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Blog Hong Kong Business Bank Account Closure: Why and How to Avoid It

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Hong Kong Business Bank Account Closure: Why and How to Avoid It

by Angel Ho | 23 February 2021

Man Using Online Banking Application On Laptop With Account Closed Message On Screen

After incorporating the business in Hong Kong, the next thing on the to-do list is to open your corporate Hong Kong business bank account. But with the increasing pressure to combat money laundering, banks have buckled down on their risk management policies, causing a spike in the number of business bank accounts closing. 

Business account closure can be inconvenient, to say the least, and has the potential to damage your business due to bounced payments. 

So, what can you do when this happens?

In this blog, we discuss the necessary steps you should take to prevent your Hong Kong business bank account from closing. 

Why are banks in Hong Kong closing business bank accounts?  

Knowing the reason behind your account closure can help you decide the best course of action to prevent this from happening. Here are the most common reasons why Hong Kong banks may close or refuse to let you open a corporate account.

1. Stricter auditing measures enforced by Hong Kong banks 

Failure to issue an audit report is a common factor that may lead to your account closure. Recent audit reports and financial statements must be provided as additional materials to your bank. If not provided in time, your account may be frozen or closed.

2. You’re not physically in Hong Kong

While some banks may allow you to appoint a legal representative in Hong Kong to open your corporate account, this is not guaranteed. In fact, in most cases, the physical presence of the directors, shareholders or beneficial owners is compulsory.

3. Suspicious transactional behaviour

The source of funds is also prone to increased scrutiny. There have been cases of Hong Kong bank accounts being closed due to problems with the legitimacy of the payers’ funds. The legality of the purchase and payment from these bank accounts and the source of funds is an important consideration. 

 

How can I prevent my bank account from being closed?

While there isn’t a guaranteed solution to prevent account closure, you can take a number of the following measures to decrease the chances of this happening: 

1. Maintain an active account

Inactive bank accounts are at risk of closure. To avoid this, you should initiate an activity on your bank account, such as a deposit or withdrawal every six months to avoid suspension.

2. Maintain detailed documentation of uncommon transactions  

Banks tend to flag the deposit or withdrawal of an unusually large amount of money which varies from your business’s normal commercial operations. While you can’t exactly warn your bank of large transactions that may come in and out of your bank account, be ready for questions. They may ask you to explain the transaction, show the invoice and ask you about the other party.

3. Maintain updated contact records

Ensuring that your contact details are up to date is very simple yet especially important to avoid your Hong Kong corporate account from closing. If they can’t reach you, they will close or freeze your account. 

4. Issue an audit report

Remaining compliant with Hong Kong's accounting policies is crucial to your company’s future success, as any suspicion may affect your reputation with banks. While annual audits are compulsory by regulation, they can add another layer of credibility to your transactions – which is definitely a huge benefit, especially in the eyes of the bank!

How can Hongda help? 

Navigating bank account closures can be tricky, at Hongda, we can assist with accounts that are impending closure or already closed. Our experienced staff will help you determine if your bank account is eligible for reinstatement and liaise with your bank by providing them with all relevant documents to facilitate this process.

Topics: Doing Business in Hong Kong

Angel Ho

Angel Ho

Helping make China companies easy for foreign investors since 2007 as lead consult.

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