Reality of Banking in Dubai/UAE - Source of Funds, Cash Deposits, Audit/Queries etc.

[andrew28fl]

I am considering opening a Dubai Free Zone company and actually making the move to UAE. Not getting in trouble with the authorities is my top priority, so I want to keep my setup as simple as possible. The company would ideally be pretty lean, me and max 1-2 more key employees in the UAE along with some non-UAE contractors that I would hire online.

I am getting some conflicting information about the issues that UAE Banks might raise for large volumes ($50k+/month) in a business account. I am posting this hoping that people with experience banking in UAE could comment on some specific concerns of mine. I am stuck in a country that UAE has banned for flights, so I can't visit Dubai to investigate this at the moment, but I plan on doing so in near future.


For a free zone bank account, how concerned should I be about the bank questioning me on the following:

Source of Funds: If I am depositing $50k+/month from various sources (bank drafts deposited in UAE bank in person, wire transfers from abroad, cash deposits in UAE local branches), would the banks query me about the source of funds? And to answer these queries, what type of explanation is sufficient? Would a simple invoice issued to an UAE or non-UAE company be sufficient or do they dig deep and check how the services were rendered, how many employees my business has to be able to provide these services etc?

Cash Deposits: While I read a thread on here (Deposit large sums of cash in a UAE bank) that said UAE banks don't mind large cash deposits, what is considered large? Would $20-$30k/month being deposited in cash raise flags?

Accounting/Audit: While I am told that free zone companies which are formed right (IFZA) don't have audit requirements, would the banks require me to maintain accounts, invoices, financials for the entity?


Anyone with practical experience running a free zone company in Dubai and banking there please comment. Thanks!

 

[CaptK]

In my experience you should not have a problem. My clients and I, we all recieve a mixture of payments from around the world, local payments by transfer, cash and cheque.

Providence is key when setting up your company. The more you can prove to the bank at the beginning the easier banking will be.

 

[andrew28fl]

In my experience you should not have a problem. My clients and I, we all recieve a mixture of payments from around the world, local payments by transfer, cash and cheque.

Providence is key when setting up your company. The more you can prove to the bank at the beginning the easier banking will be.

Thanks for answering @CaptK . How long have you and/or your clients been banking in Dubai? And how many times has the bank asked you to provide proof of source of funds, invoices etc?

 

[Fred]

1. No issue with your source of funds
2. No issue with the cash deposit of 20-30k$ AED/month -> for this amount you can deposit at ATM with 100k/day limit
3. No - the bank will ask you once a year to upload the new business trade license and every 3 years the Emirates ID

We are banking since 5 years with local UAE Banks and only received 2 times questions. Every time the amount of the transfer didn't matter - much more important is the source from where the money comes from and who is sending it.

For example getting 250k$ from a HK Company doesn't triggger any questions but getting 10k$ from a Latvian National with Bank Account in Poland and Address of Residence in Ukraine.

So you really have to trigger the bank with everything that is possible with mix of Private Person, Bank Location and Residence Address.

Important is that you stick to a big local bank and no small foreign owned Pakistani, Egypt or Saudi Bank.

 

[CaptK]

Thanks for answering @CaptK . How long have you and/or your clients been banking in Dubai? And how many times has the bank asked you to provide proof of source of funds, invoices etc?

I have have been servicing clients in the UAE snce 2010. When everyone was leaving after 2008/09 crash I went because it made more sense to me than Cayman and BVI.
In the begining it was fine there was no issues but as regulation changes we have to adapt. I have had a few issues with Source of funds just due to the nationality of the clients. My UAE business accepts cash and its normal to bank $200K, the bank dont ask.
For your situation specifically, I dont see a problem, simple normal things like ensuring every payment in and out has an invoice. The bank will request it and if you have it on hand immedietly. Just have it ready on email or on your drop box so if they ask for it you can send straight away, then you wont have issues. It shouldnt take you a week to produce invoices

 

[andrew28fl]

My UAE business accepts cash and its normal to bank $200K, the bank dont ask.

You mean you are able to deposit that amount of cash in a single transaction? That's amazing.

In your opinion, is it better to make cash deposits, or wire/bank drafts to receive funds? How does one explain cash deposit anyway, I mean I could always show them an invoice but do they reach out to those entities and validate invoices, in your experience?

I am a Canadian, been a non-resident of Canada for 10 years now. Does this help in the transition to UAE?

 

[CaptK]

You mean you are able to deposit that amount of cash in a single transaction? That's amazing.

My business has been established for a while so cash payments are not unusual for my bank.

In your opinion, is it better to make cash deposits, or wire/bank drafts to receive funds? How does one explain cash deposit anyway, I mean I could always show them an invoice but do they reach out to those entities and validate invoices, in your experience?

A mixture of payments would not be a problem. If you have an invoice for the payment just in case they ask you are good to go.

I am a Canadian, been a non-resident of Canada for 10 years now. Does this help in the transition to UAE?

Canadian passport holder will have no problems getting a visa, residency and banking.

 

[EliasIT]

My business has been established for a while so cash payments are not unusual for my bank.

you mean you walk into the Dubai bank with a bag filled with US$ and just hand it over so they credit your account with that money?

 

[Fred]

you mean you walk into the Dubai bank with a bag filled with US$ and just hand it over so they credit your account with that money?

Local currency AED will raise less questions and is pegged to the US$ anyway.

 

[andrew28fl]

My business has been established for a while so cash payments are not unusual for my bank.

@CaptK could you please send me a PM, I am not sure how to from my end. I would like to know more about what you do, and possibly create a similar solution for myself.

 

[CaptK]

@CaptK could you please send me a PM, I am not sure how to from my end. I would like to know more about what you do, and possibly create a similar solution for myself.

Contact details below

 

[CaptK]

you mean you walk into the Dubai bank with a bag filled with US$ and just hand it over so they credit your account with that money?

Yes, the payment is made in local currency AED but the equivalent in USD. I have deposited it as the account holder, a customer could not deposit that amount into my account.

Also I have a long standing relationship with the bank and they are used to large payments via all methods. As stated earlier you must run your business like you would anywhere else in the world. Have your invoices and contracts to hand as they could ask for them at anytime.

As a new customer it's just a matter of evidence when receiving large payments. Once you have provided them with the proof when requested for the first 10 payments, then future payments will not be a problem.

 

[mike400]

For your situation specifically, I dont see a problem, simple normal things like ensuring every payment in and out has an invoice. The bank will request it and if you have it on hand immedietly.

That's weird, cause @Fred told me several times that UAE banks will not ask for any invoices once the account is open...

Hopefully I'm not in for another bad surprise

 

[JimBeam]

Once you open the bank account, the baking itself should not be the problem in UAE... They don't ask much questions about money coming in or out...

Regarding the accounting, once you go over 375k AED/year (slightly more than $100k/year) you'll need to register for VAT and then you must issue VAT/Tax invoices and pay VAT if you do business with local companies. You will also have to file VAT returns... At this point I guess it's better to have an accountant... So, my advice is to have an accountant from day one... If no one asks for audits - don't do them, but have the accountant... Or at least buy Zoho Books and keep all your "books" there... It's a great business tool and some banks will give you 6 month free license for the start...

 

[Fred]

That's weird, cause @Fred told me several times that UAE banks will not ask for any invoices once the account is open...

Hopefully I'm not in for another bad surprise

Don't worry - that's bulls**t.

The banks we open with are all very transactional and don't ask invoice for every transaction.

In fact beside of small pakistani bank branch no bank in UAE is asking invoice for every transaction.

By the way banker called us today and confirmed to open you the requested other currencies you were asking for so already the 2nd bank account with major currencies open and 2 more under process - patience.

I can only recommend anybody to put some faith into service provider and go with the flow of things. It's not that difficult especially in the UAE you can still have everything and the price is some patience - no magic involved.

If @JimBeam refers to 6 month of free trial zohoo books most likely he is banking with Mashreq. So the typical banks since day 1 are still there you simply have to adopt frequently with the changing internal policy and have a relationship manager that takes really care of you even after the account opening.

 

[CaptK]

That's weird, cause @Fred told me several times that UAE banks will not ask for any invoices once the account is open...

Hopefully I'm not in for another bad surprise

Always be prepared. They don't ask often but they can and will ask for an invoice for a specific transaction at some point.

Bank is a bank and for them to never ask at all is rather naive approach.