Foreign accounts: how to get KYC done

If you buy property in a foreign country and open a bank account there to transfer money for the purchase, you will have to face KYC (Know Your Customer): the banking procedure for customer due diligence and for checking the legal origin of funds. Most countries have been toughening such procedures since the early 2000s. They are regulated by the standards of FATF, OECD and other international organisations. The foreign capital coming into Europe and the US from countries that are not members of the correspondent organisations is subject to special controls and examination.

First of all, banks require the provision of passports and documents proving the legal origin of funds. As for capital proof of origin, the precise documents required depend on the sources of income, the most common of which are:

• salary;
• personal business dividends;
• funds from the sale of assets;
• interest on deposits;
• capital gains from securities;
• inheritance;
• rental payments;
• royalties.

For example, if the source of income is your salary, you will need to provide the bank with payslips for the previous year and year to date. If you have earned the money as an entrepreneur or obtained it from selling your assets, you will have to provide a tax return.

“Banks require entrepreneurs to demonstrate the steady growth of their businesses,” Kirill Schmidt, Head of Financial Services at Tranio, notes. “If a company has been making a loss over the last decade, but has suddenly made a handsome profit over the last two months, their track record will prompt a lot of questions and, most probably, will not be accepted.”

KYC can take from several weeks to several months, so, making inquiries about the requirements of the bank you are going to open an account with, preparing all the necessary documents and transferring the money in advance is recommended. “Unfortunately, it is not uncommon to be in a situation where the client only thinks about transferring the money after they have already come to the country of purchase and have already chosen the property,” says George Kachmazov, managing partner at Tranio. “While the bank is busy with the procedure, the property may go to another buyer who has already completed the KYC procedure and opened an account in advance.”

Certain countries impose additional requirements on those wishing to open a bank account. For instance, in Spain, a NIE (foreign tax identification number) has to be issued, whilst German banks will need your CV, including information regarding your place of birth, education and career, all in addition to information on your movable and immovable assets.

Furthermore, in addition to the set of compulsory documents, it is worth preparing any other proof of your reputation as a reliable bank client: for instance, your transaction history over the past few years; or letters of recommendation from established banks that you already have accounts with.