If you’re a non-resident looking to establish or maintain a U.S. business, there’s a new challenge you need to be aware of—compliance regulations are tightening. Maintaining U.S. bank accounts, especially with neo-banks like Mercury, Relay, and Wise, has become more complex.
Update Oct 10, 2024: TD Bank Hit with a $1.3 Billion Penalty* by FinCEN— What This Means for E-Commerce Sellers. The recent news of TD Bank’s $1.3B penalty should alert every e-commerce seller. Compliance changes in 2024 are real—expect more requests for business verification if you’re using U.S. bank accounts with payment gateways like Shopify Payments or Stripe. For non-resident sellers, the stakes are even higher. Don’t wait—verify your U.S. accounts now to avoid disruption. *TD Bank was also fined $1.8B by the DOJ.
Many assume the Beneficial Ownership Information (BOI) reports under the Corporate Transparency Act drive these account closures. However, Customer Due Diligence (CDD) rules are the real challenge. These require banks and financial institutions to verify the ownership of their clients. For non-residents, this means more stringent requirements and additional steps to maintain active accounts. Update December 10th, 2024: The BOI report is now Voluntary Only with a recent Texas case: https://www.fincen.gov/boi (see alerts).
The Real Compliance Challenge: CDD, Not BOI
Account closures for non-residents are not primarily due to BOI reporting. The core issue stems from CDD regulations, which require stricter verification of who owns and controls the business. Neo-banks like Relay, Mercury, and Wise rely on traditional banks for their licenses, and these traditional banks face increasing regulatory pressure to ensure compliance.
As a result, to set up non-resident U.S. bank accounts, neo-banks—and their traditional banking partners—are adopting more aggressive risk management practices. Proving ownership and business legitimacy has become more difficult for non-residents, leading to a wave of account closures, often without clear explanations.
Why Non-Residents Are Facing More Scrutiny
The key challenge for non-residents is proving that their U.S. business is legitimate. Banks are being required to verify both ownership and whether the business has a real operational presence in the U.S.
Here’s what this means for you:
- Personal Utility Bills: Banks increasingly request a personal utility bill to match the individual’s home address with what’s on file. This adds an extra layer of verification.
- Business Lease and Utility Bill: Many banks require a business lease agreement or utility bill tied to a U.S. office. These documents confirm your company’s operational presence in the U.S.
- Operational Presence at Both Personal and Business Levels: Some banks are raising the bar by requiring a U.S. presence at both the personal and business levels, increasing costs for non-residents as maintaining a physical U.S. location is expensive.
The Cost of Compliance for Establishing Non-Resident U.S. Bank Accounts
For non-residents, these new compliance demands add up. You might need to:
- Lease office space in the U.S. to satisfy operational presence requirements.
- Set up utilities in both your personal and business names to meet verification standards.
- Handle increased tax compliance triggered by a more substantial operational presence in the U.S.
This isn’t just extra paperwork. The financial costs and tax obligations can deter many non-residents from expanding into the U.S.
What Compliance Looks Like in 2024 for Non-Resident U.S. Bank Accounts
In 2024, neo-banks like Mercury, Relay, and Wise are facing increased pressure to comply with CDD regulations. As a non-resident business owner, expect heightened scrutiny when opening or maintaining a U.S. bank account.
Here’s what compliance looks like today:
- KYC (Know Your Customer) Checks: To verify operational presence, more detailed information about you and your business, including personal utility bills and business leases, will be requested.
- U.S. Presence Requirements: Banks favor businesses with a legitimate U.S. presence, at both the individual and company levels. Failure to meet these requirements could lead to account closures.
- Increased Account Closures: Many non-residents are reporting sudden account closures due to banks’ conservative approach to compliance.
How to Protect Your Business and Avoid Account Closures
If you’re serious about expanding into the U.S., you must stay ahead of these changes. Here’s how to protect yourself and your business:
- Establish a Verifiable U.S. Presence: Secure a physical office, set up utility bills in your name, and ensure your home address matches the paperwork. Solid proof of a U.S. operational presence is crucial.
- Stay Up to Date with CDD Requirements: Ensure you understand the latest Customer Due Diligence rules. Banks are under increasing pressure to comply, and your business must meet transparency standards.
- Work with Compliance Experts: Navigating U.S. banking regulations as a non-resident is complex. Working with experts helps you avoid mistakes that lead to account closures or penalties.
The Future of U.S. Banking for Non-Residents
As compliance standards continue to evolve, non-resident business owners must adapt. Virtual offices and mail forwarding services are no longer sufficient. Banks now want proof that your business is legitimate and requires both personal and business ties to the U.S.
That’s why working with professionals who understand these challenges and can guide you through them is essential.
Why You Need Expert Help
At Nevada Corporate Planners (NCP), we specialize in helping non-residents navigate the complexities of U.S. banking and compliance regulations. With our years of experience, we offer tailored solutions to help you meet the new compliance requirements without the risk of unexpected account closures.
Here’s how we can help you:
- Secure your U.S. operational presence and meet the latest CDD standards.
- Keep your accounts compliant with both personal and business verification requirements.
- Avoid costly account closures by staying ahead of regulatory changes.
Ready to Stay Compliant? Let’s Talk
With increasing regulatory demands from banks like Mercury, Relay, and Wise, non-residents face tougher challenges. But with the right strategy, you can avoid these pitfalls and keep your business growing in the U.S.
Book a free call with our team, and let’s discuss how we can help your situation and our service options and fees to ensure you’re prepared for these changes—without the frustration of account closures or compliance hurdles.
