Hello,
as proposed previously I would like to share some insight into the challenges to open bank accounts as an international foundation.
It seems like a trivial act, but turns out to be a massive paperwork for everyone involved.
Legal representative
Every organization has legal representatives. In case of TDF, it is the board of directors as legal representative, in charge and responsible. Based on our statutes, the board also can issue warrants to individuals, but the ultimate legal representation, and the unique persons listed in the official documents, is the board of directors.
Anti money laundering rules
In consequence, it is the board of directors which needs to provide all their legal details for opening a bank account, every time there is a change in the board composition. This involves:
- personal address (usually, PO boxes are not accepted)
- tax status and tax ID, often including US tax status, e.g. FATCA
- passport copy
For the latter, usually a video verification is required, similar to veriying your mobile phone contract. This can either be done in person or via video identification. In person, this often only works at the German postal service or a branch office of the bank, so it is not suitable for board members from other countries unless they are in Germany by chance anyways.
The video verification also has its challenges, I am not happy with how this is implemented. The first set of questions often is only in German, while the actual video verification often can be done in English. Usually, I join the non-German speaking board members via phone conference or Jitsi, to guide them through the verification process. It can also be tricky to find proper light and webcam, to get the verification done.
Some banks even go further and requires us, as a German entity, to fill in a US tax form (with which we effectively confirm we are a nonprofit in Germany and the tax treaty is applicable). The form for TDF usually is W8-BEN, like the one we have to provide for the app stores. Unfortunately, often it can’t be reused for some strange reasons, or is slightly updated, so we have to do the process again for several occasions.
Compliance
Every once in a while, the bank compliance department asks questions to fulfil their duties from anti money laundering rules. One of the more strange ones I received was “Why does your foundation regularly change its board composition, and why do you have board members from so many foreign countries?”. While that sounds quite offensive, the background is to minimize their risks and fulfil compliance rules, which get stricter day by day.
The obvious answer to the above is that board members are elected as per our statutes and can be elected from around the globe, plus a link to our statutes. Still, it is bureacracy, and failing to comply in time can lead to a temporary block of the bank account. In this case, it doesn’t matter of the questions were rightful or wrong, we have a problem then.
Blast from the past
Thankfully, most banks - while they require a physical signature on paper - at least provide one document per person. Some banks, however, require a physical signature on the same sheet of paper. That obviously adds massive overhead and delays, if you have to ship documents around the globe. Sometimes FOSDEM or LibOCon come in handy and we get most people on site, but the timing of the bank requests can be odd, and deadlines are tight.
Rules are not always the same
Banks seem to interpret regualations quite differently. While some banks ask for data of all board members, some are fine to only get it from chair or deputy and another board member. That makes our life easier of course, but things also harder to plan, if the application of regulations is handled differently with every bank. This is part of the reason why we closed several bank accounts again, as the administrative overhead was just too much.
Why not a warrant?
A warrant would make things so much easier. However, whether rightfully or not, several banks outright refuse that, and require people to be present in person. Probably, a warrant given in front of a notary would work, but then we run in circles, as it likely requires a German notary, which means getting people to Germany.
A German problem?
No. Anti money laundering rules are international and at an European level, and I’ve heard similar horror stories from other organizations. Depending on your setup and the banks involved you might run into challenges or not, but the underlying problem is at least comparable.
Not only banks…
…but also payment processors for credit cards require similar details. Recently, also lawyers, tax consultants, auditors and notaries ask for such documentation.
Fun story
One particular fun story is when in summer of 2024, we had an in-person team meeting in Munich, with also board members present. We tried a video identification before, but the respective passport was too new for the system and it didn’t have the security identifiers. The only option the bank provided was to do it in person in Germany.
While in Munich, we took the opportunity, spontaneously wen to the banks, and did the signature in person. It took a bit of discussion to get this achieved (and some interesting moments of us in leisure clothing in a fancy investment bank), but it eventually worked out.