After incorporating in Malaysia, the biggest hurdle is opening a bank account, not the company registration. Many founders realize that the process for the Companies Commission of Malaysia (SSM) is much quicker, fully digitized, and can be done through the MyCoID portal, usually in one to three working days, than the process for corporate bank account registration which follows. There is a separate process that requires the bank’s KYC and AML frameworks, where the bank account is opened and then enabled for international transactions. This is not the case for the SSM, and these frameworks vary from one bank to another. There is quite a significant difference between a simple local business profile and a more complex foreign business profile, which may be foreign-owned, with offshore shareholders and cross-border business transactions.
The Banking Landscape for Foreign-Owned Businesses
The Malaysian banking framework is advanced and comprises major domestic banks — Maybank, CIMB, Public Bank, RHB, and Hong Leong, among others — and international banks with a strong regional presence such as HSBC, Citibank, Standard Chartered, and OCBC. For foreign-owned companies, the choice of bank depends less on the size of the institution and more on its willingness to accept large international corporate clientele, its knowledge of the sector the company is in, and its capacity to service the foreign exchange and cross-border payment needs of the company. International banks, most of the time, have a more simplified process of onboarding foreign-owned corporations in their global clientele but may have a higher threshold for minimum balance or transactional volume. Local banks may have the strongest presence in servicing the local market but may demand more documentation and physical presence of foreign Directors during the onboarding process.
The Requirements for Foreign Investors to Open an Account
In Malaysia, banks implement strict KYC and AML for all account applicants, and these measures are more stringent for applicants of foreign-owned entities. For foreign-owned companies, the documentation and information requirement for the account opening may include the following: the incorporation documents (from SSM) (Certificate of Incorporation, Memorandum and Articles of Association and the Company’s Constitution), an account opening board resolution, a declaration of beneficial ownership, an account opening request stating the anticipated business activities and the expected transaction flows of the Company, and the expected source of funds, along with the supporting documents. The account opening documentation also includes the passport copies and proof of residence of the Company’s directors and majority shareholders.
If the foreign founders of the Company are the beneficiaries, banks will ask for a valid Malaysian visa (or proof of Employment Pass or that the foreign national is registered with the DE Rantau programme) and proof of residence in Malaysia, and also have to comply with the funds justification requirement. Recently, the requirements and measures for justify funds have become more demanding, and investors have to meet the funds justification requirements to avoid delays and Account Opening Application review.
Personal Accounts for Foreign Nationals
Opening personal accounts for foreign nationals in Malaysia is much quicker and easier compared to opening corporate accounts as foreign nationals are permitted to open personal bank accounts in Malaysia. Banks usually ask for a passport, along with at least a visa or a residency pass, and documents supporting a Malaysian address, for example, Malaysian tenancy or utility bills. The account opening process is usually completed within one to five working days. Because of the smooth process of opening a personal account, business founders who are relocating to Malaysia are encouraged to open personal accounts early. Additionally, having a personal account makes it easier for founders to open the corporate account for the business, because banks consider personal accounts as a partial banking relationship with them.
Corporate Account Opening: Timelines and Responsibilities
Opening a corporate account in Malaysia usually takes two to four weeks from when a complete document package is submitted. In practice, this time frame is a rough estimate. It depends on a bank’s transaction backlog, the complexity of the company’s ownership and control structure, and the depth of the KYC review and whether a follow-up is needed. Foreign-owned companies that have multi-layered offshore shareholders, directors from several jurisdictions, or that will operate in sectors that require enhanced due diligence, such as money services, cryptocurrency, or high risk import-export operations will usually take longer. The most effective way to move the process along is to provide documentation and respond to a bank’s requests for documents in their entirety in one complete package.
Corporate account opening applications should be submitted first to reduce delays in payroll, EPF and SOCSO registrations, and other industry-specific licenses. The company tax number and EPF and SOCSO registrations can be processed in parallel to the corporate account opening. These registrations do not require the completion of a corporate account opening.
What do Banks Look at
Banks are usually concerned with three broad categories when onboarding foreign-owned clients. The first is ownership and control – banks identify the ultimate owners of the company and assess how the ownership structure has been documented. They also check if any of the beneficial owners show up in AML or sanctions lists. The second is business legitimacy. Banks try to assess whether the business makes sense given the owners and whether the anticipated transaction activity and counterparties commensurate with the business of that size and scale. The third is financial substance. Banks assess whether a company has a presence in Malaysia beyond a holding company or agency company. It is usually easier for a company that has committed operational presence and business activity to onboard in Malaysia than for a company whose purpose is not clear from the documentation.
Establishing Parameters for Global Payments
Opening a corporate account is only a preliminary measure. Corporate accounts are not automatically enabled for international transfers. Banks typically impose additional scrutiny before international payments features are turned on, especially for outbound transfers, intercompany loan requests, or requests to make payments of dividends to foreign shareholders. In this case, we may be asked to certify that the company has filed its annual tax return, that its Employee Provident Fund and Sosco registrations are up to date, and that a given international payment is supported by an appropriate document. Examples of this include an invoice, a loan agreement, a board resolution, or a dividend declaration. This means that the time taken to open a corporate account is directly related to the time taken to open the company’s capital for international payments. If an international transfers capability is needed immediately, this should be factored into the company’s operations as it will impact the overall planned time-to-market.
Costs Involved with Starting a Company and Setting up a Bank Account
Incorporating a Sdn Bhd via the SSM portal incurs a fee of RM 1,000, and RM 50 to reserve a name, with the company secretary charging an additional RM 1,500 to RM 3,000, for a total estimated cost to set up a Sdn Bhd of RM 5,000 to RM 10,000. Banking incorporates additional costs. Banks do not charge for incorporating a banking account, but many foreign-owned Participant companies have a Minimum Capital Requirement for establishing a banking account, or maintaining a banking account.
Common Questions
Can foreigners open a business bank account in Malaysia? Yes. Foreign owned Participant companies have a banking account opened after thorough Know Your Customer and Anti-Money Laundering checks, and may require a valid visa, proof of a Malaysian address, a source of funds, and complete company documents.
How long does opening a corporate account take in Malaysia? Opening a corporate account takes two to four weeks from the time a complete document set is submitted, and may take longer for a more complex ownership structure or a longer Anti Money Laundering review.
Do I have to incorporate my business to open a business bank account? Yes. Banks will ask for the Certificate of Incorporation and some of the SSM documentation for corporate accounts. Since the SSM incorporation process is usually complete from one to three working days through MyCoID, banks will usually begin the process of opening an account for you after the incorporation of the company.
What do you see as the biggest challenge foreign investors face in setting up a bank in Malaysia? For most foreign founders, the biggest friction points are the bank’s requirement for source-of-funds documentation and the lengthy beneficial ownership assessment of an entity with multi-jurisdictional shareholders or directors.