Reasons to Refuse a Foreign Account

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Question:

We have a customer (existing, but the current business is unrelated to the business in question) that maintains a business based in the UAE and wants to open a deposit relationship in the U.S. The customer is willing to register the business in Texas as a foreign entity, using the UAE address. Our policy states we do not open accounts for foreign business. We are a small bank with small infrastructure. I have a suspicion that this deposit account will be used as a shell company. How can I inform management that I do not recommend opening the account for what I deem a high-risk entity? Is there something I can cite as support?

Answer:

Our policy states we do not open accounts for foreign business.

If that is your policy, then management will have to go to the board of directors to change the policy. Let them worry about justifying why that is a good idea.

The due diligence requirements for vetting and maintaining foreign accounts for one or two and not worth the time effort and the development of the required written procedures to support them. Ask them how do they plan to validate that the business is properly registered in the UAE and is in good standing with their laws and requirements? Surely, they do not think that just asking the customer is enough based on the risks presented.