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What is a bank reference?

A bank reference is one of the usual documents for KYC / Due Diligence purposes. Bank references are routinely asked from new clients at new bank account openings, including opening of the account for an offshore company. Bank references are required from all all individuals involved with the new account, including the beneficial owner of the underlying offshore company. Requesting bank references from new clients is standard procedure in practically all banks, including offshore banks. In some cases we may also ask new clients to provide a bank reference for our own Know Your Client purposes.

A bank reference is a fairly standard letter from Your "home" bank, stating You are their customer for a period of years (preferably, for at least 3 years). A bank reference should simply confirm that Your banking relationship has been acceptable, without any defaults from Your part. Ideally, the bank reference could also confirm Your address, as featuring in the records of the bank - if so, the bank reference can also serve as proof of address, so there is no need to provide a separate proof of address. A bank reference may be obtained in regards of Your personal account, as well as based on a business account (of a company), if You have signatory rights in that business account.

A bank reference is a standardized document, well known to all bankers, so they won`t be surprised when You ask for it. Every bank usually has its own, slightly different wording. That`s perfectly acceptable. Some banks may also include a disclaimer to the extent that the reference letter is for information purposes only and does not provide any representations or guarantees on banks' part. Such wording is also no problem, as the purpose of bank reference is not to guarantee anything - just provide a basic confirmation that they know a particular individual.

As a rule, bank reference does not reveal any confidential information! Bank reference does not have to state the account number, the amount of funds on the account, the outstanding loan or any other kind of personal financial information! If by some reason or misunderstanding the bank is purporting to include any more confidential details in the reference, like account number, You may request them to withold any such details. A bank reference should be nothing more than just an informative letter, stating that the bank knows You for certain period of time as a decent customer - without going into any further detail.

For Due Diligence purposes, the logic and practical reason for the bank reference is to establish that the particular person is an ordinary, economically active member of the society (all of which would normally have some sort of bank account), and that his/her identity and address can be confirmed by an independent, reputable financial institution (the bank).

The preventive purpose for requesting the bank reference is to avoid fraudulent attempts to register an offshore company in the name of a "ghost", a dead person, or in the name of a marginalized, destitute individual, who might just have sold his passport for a bottle of booze. It is quite improbable that any of such individuals would have a long-standing banking relationship. Therefore, appearance of such individuals as beneficial owners of a new IBC would be a signal to look more closely into the overall circumstances of the registration order.