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What is a bank reference?

A bank reference is one of the usual documents for KYC / Due Diligence purposes. Bank references are routinely asked from new clients at new bank account openings, including opening of the bank account for an offshore company. Bank references are required from all all individuals involved with the new account, including the beneficial owner of the underlying offshore company. Requests for bank references from new clients is standard procedure in virtually all banks, including offshore banks. In some cases we may also ask new clients to provide a bank reference for our due diligence purposes.

A bank reference is a fairly standard letter from any bank where You have an account. A reference should simply state that You are their customer for a period of years (preferably, for at least 3 years) and should confirm that Your banking relationship has been acceptable, without any defaults from Your part. The bank reference can also confirm Your residential address, as it features in the records of the bank. This way the bank reference can also serve as proof of address, so there will be no need to provide a separate proof of address. A bank reference may be obtained on the basis of any banking relationship - a personal account, joint account or a business account (of a company), insofar as You have signatory rights in that account.

A bank reference is not a guarantee. It is just a standard, informative letter. As such, a bank reference is well known to all bankers, so they won´t be surprised when You ask for it. Every bank usually has its own wording for a reference. That`s perfectly acceptable. Some banks may also include a disclaimer to the extent that the reference letter is for information purposes only and does not provide any representations or guarantees on banks´ part. Such wording is also no problem, as the purpose of bank reference is not to guarantee anything - just provide a basic confirmation that they know You.

The bank reference does not have to reveal any confidential information! Bank reference does not have to state the account number, the amount of funds on the account, the outstanding loan or any other kind of personal financial information! If by some reason or misunderstanding the bank is purporting to include any more confidential details in the reference (like the account number), You may request them to withold any such details. A bank reference should be nothing more than just an informative letter, stating that the bank knows You for certain period of time as a decent customer - without going into any further detail.

The underlying logic for the bank reference is to establish that the particular person is a regular member of society with some economic activity or vocation - as all such individuals would normally have some sort of bank account. The secondary purpose of a bank reference may be to confirm the identity and address of an individual by an independent, reputable financial institution (the bank).

The preventive purpose for requesting the bank reference is to avoid fraudulent attempts to register an offshore company in the name of a "ghost", a dead person, or in the name of a marginalized, impoverished individual, who might just have sold his passport on a street corner. It is highly improbable that such individual would have a long-standing banking relationship.