SMEs in the UAE face rigorous compliance checks when opening a bank account

Small and medium sized businesses in the UAE are turning to Emirati banks more and more as international institutions back away over increasing compliance concerns. But all is not lost when it comes to banking, says our UAE expert.

Setting up a company in the UAE – either onshore or in a Free Zone - is getting easier with more straightforward processes being put in place.

But while that happens, opening a bank account is getting much more difficult with more rigorous procedures and compliance requirements.

International banks are increasingly backing away from the sector as concerns grow over international compliance and competition. Standard Chartered last week announced plans to almost entirely exit the SME banking sector in the UAE, and HSBC provoked anger when it cut a series of SME accounts last year following its US$1.9bn  fine for doing business with customers in countries under sanctions.

The UAE’s federal government recognises the importance of SMEs to the country’s economy, especially as it tries to diversify away from its over-reliance on oil. 

A federal law approved in April included a requirement for federal authorities and ministries to contract at least 10% of their procurement budget for purchasing, servicing and consulting to SMEs; in the same month, the Minister of Economy, Sultan Al Mansouri, said he hoped the contribution of the sector to the non-oil economy would rise to 70% by 2020, the year of the Dubai Expo, up from a current 60%.

Getting through the red tape

We have found that the large international banks have become much more bureaucratic and have increased minimum balances so steeply that many small and medium enterprises or new establishments cannot meet their conditions. 

Local banks are still open to new business, however many of the strict requirements in place in the UAE are set by the Central Bank and must be implemented across the sector. 

We are finding that the bank account opening process can take up to six months, resulting in major delays for company formations in the cases where share capital is required to be deposited prior to license issue.

So if you’re thinking of doing business in the UAE, here are six factors you’ll need to consider before you can open that bank account – and how a third party partner can help you overcome that red tape nightmare.

  1. Authority requirements do not tally with bank requirements. Try to run the bank account opening process alongside the company establishment and ask for documents to be prepared for the bank as well as the authority in the jurisdiction of set-up.  
  2. As banks require certain wording in board resolutions and have more specific attestation and legalisation requirements, formulate all legal documentation such as resolutions to include the bank, when required, as well as the authorities and government.
  3. UBO (Ultimate Beneficial Owners) information is key; banks require a full overview, including registration numbers of all holding companies, and passport copies and addresses of any person holding more that 5% in the parent company or holding companies above this in the company structure.  Banks have been known to require the main UBO to sign the opening forms in person in the UAE.
  4. Projected revenues and a list of suppliers and potential clients must be made available for the bank on request. 
  5. Minimum balance requirements are high – particularly with international banks.
  6. It helps to get support from your international relationship manager if you want to open an account with the same bank, but you will have to submit all documentation again in original form to the local branch.

Find out more about doing business in the UAE

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