Thank you but no thank you (for the business)!

I’m just finishing a longer trip to Asia. This time the travel focus was on East Asia, mainly Hong Kong, Mainland China and Taiwan. The key decision for this trip was the wish to open a bank account in Hong Kong for a newly Hong Kong incorporated financial services firm. The company aims to operate as a money service operator and will offer international money transfer and foreign exchange. The main shareholder of the Hong Kong company already has an identical successful business in the United States which turned over last year a solid 9-digit amount with international payments. You would assume, they know their business. 

Whether you like doing business in or with the United States or not, one thing is guaranteed: If you operate an international money transfer and foreign exchange firm in the United States, your risk management and compliance department have to be at the forefront of the latest crime prevention and anti money laundering regulation that the world knows. Most likely you even have to be more up to date than in other markets, including Europe. 

With this in mind, I flew to Hong Kong, expecting no major problems. I couldn’t have been more wrong. Setting up the company was done in a few days, quick and easy as it has always been in Hong Kong. The Chinese special administrative region has been voted as one of the most business friendly countries over decades. Also the communication with Hong Kong Customs, in charge for the license that is required for this kind of business, has been flawless. Fully transparent, efficient instructions available online and offline and a great communication made it a pleasure to apply for the license. Only the banks changed all the game. 

I’ve been doing business in Hong Kong since 2006 and never before have I felt more like a criminal whilst contacting the 85 banks that were on our list. We contacted 55 of them via phone and I walked into 30 branches. Believe me, I’ve chosen the word “criminal” carefully. I considered 10 other words to use instead, but none of the words described the disrespect, ignorance and pre-judgement I have experienced in these conversations better than “criminal”. 

I heard some halfway understandable concerns why not to do business with us. But the majority of banks just tried to put unreasonable burdens, they just wanted to block any type of new business. What I do understand is if a bank doesn’t want to do business with you because you operate in a field that competes with them. Sure, what’s the point for them to share the pie. I also do understand that banks see money service operators as high risk businesses. Yes, they are, but that doesn’t mean that risks cannot be handled. I question that there is a difference between the risk management of payment department in a bank or an independent transfer agent. And I allow myself to speculate that the concern and care about risk management of an independent transfer agent is even higher than that of a bank because payments are the core business to an independent transfer agent and the whole business depends on solid processes, procedures and compliance. 

The points I didn’t understand, amongst many others, were that we would need a Director with a Hong Kong ID card (do I smell discrimination here), that we do need an office from day one (HK Customs knows that payments are executed online and does not require an office for the license at all), that no business is done with foreign shareholders (what do you want me to say here?), that only business is done with companies that have been operating for 3 years (yeah right!) or that you need to have clients before you can open a bank account (well how can a transfer agent have clients without a bank account?)

The most often heard excuse however was that you need a reference letter from an existing client who has been with the bank for 1-3 years and has a significant relationship with the bank. I know, we had this in Switzerland in the 80s and 90s as well, but is that how business is won nowadays? What annoyed me most about this point was that none of the banks who used that excuse - about one third - did actually want to hear about our business or listen to anything we had to offer or say. I was thrown out of the entrance within seconds that I entered their halls of finance. 

I checked within my network who could provide a reference for me. I found 6 business partners who were willing and able to help. Unfortunately none of the banks they had a relationship with were considering opening accounts for money service operators. In the light of the fine that HSBC recently had to pay in the United States for the wrong doing of one of their Mexican daughter companies, I actually do understand their reluctance to consider any new clients for our sector. But any and foremost all the other Hong Kong based and origin banks were backing out without any (obvious) reason. 

The most welcoming banks were the Indian banks. Praise to Indian hospitality. They listened, were clear and transparent about what they were able to do and what they wanted from us. Heaven on earth! The only downside for all of the 14 Indian banks in Hong Kong was that none of them could provide online banking. Given that we are aiming at a couple of thousand transactions every year, there is no way we - respectively them - could execute them manually. So believe it or not, we couldn’t come to an agreement - for technical reasons. And most frustrating about that was, that all those banks have state of the art online banking facilities in India. They just don’t have the critical mass in Hong Kong to make an investment in a local online banking system economically viable. 

Well, we have 3 account opening applications currently pending. Interestingly none of those banks mentioned any of the excuses I heard from other banks. And when confronted with them they just replied “This is all rubbish, nobody truly needs those requests. They just don’t want to do business”. Understood! Let’s hope for the best.

Do you have any tip what I can do better next time or have a similar experience you want to share? Happy to hear your story. Comment hear or give me a call.