong. The issue with this is that banks sometimes keep records of previous rejections, making it harder to reapply at the same institution. 

Unfortunately, when your application is rejected, there is often no recourse. A bank’s decision is typically final, and requesting a review of the rejection may prolong the process and often result in another rejection.

However, as a precaution, you can ensure that all mandatory documents, such as those verifying your business’s compliance, nature, and financial records, are prepared before applying for the account.

Alternatively, you can explore alternatives to traditional banks in Hong Kong, such as virtual banks and financial service providers with simplified application processes, flexibility for new businesses, and reduced costs.

If you’re looking for a convenient, entirely online account opening process, Statrys is the solution.

Statrys isn’t a bank, but it is a licensed Money Service Operator providing multi-currency business accounts to businesses registered in Hong Kong, Singapore, and the BVI. With Statrys, you will enjoy a seamless, fully digital onboarding experience and can have your account ready in as fast as three working days.