The reality is that setting up an Isle of Man company is typically a good deal easier than opening an Isle of Man bank account. This is a result of our financial services regulation and and money laundering laws which together drive the policy of the local banks.
Of course, I am inevitably making some generalisations but broadly the position is as follows:
Local business (Easy to open): Local businesses are those that are controlled and operated in the Isle of Man – this includes local shops, restaurants or garages – in fact more or less any company that employs staff locally would be a local business. Subject to the usual bureaucracy we have all learned to live with, it’s generally pretty straightforward to open accounts for these types of business. Usually the account opening and relationship management is dealt by the banks dedicated local business team. If you a non Isle of Man based client then this is probably not relevant to you so read on….
Client managed companies (Almost impossible to open): Client managed companies are companies that are incorporated in the Isle of Man, but owned and controlled by non residents. Such companies will not usually have their own offices or employees in the Isle of Man and will invariably have a local corporate service provider (CSP) engaged to provide registered office and agent services but these companies are not controlled by professional directors provided by the CSP – instead the client is appointed as the director.
Generally, Isle of Man based banks don’t like this type of business at all. The background to this is regulatory – “client managed” companies are considered to pose a higher risk of money laundering and consequently the Regulator requires a much higher level of monitoring and overview by the bank – which is expensive for them. Generally we don’t even try to open a local accounts for these types of companies; although there can be exceptions to this. Exceptions usual result from commercial considerations of the bank (ie money talks)…e.g perhaps the entity is part of a listed group or maybe client has an existing valuable relationship with the bank that the bank wishes to cultivate.
CSP Managed companies (Reasonably easy to open): CSP Managed companies are companies to which the CSP provides directors as well as registered office and agent services provided to Client Managed Companies.
The appointment of professional Isle of Man based directors is an important distinction for the banks because the involvement of the CSP as another local regulated party allows them to delegate (up to a point) the monitoring of the accounts for money laundering purposes – it also means they only need to deal with a single point of contact (the CSP) for both new introductions and existing client relationships.
This means, subject to their internal policies, opening accounts for CSP Managed Companies is attractive for local banks – and this is the mainstay of their international business in the Isle of Man.
In such cases, the CSP staff will act as bank signatories (ie no client involvement – although view only access is sometimes possible) – and, of course, the CSP is required to collect and understand all necessary supporting documentation prior to receiving receipts or making payments.
More about opening accounts for “client managed” companies.
All of this begs the question as to what clients should do if their circumstances require a “client managed” company with a bank account.
Generally, our initial recommendation in these cases is for the client to consider their existing banking relationships first. Frequently, clients will already have an existing relationship with a bank that knows them and values their business – in this case they may well be willing to open an account for the new entity. This is often the path of least resistance for the client.
Failing this – Middleton Katz can make introduction to a number of non Isle of Man banks which, depending on the individual circumstances, will accept applications for client managed companies. Generally, these banks are to be found in Eastern Europe or the Caribbean and they tend to be smaller institutions. Where such an introduction is made we cannot guarantee the success of any application as this depends on the banks own internal policies.
A Final Word.
Where Middleton Katz establishes and administers ‘client managed’ companies for its clients, even though we are not appointed to the board we have a regulatory obligation to monitor the activity for anti money laundering purposes – read more about transaction monitoring here.