The speed of incorporation in the Philippines significantly outweighs that of business banking. Once the documentation of an application for a domestic corporation is complete, the Securities and Exchange Commission can approve it in days. However, the corporate bank account that follows can take two to four weeks to open. This gap is where foreign investors tend to first encounter unexpected operational friction. Philippine banks employ strict know-your-customer (KYC) and anti-money laundering (AML) measures on foreign-owned corporate accounts. These measures are less stringent on domestically incorporated businesses that have straightforward ownership structures and locally-resident shareholders. Knowing what the bank wants and preparing for it during the SEC registration process, instead of after, is the best way to reduce the time taken from the decision to having a business that is operational.
Banking Options for Foreign Investors
In the Philippines, universal and commercial banks dominate the corporate banking landscape. Local banks that top this list are BDO, BPI, Metrobank, Security Bank, and RCBC. Examples of international banks are HSBC, Citibank, and Standard Chartered. These banks offer full corporate banking service suites. Smaller, domestic thrift and rural banks are generally not suitable for foreign-owned companies that are likely to need international payment functions.
For the onboarding process, which bank you choose may be more important than you’d assume. Banks with international networks tend to be more efficient in onboarding foreign owned businesses with offshore shareholders. This type of client is part of these banks’ regular clientele. Local banks may have a more cumbersome initial KYC process for foreign owners, but may provide a more developed local payment infrastructure and a connection to government entities that facilitate payroll, tax payment, and local procurement. For many foreign investors, the most efficient solution is to open accounts at two banks (an international bank for cross-border transactions, and a domestic bank for bank peso payroll and payments) — although it may be more time consuming to set up this solution.
In recent years, digital banks have increased their corporate offerings, and several licensed neobanks provide business accounts and quicker onboarding than conventional bank branches. However, these digital banks still struggle with international payments, and there has been a marked increase in regulatory scrutiny of their AML processes.
Requirements of Foreigners Opening Accounts
Opening personal bank accounts in the Philippines as a foreigner generally entails possessing a valid passport, a visa or ACR I-Card as proof of legal status in the Philippines, verification of a local address in the Philippines, and bank statements or proof of legal funds. The ACR I-Card, which is the Alien Certificate of Registration Identity Card issued by the Bureau of Immigration, is a document that most Philippine banks customarily require to confirm the legal status of foreign residents. The personal accounts of foreign residents are usually commercially opened by the banks within one to five business days, while the foreign resident is required to be physically present at the bank, especially for the banks that permit a portion of the account opening process to be completed online.
The opening of corporate accounts requires a considerably larger and more complex volume of documents. The list of documents, however, is generally the same at all banks and includes the SEC Certificate of Registration, the Articles of Incorporation and By-Laws, the most recent General Information Sheet, a board resolution authorizing account opening and designating the authorized signatories, proof of beneficial ownership and the ultimate beneficial owners, active tax registration with the BIR and its Certificate of Registration and TIN, proof of the registered business address, and copies of valid identification of the Foreign Directors and the Authorised Signatories. For foreign Directors and Shareholders, the required identification is an apostilled or notarized copy of their identification.
KYC Depth for Foreign-Owned Entities
The documentation outlined above is a starting point. When assessing risk, banks will look at the business profile of the foreign-owned entity and examine its activities, business customers and suppliers, expected currencies and transaction volumes, and the alignment of the business activities with the purpose of the funds. Source of funds documentation will be analyzed for the first deposit and for businesses that are likely to receive additional foreign capital for the ultimate owner of the funds, and not just the immediate corporate shareholder. Foreign-Owned Entities that have long and complex ownership structures through Intermediate Holding Companies, Trusts, and Enhanced Due Diligence Jurisdictions, will likely incur longer review periods and additional documentation requests.
The most frequent reason for delays in processing a corporate banking application for a foreign-owned entity is insufficient source of funds documentation. Banks are interested in the source of the capital at the foreign-owned entity level as well as the immediate holding company level. Examples of sources of funds at the ultimate shareholder level include business proceeds, capital market transactions, bequests, or salary, which all entail different documentation. Providing the source of funds documentation in advance, rather than waiting for the bank to request the information, can save 10 business days or more.
Operating and Payroll Accounts
Most operating companies in the Philippines require two accounts as a matter of business practicality. These accounts are a primary operating account for receiving customer payments and making payments to suppliers and for business expenses and a payroll account or a payroll disbursement arrangement. Banks that provide payroll services to business clients can often provide direct payroll credit to employees’ accounts in the same bank or a different bank. This service simplifies the monthly payroll process. Using separate accounts for operating and payroll accounts also improves compliance reporting and audit preparation by showing payroll account transactions as statutory payroll transactions instead of general operating transactions.
FX Access and Cross-Border Transfers
In the guidelines provided by the Bangko Sentral ng Pilipinas, banks are not required to sell foreign currency only to clients that maintain deposit accounts in the bank. This is an important distinction because it means that the only way a Philippine corporate entity can access foreign currency is not by maintaining a deposit account in bank that will provide foreign currency. However, in most cases of corporate clients, banks prefer that both the foreign exchange and the underlying funds transfer are handled through the same bank.
Outbound international transfers from the Philippines require supporting documentation and are subject to BSP reporting requirements for BSP covered transactions that exceed certain thresholds. Supporting documentation includes invoices, contracts, and, in certain cases, board resolutions. In the Philippines, there is a very complicated process to get a corporate bank account to a state in which the account is able to process international transfers. There is a very complicated process in addition to opening a corporate bank account to obtain permission from the bank to use their Foreign Exchange services. For these reasons, the time to make a company fully operational in terms of payment services is many times longer than the time to make the company legally registered.
Practical Setup Advice
The best advice is to start the bank preparation work during the incorporation stage, not after. This is because registering with the SEC (Securities and Exchange Commission) and BIR (Bureau of Internal Revenue) provides a lot of the same documents that Corporate Banking requires. Also, documenting the business model, anticipated customers, and anticipated transactions is best done in writing before visiting the bank, to avoid having to respond to clarifying questions. The bank will most likely stop the review process with clarifying questions. If a bank requires an audit trail for all incoming payments, the company should provide a record of all payment receipts and provide the documents that show the source of the funds.
Can foreigners keep a business bank account in the Philippines? Yes. Foreign business accounts in the Philippines are subjected to KYC and AML procedures. Personal accounts usually require a passport, a visa or ACR I-Card, and proof of address in the Philippines. Corporate accounts may require full registration with the SEC, along with the Beneficial Ownership documentation packet.
How long do banks take to open corporate accounts? Personal accounts take about one to five banking days on average, and corporate accounts for foreign owned businesses take about two to four weeks on average, assuming a complete documentation packet is submitted. Corporate accounts for foreign businesses with complex ownership structures take longer.
Can foreign owned businesses in the Philippines move funds internationally? Yes, however, the BSP and the banks in the Philippines require specific supporting documents for each transfer. Business Process Outsourcing holds the Foreign Exchange (FX) market and an international transfer is typically done through the corporate account of the bank in question.
What is the most common reason why banking for corporate business activity is delayed? The most common reason why banking for foreign owned businesses is delayed is an inadequate or incomplete source of funds documentation. This is often followed by a disparity between the business activities the company has stated and the transactions they are attempting to process