Corporate Banking: What Documents You Need and How to Manage Them?

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Navigating the complex world of international payments as a business owner is daunting, particularly when meeting the required documentation standards.

Documentation is a critical component of international payments as it helps to ensure compliance with Anti-Money Laundering (AML) and Know-Your-Customer (KYC) regulations. Authorities use this information to track the flow of money, detect and prevent fraud, and maintain the stability and security of the financial system.

Ensuring that you have the proper documentation protects your business from potential legal and financial penalties and also helps to facilitate a smooth and efficient cross-border payment process.

Whether you are making a one-time payment or regular international transactions, having the necessary documentation in order is critical for compliance, speed, and security.

When you don't have the correct set of documentation for international payments, a delay in payments may not be the only consequence. Failing to comply with documentation requirements may result in legal penalties (fines, sanctions and criminal charges), a business’s reputational damage and may eventually lead to a loss of business.

In 2013, a major multinational corporation was fined $536 million for failing to document cross-border payments made to suppliers in Asia and Europe. The company was found to have breached anti-money laundering regulations by failing to obtain adequate documentation for these payments.

Various factors also influence documentation requirements for international payments. Payments to countries that are considered higher risk may require additional documentation to ensure compliance with sanctions laws and anti-money laundering regulations.

Common Types of Documentation

To comply with regulations and ensure the security of transactions, there are several common types of documents that may be required by the relevant authorities:

  • Proof of identity and proof of address may be required from the sender of the payment. This may include a passport or a government-issued ID used to verify the identity of the parties involved in the transaction.
  • Incorporation documents may also be required for international payments. These documents provide information about the company's structure, ownership, and governance. For example, in Singapore, this set of documents could be the business profile obtained from ACRA BizFile. Depending on where your business is incorporated, other documents that may be required for incorporation would be Shareholding Chart and Business Registration certificate.
  • Trade licences may be required for some international payments. This is applicable to businesses that are engaged in international trade and need to prove that they are authorised to conduct business in their respective countries. For example, a liquor business is required to have a valid liquor license.
  • Invoices are often required as they are records of the goods or services being purchased and the amount being paid. Invoices can also help you ensure that all necessary information is captured and easily accessed if needed in the future.

By understanding the common types of documentation required for international payments, you can better prepare yourself in minimising the risks associated with incomplete or incorrect documentation.

Common Challenges of Business Documentation

One of the biggest challenges for business owners when it comes to documentation for international payments is the lack of understanding of the regulations and requirements. They may not be familiar with the specific documentation requirements for international payments.

Obtaining the necessary documentation can also be difficult. Depending on the country where the business is based, the requirements may vary and documentation may need to be obtained from specific authorities.

Slower processing time with banks can be an issue, as incomplete or incorrect documentation will lead to delays in the processing of international payments. Imagine reaching the end of a long queue to make a purchase, only to find out you have forgotten to bring your wallet.

Keeping up with changing regulations is another challenge, as international trade regulations and financial compliance requirements are constantly evolving. Staying up-to-date with the latest requirements can be difficult for business owners, especially as they are often busy with the day-to-day operations of their business.

Best Practices for Organising and Maintaining Documentation

  • Create a centralised system for storing and tracking documents

This can be in the form of a digital file storage system. When you have a single, easily accessible location for all the necessary documents, the process of obtaining and submitting documentation becomes much easier. This system will reduce the time and effort spent searching for and organising documentation, therefore, increasing the efficiency of your international payment process.

  • Establish clear guidelines and SOPs for documentation

Appoint a team member to be responsible for maintaining the documentation. They should set up a periodic review for updating the documentation to ensure it is up to date. They can establish documentation SOP for receiving and submitting documentation to the relevant entities.

This will improve the efficiency of your payment process by reducing errors, delays, and confusion associated with inconsistent or outdated documentation. Additionally, having documentation SOP will streamline the process and increase the accountability of your business.

  • Keep a record of all correspondence and communication-related material to international payments

This includes emails, invoices, and contracts. Having a complete record of all communications will ensure that all necessary information is captured and easily accessed when needed.

Wallex can help you smoothen your international payment experience. Find out more: https://www.wallex.asia/