Banking with the French? Don’t compte on it!

I would consider myself someone who is up for a challenge. I have moved to countries on a whim with little to none of the language under my belt and no friends or family there to cushion my crash-landing. I have willingly completed two half-marathons. The first, to see if I could. The second, because I am competitive and a guy at work said he was faster than me. Spoiler alert, he wasn’t. I pride myself on being up for a challenge but I was not prepared for the challenge that is… opening a French bank account as a foreigner!

Disclaimer before we go any further: This was one challenge that, at the time, would have resulted in a Britney Spears 2007 style meltdown. I gave up on French banks and instead opened an account with N26. Nonetheless, I wanted to look at the process involved more closely because my experience is not unique; it is clear from talking with foreigners and looking at expat groups/blogs that this topic is well discussed because it is so unbelievably and inexplicably difficult! Scattered amongst the horror stories are some positive experiences but for the most part, those persons were European or in a relationship with a European. Those with the worst stories were American (FATCA = a big fat no thanks from French banks). So what’s the story?

WTS stands for what’s the story, not what the shit, I promise.

What you need to open a French bank account (aside from patience).

So you’re moving to France, good for you! One of the things you’re going to want to do, tout de suite, is start the process of opening a bank account.

There are some international banks that may open a French bank account for you before you arrive (HBSC, Societe General and Credit Agricole for the Brits) but this will depend on whether you have an account with them in your country of residence. There are also some banks that provide online services for opening an account but this option is really aimed at French citizens or persons who have been living and working in France for a long period of time as a condition of eligibility is the provision of evidence that you are a “resident fiscal français” which in practice means you have to upload evidence of your French tax return. Those moving or having just moved to France unsurprisingly will not have such evidence available, which is why most people will need to start the process in the country.

Things you’ll need to take to the bank: proof of identity, proof of address and proof of income. Proof of identity is easy. Just scan a copy of your passport, national identity card, drivers license etc. This is something you are going to need to get used to. I had to take my passport to join the gym and now, with my identity verified, I am licensed to get fit. The second and third requirements are a little trickier. Proof of address could be provided by presenting a copy of a lease or sale of purchase receipt (if you’re a homeowner) as well as a utility bill issued in your name. This is the first catch 22 you’ll encounter as you can’t rent or buy a home in France without a French bank account (likewise with paying bills) but you need evidence of these things to open a bank account in the first place! Whaaat?

Options:

• If you are staying with someone in France (i.e. you’re being hosted), your host can sign a document to that effect and provide their paperwork (lease, proof of identity and proof of address) to the bank.
• If you are staying at an Airbnb or renting a place for a decent amount of time (i.e. a month or longer), you could ask your host very nicely if they will do the above process for you.
• If you are here to buy a home in France, you can present a statement from the estate agency on your intention to buy.

Proof of address is a requirement due to international anti-money laundering and counter-terrorism financing regulations. This is a universal requirement for banks (and some other entities) that reside or operate in countries that have ratified such regulations into domestic law, so it is not unique to France. Essentially, what banks want to see is that you are a real person with a corresponding birth-date associated with a real address (i.e. not a P.O. box or fake address) that can be checked against internal watch lists or black lists to assess any risk associated with your profile. Verifying your identity is part of the Customer Due Diligence (CDD) requirements. Evidence of address can be difficult for people who are transient or who do not have a fixed abode but it is not insurmountable. The options listed above are some ways French banks apply policy to allow people who are transient to still meet this requirement. We will talk about policy a little later but for now, let’s continue to the last requirement. Proof of income.

Providing proof of income is logical. A bank needs to know you have money or will have money coming into the account, otherwise it will be an immediate loss for them to open an account for you. However, when I called the bank to ask what evidence was required I was told I would need my French tax receipt. Whaaaaat? Don’t worry, I don’t think this is true. They probably heard my accent and were like “oh no Jeanne-Pierre, we have another one, tell her she needs to bring in a unicorn and the tears of a mermaid for us to open her account.” What you will need is a pay-slip (or three) as well as a contract or evidence of employment in France. Alternatively, if you don’t have a job yet, you could provide 3months worth of statements (showing the amount in your account, not a transaction history) from your bank at home. You’ll also need a cheque ready to make an immediate deposit into your account, which can vary in amount (e.g. BNP Paribas requires 300 Euro).

This SHOULD be enough for an account to be opened, but it also may not. Things that may help your case:

• If you have a friend in France with a bank account, ask them if they will introduce you to their bank. The personal connection sometimes helps.
• Expect the worst so bring all of your paperwork. Oh, you “need” my birth certificate as proof of identity? Sure, be my guest.
• Most importantly, you need to be ready to explain your situation in French so if you don’t speak French take someone along who does.

If you’re successful in the above, you will be sent your card and your pin (separately, of course) in the mail. Cross your fingers that they both arrive, as a number of people I talked to had issues with this process and waited over 3 months to receive their card and/or pin! Some banks do let you pick the card up from your branch once your account has been established. I would recommend asking upfront for this option as the French post is about as reliable as French banks when it comes to providing a service.

You’ve done all of the above and they still said no? Don’t stress. Ask for a letter de refus (letter of refusal) and head down to the Banque de France with your ID and proof of residence to complete a droit au compte (right to an account). Under the French Code Monetaire et Financier all persons residing in France (and all French persons residing overseas) have the right to open a bank account and to have access to basic banking services. This law has been in place since 2006 which is why I find the process for opening a bank account in France so surprising but voila, c’est comme ca!

So the process is a little complicated. So what?

When you move to France to live or do business, you need a bank account. You cannot do anything without one. You can’t get paid, you can’t pay someone else, you can’t rent an apartment, you can’t buy a car etc. etc. When the process for obtaining a bank account is unclear, contradictory or unnecessarily difficult it impacts on a person’s rights to basic banking services. Why incorporate it into law and enshrine it as a basic right if you’re not actually going to practice it France?

Poor policy and processes are also off-putting to businesses looking to get set-up in France. I personally haven’t experienced the paperwork and pain required to set up a corporate or business account in France but I hear it is like the process above but on steroids. While the difficulties associated with French banks may not be a complete deterrent for businesses looking to get set-up in France, they are off-putting. For a country looking to attract investment and become the tech capital of Europe, this is an issue that should be taken seriously.

Watch out France, a Revolut-ion is coming!

I mentioned at the beginning of this tirade that I opted to bank with N26. I think it is worth mentioning that there are a number of startup banking solutions such as N26 and Revolut which offer personal and business accounts for persons in Europe, the UK and further afield. These startups are licensed banks, which means they are legally required to comply with the same regulations as the other banks operating in France. The process for me obtaining my account with N26 was a dream. I entered my information online and then verified my identity over the phone through video verification (one of three options for identity verification), the security details of my passport were scanned and then the passport image was matched with a real-time image of me. All up, it took about 5minutes! My card was then posted and I was able to activate it and add a pin online once it arrived. Easy peasy!

The services that these banks provide are simple online accounts that allow you to track your personal or business spending online with little-associated costs for the account, cards, and transactions. The business accounts are limited, they are designed more for freelancers or auto-entrepreneurs, so it is not on par with the business services provided by banks. However, that may change in the future as they continue to grow. For example, in mid-2017 N26 paired with a credit provider to be able to offer personal loans from €1,000 to €25,000 to its customers. Revolut also offers personal loans from to £500 and £5,000. There are also French start-ups such as Qonto and Spendesk, who are operating to provide better banking and company spending solutions for businesses. Qonto is in an interesting one to watch, having recently obtained ACPR status in France (Autorité de Contrôle Prudentiel et de Résolution) which means they are recognised as a banking entity in France. These startups are perfectly poised to disrupt the banking system in France and I personally can’t wait to watch them do so!

Which begs the question — if these banks can offer easy banking solutions while still maintaining compliance with laws and regulations, why can’t the French?

I have asked a number of persons why French banks are so difficult when it comes to opening a bank account for foreigners and received a handful of different responses:

• There are potential financial losses a bank may incur by opening accounts to foreigners who are only going to stay for a short period of time or who might up-and-leave without giving due notice. In this case, it is not worth the effort and associated costs to open bank accounts for foreigners.
• The banking industry in France is heavily regulated with a lot of requirements to be met, so foreigners seeking an account should just accept that they will have to provide whatever information the bank determines is necessary to meet these requirements.
• Obtaining a French bank account gives you access to so many things in France, it is a privilege and so, of course, the banks make it difficult for foreigners to obtain.

These are poor excuses for any business, especially when there is competition in the banking sector ready to snap up your clients before you can say “show me your French tax return and minimum deposit check.” I believe the real issue with French banks is poor compliance policy and processes, as well as a lack of innovation to meet legal requirements. What do I mean by compliance policy and processes? A policy is a statement that an agency or business makes around what they are going to do to put the law into effect and the process is how they are going to do it. For example, I mentioned the legal requirement for banks to do Customer Due Diligence at the point of on-boarding as part of the anti-money laundering regulations. Banks are legally required to verify your identity but how they choose to do so is essentially a question for policy and process.

Decisions on policy and process should be based on risk management. The question for banks opening accounts for new customers is how do we determine the risk associated with this customer? And by risk, I mean the risk that the individual could be involved in criminal activities which may in turn make the bank complicit. Banks that contribute to money-laundering or the financing of terrorism, wittingly or unwittingly, can be subject to fines and at the extreme end of the spectrum, prison time. For example, Danske Bank, has recently been rocked by a money laundering scandal with its Estonian branch which, if they are found to be guilty of wrongdoing, may result in a fine within the hundreds of millions to $8.3 billion. This is one of the reasons why strong compliance systems are so important; however, compliance should be seen as more than “a keep me out of jail card.” Good compliance systems make processes transparent for customers — they know what they need to provide and why they need to provide it. A positive customer experience leads to happy customers who share their experiences with other potential customers which in turn creates business and profit. So banks of France, what are you waiting for!

P.S. Revolut takes a different approach to compliance, which you can read about here (How Revolut took a different approach to Compliance)

New ways of thinking in New Zealand?

As a proud New Zealander, I wanted to compare compliance systems in France and New Zealand to see if there are any potential lessons to be learned. New Zealand has ratified the anti-money laundering and counter-terrorism regulations into domestic law so the banks are subject to the same Customer Due Diligence requirements. So how do they manage it “down under (and a little to the right)”?

An everyday scene, I can assure you.

Four of New Zealand’s biggest banks will allow you to open a bank account online or over the phone before you arrive (ANZ, Kiwibank, BNZ and ASB). For online applications, you will need to fill in a form that outlines your details, your overseas contact details as well as your contact details in New Zealand (if you know them). You will then be asked to fill in a tax residency and foreign tax information form, which identifies accounts being opened by customers who are foreign tax residents so that this information may be shared with the relevant overseas tax authority. This is also a requirement for opening a bank account in France, I just never got to that stage. You will then be asked to certify that the information provided is true and agree to provide evidence of this to the bank upon arrival in New Zealand. This will be enough for the banks to open an account for you so that you will be able to transfer funds in advance, however, you won't be able to access the funds until you have verified your identity in person with the bank.

Once you arrive in New Zealand you will need to go into the bank in person to verify your identity (or to start the process). Things you will need to take with you are your passport, proof of residential address i.e. a recent bill, bank statement or letter addressed with your name and address (even if that address is based outside of New Zealand) and your relevant visa. Copies of these documents will need to be certified as true. Some of the banks may allow their staff to certify the documents whereas others will provide a list of suitable professionals or persons who you will need to have certified them (e.g. lawyer, justice of the peace) but certification is free of charge. Then, once you have gone through this process of validation and certification, you should be able to walk out of the bank with your debit card in hand et voila!

Big differences?

1. Proof of address: New Zealand banks will accept proof of an overseas address. This is much more practical than asking for proof of address in-country as it is rare for foreigners moving overseas to have their accommodation arranged before or as soon as they arrive. There is also merit in requesting historical addresses, as opposed to accepting someones Airbnb or host addresses, as it allows the bank to conduct a more accurate check of the customers' risk profile. As I mentioned, your name and address are searched against the banks' internal watchlist or “blacklist” to see if it matches any of the following profiles: politically exposed person, criminal, terrorist, sanctioned individual/entity or reported in media to be involved in an activity that is adverse in nature. These profiles represent a heightened risk for the bank and so it is essential that this risk is identified at the point of on-boarding. To do this, you’ll need to use the most accurate or full information to make this assessment, which for those having just relocated or moved would be the historical address.
2. Proof of income: New Zealand banks don’t require you to produce a tax receipt at the point of on-boarding because, quite frankly, for most customers it is over-the-top. The purpose of banks reviewing a persons’ tax receipt is to identify their source of income or source of wealth as part of anti-money laundering efforts. This is required as enhanced customer due diligence where it has been identified that a person carries risk to the bank (e.g. because they are a politically exposed person), therefore the bank needs to carry out additional checks to ensure that they are not or will not be complicit in perpetuating any crimes. The EU Commission suggests that enhanced customer due diligence should be applied where there are risky situations or a high-risk third party country involved. As such, providing a tax receipt should not be a mandatory compliance requirement for all persons seeking to open an account, it should only be required where there is a higher risk to the bank. Further, I would suggest the best policy for banks would be to obtain a persons most recent tax receipt as opposed to their French tax receipt. It is unrealistic for persons having just moved to France to have such documentation on hand, meaning banks will have to act in a non-compliant manner with their own policy should they choose to open an account without this documentation. Further, if you want to make a full and accurate assessment of the risk posed by a customer the more informative information may actually be the tax return from their home country.
3. Document verification: As I did not physically go into a French bank to open a bank account I cannot comment on whether they do or do not apply a document certification process. New Zealand banks do apply a process for certifying documents, which is clear from their websites, although I would say it is fairly low level. In my opinion, the optimum standard of document certification was provided by N26, who used technology to verify that my passport was real. N26 have faced some criticism around their processes for identity verification, with one or two people getting through with a fake document. Fraud is nothing new for banks, so applying processes to be able to identify it as soon as possible is incredibly important. While N26 did not identify the fake documents in real-time, they did identify them afterwards. Interestingly they also commented that, while persons may think uploading a photo ID document leads to more fraudulent activity, they have actually noticed a higher fraud rate from customers who physically go to the post office to check their ID document. So you thought you could fool Postman Pat but not the little man in the computer eh? Shame on you!
4. Online systems: I don’t think much needs to be said here other than get with the programme France! Allowing persons to open an account online is not only efficient for customers but it is efficient for banks. Obtaining information about potential customers in advance (i.e. before they arrive in country or in person to the bank) allows more time for thorough due diligence and checks. Also, the teller doesn’t have to enter the information provided by potential customers as it is already there! This reduces the time taken to onboard and it reduces human error, as the person entering the information online cares more and is familiar with the information being entered. This is particularly important when opening accounts for foreigners as things can get lost in translation, resulting in human error and delays. There is no reason, in this day and age, for banks not to offer online services. There just isn’t!

Challenging the expression “C’est comme ça”

The purpose of me writing this article was not just to vent, I already did that with my friends (poor buggers). The purpose was to identify potential lessons learned and to challenge the French saying “c’est comme ça.” It is true, French banks hold a huge place in the French economy and society but if they want to maintain this privileged position then I firmly believe they need to change their ways before they are usurped by other smarter and more easy-to-use banking services. The key to this change? Better, smarter compliance systems that allow banks to comply with all legal requirements while still offering competitive services to its customers!

…and to think this article only examines the on-boarding process for French banks, we haven’t even touched the rest!

Watch this space for more rants on compliance and thoroughly sassy comparisons of regulatory environments.