BANKS TIGHTENED REQUIREMENTS TO OFFSHORE

 

Against the background of the movement in Europe of automatic exchange of tax information, European banks continue to tighten, and offshore companies have fallen under their onslaught. If the first tightening began with a simple requirement to “confirm the beneficiary”, which, in fact, meant providing additional documents on the income of the person who will manage the bank account. Now, banks have begun massively denying service to offshore companies, suggesting that beneficiaries change their jurisdiction or close the account within 30-40 days.

A sharp change concerning this particular rhetoric began in the spring of 2016, when the Baltic and Cypriot banks began to demand that their clients report financial statements when opening corporate accounts (or from existing corporate clients). Thus, any current confidentiality benefits began to disappear, placing many freedom-loving customers in a difficult situation. Previously, for those customers, the lack of such requirements was a clear advantage while operating withinin an offshore jurisdictions.

An additional difficulty was the fact that banks do not have a common policy to establish requirements for compiling accounting reports. Now banks require the provision of financial statements in accordance with the standards of the internal accounting report.

The new requirements, came into effect as part of the latest legislative changes, especially in Latvia, paragraph 31.7 of the “Regulatory Procedures for Advanced Study of the Customer” from the Latvian Financial and Capital Market Commission indicated that the lack of reporting is one of the signs of the risk of such a client for the bank. In Cyprus, the national legislation amended, in paragraph 76A, Anti-Money–Laundering Directive, that the bank may require reporting from its customers.

It’s seems like the banking reporting requirements is not the last call and most likely the whole industry will be anticipating a major changes within the foreseen future.

Offshore Forex Brokers

At the moment, those investors who have not yet abandoned the use of offshore companies, as example those investors who are working with the offshore brokers, may still not experience any of the discussed restrictions (including investors whose accounts are open in regulated Western brokers). However, their difficulties can begin with banks and only later on with the brokers.

For offshore Forex brokers, the situation becomes tougher, it was already noted earlier that banks are barely agree to open accounts for their offshore companies, and in most cases trying to avoid any contact with such companies. Since the constant complaints of clients of such companies have undermined the patience of banks and the regulator. Recently, there have been raising difficulties in opening bank accounts even to the European brokers.

At the moment, tightening continues, both in the regulation of the Forex industry, and on the part of the banks, which try not to work with “complicated” customers.

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