Top 5 banking risks for international business and how to minimize them

International business always faces a number of risks when interacting with banks, which can complicate operational activities and jeopardize the financial stability of the company. In their practice, Antwort Law lawyers regularly help clients minimize banking risks when supporting banking operations and international agreements. We have identified the five most common risks and developed effective strategies for their prevention and management, which allow our clients to act confidently and avoid potential financial losses.

1. Failure to comply with a bank for a company means that it does not meet the requirements of the verification that the bank conducts as part of its Know Your Customer (KYC) policy and compliance control, aimed at assessing the legality of the company's activities, its financial stability, transparency of operations and compliance with international standards for combating money laundering (AML), terrorist financing and compliance with sanctions regimes.

To minimize this most common banking risk, we recommend preparing complete documentation in advance, which may include corporate documents, financial statements, and information about beneficial owners. If your company has a high document turnover and several accounts in different banks and jurisdictions, it makes sense to contact legal specialists.

Lawyers will help optimize and automate compliance processes, which will ensure their compliance with the requirements of various banks and regulatory authorities and minimize the risks of blocking accounts or refusing to carry out transactions.

2. Blocking or closing an account

Banks can block or close an account for a number of reasons, including suspicion of fraudulent activity, failure to comply with compliance requirements, or low account activity, which can be a serious problem for a business, especially if the blocked funds are necessary to fulfill current obligations.

How we advise our clients to minimize this risk:

• Open several accounts in different banks, which will help you in case one of the accounts is blocked;
• Maintain transparent and correct financial reports and provide them to the bank in a timely manner upon request;
• Establish an open communication channel with the bank for timely notification and response to possible problems.

3. Delayed payments

The reasons for delays may be difficulties with checking data on counterparties, additional control by the bank, problems with the SWIFT system or geopolitical factors.

How we advise our clients to minimize this risk:

• Make sure that you have all the necessary information about counterparties to avoid delays at the verification stage;
• Take into account possible delays in international payments and try to initiate them in advance.

4. Bank Audits

To ensure compliance with their rules and regulatory requirements, banks conduct regular audits, which may include detailed analysis of financial transactions, verification of documentation and reporting. If violations are detected, the account may be blocked or fines may be imposed.

How we advise our clients to minimize this risk:

• regularly conduct internal audits that can identify possible inconsistencies before the start of a bank audit;
• ensure timely and proper maintenance of all documentation, ideally it is better to implement internal control systems and protection against possible claims, which lawyers can develop for you.

5. Fraudulent banks

When working with online banks, the risk of working with fraudulent banks or one-dayers is especially relevant, because such banks can disappear with your money or not provide the necessary level of protection for your funds.

Our clients do not face the risk of working with unreliable banks, as we take all necessary precautions:

• we carefully check the licenses and reputation of banks, which includes confirmation that the bank is officially licensed in the country of its registration and operates in accordance with international standards, as well as analyze customer reviews and study the bank's financial statements to identify potential problems;
• we cooperate exclusively with large and proven financial institutions and give preference to international banks with a stable reputation, which significantly reduces the risk of fraud and ensures the reliability of asset storage;
• we check whether the bank uses modern data and transaction protection technologies.

Banking risks can seriously affect the operational activities of international business, however, with the help of a competent approach and professional legal support, such risks can be avoided or their consequences can be minimized. Antwort Law is ready to offer you professional assistance in conducting compliance checks, resolving issues with banks and protecting your financial interests. Don't risk your money and reputation - entrust banking risk management to specialists.

Lidia Ivanova

International lawyer
Antwort Law