In 2014, OECD members passed the CRS (Common Reporting Standards) framework that has redefined the entire offshore banking landscape. CRS is a comprehensive framework for sharing financial information of foreign accounts to help address the problem of tax avoidance and fraud. Though Hong Kong is not a member of OECD, it committed to implementing the resolutions set out in the CRS.
In 2016, the Hong Kong legislative assembly passed the Hong Kong Automatic Exchange of Information (AEOI) framework that localized the CRS. This new framework has redefined the offshore banking system in Hong Kong and even in other areas. Now, if you want to open an offshore bank account in Hong Kong, here is what to expect.
Documentation that help to authenticate your identity
Under the Hong Kong Automatic Exchange of Information (AEOI) framework, banks are categorized as reporting institutions. This implies that they have to get as much information about their clients as possible. It is because of this that most of the banks have installed strict KYC (Know Your Customer) efforts before users can be allowed to open accounts. Therefore, it is no longer simply telling the banks about your name. Rather, you are required to authenticate the information.
Government-issued information and tax compliance information
The primary goal of extra scrutiny from banks is to ensure that people with intention of evading paying taxes are kept off the jurisdiction’s system. However, the banks are going an extra stretch to stay out of trouble. For example, to open an offshore bank account Hong Kong, you are required to provide government-issued documents and tax compliance information. If banks suspect that you are likely to be opening an account to evade paying taxes, the account could be declined.
Proof of income and expectations for the account
Though an offshore bank account Hong Kong operates the same way a local bank works in many aspects, more details about the source of income will be demanded. In the past, this was not a major requirement when opening an offshore bank account in most banks. Now, this has changed completely.
Most banks want to know where your income is coming from to reduce the risk of handling cash from fraud, Ponzi schemes, and theft. If you are employed, the bank will want to see appointment letters or confirmations from the employer. You will also be required to provide latest bank statements to demonstrate the cash flow.
For those in businesses, the scrutiny is even more rigorous. The bank will want to know the nature of the business and who you are dealing with. For example, if you are dealing with clients from a risky jurisdiction such as North Korea or Syria, the bank will decline your request for a bank account.
Banks also require users to demonstrate the expected cash flow. This means that if the monthly cash flow into the bank account is about $20,000, anything beyond that figure will raise a red flag. You will be called to demonstrate why the $20,000, anything beyond that figure will raise a red flag. You will be called to demonstrate why the extra cash has hit the account.
Opening an offshore bank account Hong Kong after the passing of the CRS framework Hong Kong has become extra difficult. Now, you have to proof everything and demonstrate that you are not a high-risk party. Remember that you must travel to Hong Kong to present yourself to the bank before the account can be opened.