A bank reference is one of the standard documents, used for Due Diligence (KYC) purposes. When opening a new bank account somewhere, like for a new offshore company, the new bank will definitely ask for a bank reference from all individuals involved with the new account, including the beneficial owner of the company. It´s a standard Due Diligence procedure. In some occasions, for our Know Your Client purposes, we will also ask our clients to present a bank reference.
A bank reference is a simple letter from Your existing bank, stating that they have You as a customer for a period of years (preferably, for at least three years) and that Your banking relationship has been normal and satisfactory, without any defaults from Your part. Ideally, the bank reference should also confirm Your address, as per banks´ records – this way the bank reference can also serve as proof of address, so You wont have to furnish a separate proof of address document. A bank reference may also be obtained based on a business account (of a company), if You have signatory rights in that account.
All bankers know what a bank reference is, You just have to ask. Every bank will write its own, slightly different wording – that´s fine. Some banks may also write something to the extent that the reference letter is for information purposes only and does not provide any representations or guarantees on banks´ part – that is also fine.
A bank reference does not have to reveal any confidential information! It does not have to state the account number, the amount of funds on the account, the outstanding mortgage or any other kind of personal financial information! It basically just states that the bank knows You, already for some time, as a decent customer.
The practical rationale of the bank reference, for Due Diligence purposes, is to establish that the particular individual is a regular, economically active member of society, which is proven by the fact that his identity and address can be confirmed by an independent, reputable institution, like a bank.
The preventive purpose of requesting a bank reference is to avoid fraudulent attempts by criminals to register offshore companies in the name of “ghosts”, dead persons, or in the name of marginalized, homeless individuals who might just have sold their passport on the street. As all such individuals would probably lack a long-standing banking relationship and would not be able to obtain a current bank reference, this inability would single them out for additional scrutiny and possible rejection.
