Why the bank refused to open an account: 10 main reasons

Just a few years ago, opening a bank account in Ukraine or abroad was a fairly formal procedure. Today, the situation has changed drastically. Banks operate under strict financial monitoring requirements, international sanctions, AML (Anti-Money Laundering), and KYC (Know Your Customer) rules. That is why even a legitimate business or a bona fide individual can be refused.

Moreover, the bank does not always explain the reason for such a decision. Most financial institutions reserve the right to refuse without detailed justification if they consider a potential client to be high-risk.

Let's look at the ten most common reasons why banks refuse to open accounts.

What reasons most often lead to a bank's refusal?

1. Incomplete package of documents

The most banal, but very common reason. The absence of even a single document or errors in its execution can be grounds for refusal. This is especially relevant for corporate clients, international holdings, and companies with multiple owners.

2. Opaque ownership structure

If the bank cannot quickly establish the ultimate beneficial owner (UBO), the risk level automatically increases. Trusts, foundations, multi-level corporate structures, and nominee shareholders are vetted particularly closely.

3. Lack of proof of the source of funds

One of the key questions for any compliance department is where the client's funds originate from. The bank may request:

• tax returns;
• sale and purchase agreements;
• financial statements;
• statements from other banks;
• documents on the sale of a business or real estate.

If the documents do not prove the source of funds or contain contradictions, the account opening may be blocked.

4. High-risk type of activity

Not all industries are equally attractive to banks. Banks pay the most attention to companies operating in the fields of:

• cryptocurrencies;
• financial services;
• international payments;
• gambling;
• Forex;
• high-risk e-commerce;
• international trade.

This does not mean an automatic refusal, but the document requirements become significantly stricter.

5. Sanctions risks

Even an indirect connection with sanctioned persons, jurisdictions, or counterparties can trigger an additional check. Banks analyze:

• countries of operation;
• business partners;
• main clients;
• ultimate owners;
• payment history.

In some cases, the compliance department may decide that the risk outweighs the potential profit from servicing the client.

6. Negative reputation

Modern banks actively use open sources of information. During the verification process, the following are taken into account:

• mentions in the media;
• court decisions;
• open registers;
• sanctions lists;
• professional reputation of the company and its owners.

Even unreliable publications can be grounds for additional questions.

7. Discrepancy of information during the KYC check

During the Know Your Customer (KYC) procedure, the bank checks virtually all information about the client. If the details provided in the questionnaire do not match the information in open registers, corporate documents, or during an interview with a bank manager, it can be regarded as a risk factor.

Banks pay special attention to:

• description of the business model;
• geography of activity;
• expected turnover;
• main counterparties;
• sources of financing.

Even minor discrepancies can lead to an additional check or refusal.

8. PEP status or connection with politically exposed persons

If the company owner or a family member is a PEP (Politically Exposed Person), the bank applies the Enhanced Due Diligence procedure. The PEP status itself does not mean an automatic refusal. However, the bank will require significantly more documents regarding the source of funds, asset structure, and the economic substance of operations.

9. Lack of economic sense in opening an account

The bank always asks itself: Why our financial institution specifically? If a company is registered in one country, the owners live in another, the activity is conducted in a third, and the account is opened in a fourth without a clear economic justification, compliance may consider such a structure too risky.

That is why, even before submitting an application, it is worth preparing a logical explanation for the business structure and the choice of a specific bank.

10. Internal bank policy

Not all reasons are directly related to the client. Some banks on principle do not work with:

• cryptocurrency companies;
• payment services;
• Forex projects;
• gambling;
• international marketplaces;
• companies with a high volume of cross-border payments.

In this case, even an impeccable package of documents does not guarantee a positive decision.

How to prepare for opening an account

The best way to avoid a refusal is to prepare before contacting the bank.

Before submitting an application, it is recommended to:

• conduct preliminary AML and sanctions screening;
• prepare a package of documents regarding Source of Funds and Source of Wealth;
• identify a bank that works specifically with your type of activity;
• check the compliance of the corporate structure with the bank's requirements;
• if necessary, prepare a legal opinion on the business model.

What to do if the bank has already refused?

A refusal does not always mean that it is impossible to open an account. In most cases, the situation can be remedied after analyzing the reasons for the refusal and preparing additional documents.

Practice shows that a positive result is often achieved after:

• choosing another financial institution;
• refining the KYC package;
• preparing proof of the source of funds;
• eliminating contradictions in the documents;
• engaging lawyers with experience in communicating with international banks.

Assistance from "Prikhodko & Partners"

The international corporate law and FinTech practice of the "Prikhodko & Partners" law firm supports the opening of accounts for individuals, Ukrainian and international businesses, financial institutions, FinTech companies, CASPs/VASPs, investment funds, and holding structures.

We analyze the reasons for previous refusals, prepare a full package of documents for AML/KYC checks, help prove the source of funds, choose the optimal jurisdiction and bank, and support communication with compliance departments until the account is successfully opened.