After incorporating your Hong Kong company, opening a corporate bank accent is vital to starting your business. The international communities have consistently recognized Hong Kong’s inherent strengths in its sound and robust financial system. The city has also implemented a robust set of anti-money laundering control systems, including customer due diligence procedures, making it difficult to open a bank account.
Common issues related to opening a corporate bank account in Hong Kong are choosing the appropriate bank and preparing information and documents to satisfy the bank’s customer due diligence process. In this article, we examine the different business account solutions in Hong Kong.
General Bank Account Opening Processes with a Traditional Bank
Individual banks have their own account opening procedures incorporating the applicable regulatory requirements. Generally speaking, to open a business account with a traditional bank, most banks will require an initial application overview. Before opening bank accounts, banks need to undertake customer due diligence (CDD) to understand customers’ backgrounds and needs. For corporate customers, applicants must get ready the supporting documents related to corporate identification, information of the registered office and principal place of business, information of the beneficial owner(s), purpose and intended nature of the account, and so on.
After the preliminary review, both parties will meet to sign the relevant bank application forms and documents and pay the initial deposit and application fee. Requirements of minimum deposits and signatories differ from bank to bank and from time to time. Generally, the presence of all directors or beneficial owners is not required by the Hong Kong Monetary Authority (“HKMA”). However, banks must meet the basic requirement of identifying and verifying the individual who is authorized to act on behalf of the company to establish a relationship with the bank. The specific implementation approach may be different bank by bank.
After submitting all the required information and signing the bank applications in front of a bank officer, the application will be sent to a further internal review, which will take approximately two to three months. According to the actual circumstances, banks may require applicants to submit additional information and documentation during this period. Finally, if the review is satisfactory, the bank shall inform the customer of the final results.
Virtual Banks
As a viable alternative to traditional banks, there is the option to use digital solutions provided by virtual banks or virtual account service providers. These organizations usually have no physical branches and mainly focus on virtual services.
Virtual banks are digital-only banks that primarily deliver banking services through the internet or other electronic channels with no physical base. Introducing virtual banks is a significant move to develop Hong Kong into a smart banking hub, empowering the city with more innovative fintech solutions to support Hong Kong’s most important industry segments, such as retail businesses.
The Hong Kong Monetary Authority (“HKMA”) regulates virtual banks, which must comply with the same supervisory requirements applicable to conventional banks. So far, in Hong Kong, only eight institutions are granted virtual banks licenses:
- AIRSTAR BANK LIMITED
- ANT BANK (HONG KONG) LIMITED
- FUSION BANK LIMITED
- LIVI BANK LIMITED
- MOX BANK LIMITED
- PING AN ONECONNECT BANK (HONG KONG) LIMITED
- WELAB BANK LIMITED
- ZA BANK LIMITED
Virtual banks can provide essential banking services such as deposits, loans, and inter-bank transfers. Compared to traditional banks, they may offer lower fees, better rates, and a heavier focus on small and medium-sized enterprises (“SMEs”).
Virtual banks must handle account opening applications by the same risk-based approach applicable to the traditional banks. Therefore, the process of colleting information and documentation follows the same guidelines as if you are dealing with a traditional bank. It’s also worth noting that even though virtual banks have developed online account opening interface, most of them still need to meet their customers face-to-face in Hong Kong before opening the corporate account for them. Thus, virtual banks mainly target local SMEs.
Money Service Operators
A Money Service Operator (“MSO”) typically provides money remittance, conversion services, and dedicated payment instructions, which is a service that allows you to receive money via domestic or international bank transfers and link it to third-party services or currency exchange. In Hong Kong, MSOs are regulated by the Customs and Excise Department of Hong Kong.
MSOs have an array of advantages in comparison to traditional banking, especially to online businesses. MSOs welcome start-ups, SMEs, and newly incorporated companies. Opening an account for e-commerce using MSOs is optimal in collecting payments via several payment gateways such as PayPal since most MSOs are built to connect with payment gateways easily. They offer easy solutions with lower transfer fees, payment card services, and multi-currency availability. With an MSO, the virtual account is opened entirely online, with no need to be physically in Hong Kong, which significantly benefits foreigners who cannot travel to Hong Kong due to COVID-19 quarantine restrictions. Once the virtual account is opened, a Unique Account Number is assigned to the account holder. However, the assets themselves are held in a segregated bank account under licensed banks.
However convenient and attractive it may be, opening a virtual account with an MSO has its limitations. For example, the virtual account may have a limited maximum balance. Once the limit is reached, the account holder needs to withdraw money or upgrade the balance limit in the account. Moreover, an MSO is not a licensed bank, which means businesses and individuals should not expect an MSO to offer financial products such as insurance, savings, checking accounts, investments, or loans.
Which Account Opening Solution is Best For You?
Looking ahead, Hong Kong’s further economic integration with the Greater Bay Area (GBA) will continue to attract international capital to invest in Hong Kong, making the city attractive for start-ups and entrepreneurs to seek funding support and market capitalization. If you have a viable business model and consider Hong Kong the best place to establish your company, make sure that you can open a business account, either with a traditional bank, virtual bank, or a Money Service Operator in Hong Kong. CW can help you evaluate different options before setting up the Hong Kong company, depending on your business needs.
For inquiries, please get in touch with our Corporate Secretarial Team:
Ms. Vivian Mok (cosec@cwhkcpa.com)
