As at July 2019.
I am publishing this article as additional guidance to our clients that operate a bank account through a company in Cyprus or wish to open a new one.
I have divided my article to two main headings.
- Opening a bank account with a commercial bank and
- Opening a bank account with an electronic money institution.
The information relates to the opening of bank accounts for Cypriot private companies.
A. Opening a bank account with a commercial bank.
Opening a bank account with a Cypriot commercial bank is relatively difficult and time consuming these days. It is possible though, if certain preconditions are met.
I have written more about the current regulatory framework in my article here:
As it emerges from my article above, the Central Bank of Cyprus has in the last year, imposed new directions to commercial banks as regards acceptance policies of new and existing clients.
There are four major banks that have serious international banking units (IBUs) at the moment.
All commercial banks have increased substantially their fees and charges to international clients as a means to keep only serious customers.
Key things to know are:
1.Physical Persons. Full KYC details by the UBO (owner of the company)will be required. These definitely include: Passport, Utility bill, CV, Source of Wealth Declaration and Tax ID and are reviewed annually.
In addition, the Bank may ask for additional personal data like proof of ownership of shares or other property, tax declarations in the country of residence, economic profile, bank statements from existing banks, social security payments, pay slips, declaration from the employer (if any) e.t.c. The aim of the bank is to construct a detailed economic profile of each physical person and exclude the possibility of the person being involved in any money laundering, gambling, prostitution or other illegal activity or in any other activity or business which is not acceptable by the bank.
2. About the company.
As regards the company itself the standard documents needed are:
Recent corporate certificates and a recent search by the registrar of companies.
Economic profile of the company which includes details like:
- A concise line of business (LOB). In other words, banks will not accept LOB “consulting” or “service”. The LOB must be specific and detailed.
- Details of companies or persons that the company will do business with (often described as counterparties),
- the reason that the company wants to open the account often referred to as the “Purpose of the business relationship”.
- the annual turnover to pass through the account,
- the number and level of incoming and outgoing transactions.
The need for physical presence in Cyprus. A new parameter that is often necessary in order be accepted as client, is that the company must have real economic presence in Cyprus. This means that the company must have physical presence or activity in Cyprus which is usually proven by renting offices and employing personnel. Thus the bank will require to see a lease agreement and an employment agreement. To effect the above the company should:
- Rent offices in Cyprus in self contained premises or shared.
- Employ staff, even on a part time basis.
- Register with the Department of Social Security as an Employer and pay social security contributions.
In certain situations where the company will have real economic activity elsewhere, an office and personnel in Cyprus may not be a must. For example, suppose that a business has a catering business in Greece and wants to set up a company in Cyprus to perform part of the invoicing from Cyprus. In such a case, due to the fact that there is real economic activity in Greece, the Cypriot company may not have offices in Cyprus. Of course, again there are not clear guidelines and different banks may adopt different policies on this matter. This is very unfortunate because the system, as it is now, lacks uniformity.
The need for financial statements. Each Cypriot company must maintain proper accounts and prepare and submit financial statements with the Tax Office. Commercial banks always ask for the financial statements on the annual review of the bank account. Therefore we strongly advice companies that have bank accounts in Cyprus to appoint accountants and auditors to perform this task.
3.About the process and the time required.
As I indicated in the beginning, one cannot provide a timeline. From my experience a bank account may take between 1 to 6 months to be opened depending on the complexity of the case, availability of personnel and other factors.
This is definitely a lot of time , especially compared with what was applicable in the past.
B. Opening a bank account with an electronic bank.
In the last year or so certain electronic money institutions (EMIs) made their presence in Europe like Revolut or TransferWise. These are not traditional banks with offices and branches but only offer services online. They may be an alternative in certain situations where the client will only perform electronic transactions.
The due diligence for EMIs is the same as commercial banks. In other words all the documents will need to be submitted and more information may be asked in the process. The difference is that EMIs process applications much faster than commercial banks and they are more responsive to inquiries. Of course care should be taken by clients as regards the regulation of EMIs and the safeguards that are in place in case an EMI is shut down.
The situation in Cyprus is no different that what is applicable in other European Union jurisdictions. More or less the same rules and regulations are applied in all EU countries. The EU through the European Central Bank wants to impose strict restrictions in the movement of money and also wants to control all monetary transactions. In a sense commercial banks do policing instead of banking. They have become an arm of the government and perform tasks, that in my opinion, are outside the ambit of their mission, knowledge and expertise.
As I say to my clients, having an operational bank account these days anywhere in Europe must be considered as a valuable asset. Therefore special care should be taken by businesses to maintain their bank accounts since it is not easy to open a new one. The era where banks were chasing clients and opened bank accounts without many questions or restrictions has passed and will not return.