Why corporate bank accounts are closed in different countries, how to avoid closing accounts in other countries
What are the reasons for closing a corporate bank account in different countries? Read in this article why companies' accounts are forcibly closed in Georgia, Russia and European countries. Click on the link right now to secure your business!
Find out why corporate bank accounts are being closed in different countries⬇️
- 1. Reasons for refusal to open a corporate account
- 2. Why do they close a corporate account in Russian banks
- 3. Why do they close a corporate account in Azerbaijani banks
- 4. Why do they close a corporate account in Cyprus banks
- 5. Why do they close a corporate account in Latvian banks
- 6. Why do they close a corporate account in Estonian banks
- 7. Why do they close a corporate account in Georgian banks
- 8. How to warn a company against forcibly closing an account in Georgia
Sometimes foreign entrepreneurs are faced with the refusal of banks to open a corporate account of a newly registered company. What is the reason for this, what reasons for refusal are possible, and, most importantly, how to avoid it, we will tell you in this article.
Reasons for refusal to open a corporate account
Each country has its own set of reasons for such a refusal, but there are general principles by which bank employees make decisions. These include:
- determining the degree of business risk;
- availability of debt obligations;
- checking the reputation and competence of the company's owners and its director;
- reliability of the information provided to the bank for opening an account;
- availability of a well-developed and clear company structure;
- the validity of the receipt of funds.
Even if these points are met, the bank has the right to conduct additional checks and refuse to open an account for the company. It is also not uncommon for cases when, after approval of the opening of a corporate account, they were closed after some time on the initiative of the bank.
Why banks in different countries can close an existing corporate account, we will analyze further.
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Why do they close a corporate account in Russian banks
Russian banks can independently decide to close a corporate account. All conditions under which this is possible are described in the legislation of the Russian Federation.
The main reasons for closing a corporate account in Russian banks on the initiative of the bank are:
- no transactions or cash balance on the account for the last 2 years;
- absence of transmitted tax data from a non-resident company of the Russian Federation;
- violations of the legislation of the Russian Federation.
When making a decision to block and close an account, the owner is notified about it a month in advance. At this time, the bank is obliged to double-check the status of the accounts in order to avoid errors and illegal account closure.
Why do they close a corporate account in Azerbaijani banks
Azerbaijani banks can close a company's account without the owner's consent only by a court decision. In this case, the following reasons should be possible:
- the absence of transactions for more than 1 year;
- using an account for illegal withdrawal of funds;
- the account balance must not exceed the minimum specified in the contract with the company.
Before closing, Azerbaijani banks also notify the owner of the closure of the corporate account one month in advance.
It should be borne in mind that there is currency control in the Russian Federation and Azerbaijan. If the owner of the corporate account does not provide confirmation of the legality of monetary transactions, the account may be closed due to violations of the legislation of the country.
Why do they close a corporate account in Cyprus banks
In order to get rid of the title of the main European offshore, the authorities of Cyprus decided to forcibly close corporate bank accounts in the following cases:
- the absence of real estate of the company, or significant operating assets;
- lack of premises for the company's activities;
- absence of employees in the state, or their insignificant number;
- failure to report on financial activities;
- lack of links with other organizations in Cyprus.
Violation of at least one of the above points threatens to close a corporate bank account in Cyprus banks.
Why do they close a corporate account in Latvian banks
Latvian banks are not as strict about closing existing corporate bank accounts as Cyprus banks. However, in the absence of transactions, the bank has every right to liquidate the company's account.
After the adoption of the law on the right of banks to close inactive accounts of companies, there were cases when accounts of existing organizations were closed. This contributed to the transition of business in Latvia to payment through payment systems.
Why do they close a corporate account in Estonian banks
Banks in Estonia, as well as banks in Latvia, began to close corporate accounts of many non-resident companies in the country. Using the Law on countering terrorism and money laundering as a basis, Latvian banks have the right to close an account without explaining the reasons.
This was a big blow for all foreign companies in Estonia, as not all organizations have proof of the origin of assets. This approach goes against the existing programs to attract investment to the country.
Why do they close a corporate account in Georgian banks
There is still no law in Georgia that gives banks the right to close a particular corporate bank account. The instructions of the National Bank of Georgia are used to regulate relations with clients.
Accounts for which more than a third of transactions occur in the domestic market are not subject to closure. Foreign companies may face a refusal to open an account, but they are unlikely to face forced closure.
However, sometimes Georgian banks resort to such a tool as forced closure of the company's account. This can happen if a corporate account is suspected of being used for money laundering or terrorist financing.
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Warn the company against closing an account in Georgia
To begin with, the owner of the company needs to make it a rule to save all primary documents on transactions. If the bank demands to provide confirmation of the legality of transactions, immediately transfer the primary documentation to the bank. And it is better if you upload them in advance to the taxpayer's personal account.
It is also necessary to pay taxes regularly and ensure a presence in the country. For Georgian companies, it is enough to provide payment for the rental of premises, payroll to employees or other confirmations.
Naturally, foreign entrepreneurs are treated more cautiously, and their activities are checked more carefully. But with transparent activities, non-residents of Georgia become full-fledged market participants.
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