Whether it is for studying abroad, buying overseas properties, investment immigration or using e-payment services in the mainland China, consumers need to open an offshore/mainland China bank account to manage their funds flexibly. While consumers could visit the offshore country/mainland China to open the account in person, they could also approach selected local banks offering respective account opening service. The Consumer Council reviewed the offshore/mainland China bank account opening services offered by 11 local banks and found that the requirements for application, service details and charges varied, such as minimum age, asset balance, fees, transfer means and transfer limit, minimum account balance to processing time. Take the opening of an offshore account in Singapore as an example, 5 out of the 6 local banks which provided this service required a minimum asset balance in the same bank from $200,000 to $1.5 million while the processing period ranged from 5 to 20 working days. The Council reminds prospective offshore account holders that they ought to be clear about their own needs and purposes, and compare the requirements of different banks thoroughly, such as asset balance, administration fees and currency exchange rates, as well as the taxation, the bank regulatory and consumer protection mechanisms in the countries of account opening to ensure assets abroad were well protected.
The Council approached 20 local banks for the provision of opening personal offshore/mainland China account services. 6 replied that such service was unavailable and 3 refused to take part in the review or did not reply. From the 11 banks that replied with service information, 9 of them provided mainland China account opening service, making such services the most common of all. Singapore came second with services offered by 6 banks. In addition, it is possible to open an offshore account through local banks in countries that have frequent exchange with Hong Kong such as Malaysia, UK, and US, and even in Egypt, Oman and Venezuela.
Consumers who plan to open an offshore/mainland China bank account should take heed of the following 6 main issues:
Requirements on applicants’ personal information
Depending on the countries/region (account holding location), the minimum application age is 18 for most banks. 1 bank accepted applications from juniors as young as 11 to open an account in US, Canada, UK or Australia. Documentation required also differed. While Hong Kong identity card and address proof were basic requirements, applicants might need to produce their Home Visit Permits, real name registered mainland China mobile numbers, income proof and source of income etc. among other documents depending on the countries of account.
Account opening procedures and processing time varied
After locating the bank of their choice, consumers should check whether the account opening application required advance booking and if the services were only available at designated branches or offices. Upon submission of required documents, the application might take at least 1 day and up to 4 weeks or 20 working days for processing, depending on the bank or the countries. Applicants should also note whether they need to go to the offshore countries in person to confirm or activate their accounts after their application had been successful. Depending on the countries, 6 banks in this review required applicants to go to the offshore country/mainland China to confirm or activate their accounts.
Big difference in asset balance and transfer limit
From all replies, 10 banks accepted offshore/mainland China bank account applications only from existing customers. Asset balance requirement varied among the banks, from no minimum requirement to at least $1.5 million. 7 out of the 9 banks that offered mainland China account opening services, did not set requirement on asset balance. Apart from this, some individual banks imposed various transfer limits depending on the countries or transfer means. Consumers are advised to make their choice based on their own needs.
Transfer fees and administration fees added up
Small fees could add up in the long run. Consumers ought to take heed of the account opening fee and other expenses such as transfer fee, quarterly/annual management fee and administration fee. On transfer fee, some banks had it waived while some charged a minimum of $250 per transfer. Consumers should check carefully before making their choice.
Pay attention to currency exchange rates and taxation
Prior to opening offshore/mainland China bank accounts, consumers should assess cautiously the various risks involved with the deposit or investment of their funds in the respective countries. For instance, if deposit were made through conversion into a foreign currency, account holders had to bear the risk associated with foreign exchange rate volatility. They should also pay heed to the potential charges levied on account opening, remittances, management or utilisation of funds, and whether savings and investment proceeds would be taxed by the offshore governments, tax rates, tax returns filing and payment procedures. All these should be taken into consideration before deciding on whether where or to open an offshore account.
Understand the background of the banks and the local regulatory and protection mechanism
Depositors had to be mindful of the stability of the offshore banks and the local banking regulations to ensure that deposits/assets in the respective accounts were duly protected. In Hong Kong, deposits in saving accounts, current accounts, foreign currency deposits and time deposits with maturity not exceeding 5 years in local licensed banks were automatically covered by Deposit Protection Scheme (DPS). In case a member bank of DPS failed, the DPS would pay compensation for deposits in Hong Kong up to a maximum of $500,000 to each depositor of the failed member bank. In the mainland, the Deposit Insurance Regulation stipulated that all deposit-taking banking financial institutions ought to buy deposit insurance under the Regulation to have all RMB and foreign currency deposits insured with the maximum amount of coverage at 500,000 yuan. In Australia, the Financial Claims Scheme provided protection for depositors of banks and other authorised deposit-taking institutions (ADI) for deposits up to AUS$250,000 per account holder per ADI.
The Council reminded that it is of prime importance to be clear on one’s purpose and whether there is a long-term necessity to open an offshore account. Deposits/assets in offshore accounts were only covered by the local policies and regulations but not by residing country of the account holders. Depositors should pay close attention to any changes in the relevant local policies to minimise their risk.
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