If you are looking to open a bank account for CFD brokerage then keep reading on, we are going to cover steps and best banks to do so.
CFD Brokers as any other financial services providers need to open several types of bank accounts in order to conduct their business in line with regulations and their own internal goals.
Why CFD Brokerage Needs Operational Bank Account?
A CFD brokerage requires an operational bank account for key operational purposes such as managing margin requirements, and covering operational expenses such as salaries and technology costs.
The operational bank account also plays a vital role in regulatory compliance, providing a transparent record of financial activities that enables the brokerage to meet specific standards and reporting obligations set by regulatory authorities.
Opening an operational bank account for CFD brokerage is a straight forward process, very similar to that of opening regular corporate account. The bank will seek to understand its corporate structure, identify UBOs and understand the purpose of the account. However, once opening client money accounts, collection accounts or safeguarding accounts, the enhanced due diligence will be required.
If you would like to explore operational bank account opening for your CFD brokerage, get in touch with us and we will share some banks that are open for such business.
Why CFD Brokerage Needs Safeguarding Account?
A CFD brokerage requires a safeguarding account for the protection and segregation of client funds. Regulatory authorities often mandate that CFD brokers establish such accounts to ensure a clear demarcation between client funds and the brokerage's operational capital.
Safeguarding account plays a special role in the event of the brokerage facing financial difficulties or insolvency, the funds in the safeguarding account remain separate from the broker's assets and can be returned to clients, protecting them from potential losses.
Safeguarding accounts can only be provided by credit institutions and that is what causes the challenges for CFD brokerage regardless of their licensing jurisdiction. Traditional banks often do not want to take risk of having CFD brokerages onboard for any types of accounts, let alone safeguarding accounts due to high risk of potential losses on behalf of their clients.
However, it is possible to open safeguarding accounts, especially in the European Union where some specialized banks are slowly opening doors and letting in this type of clients. If you would like to get a list of CFD brokerage friendly banks that can consider opening safeguarding accounts, get in touch with us.
Opening Collection Account Or Client Money Account For CFD Brokerage
Collection accounts and client money accounts are crucial for CFD brokerages as they serve as a cornerstone for allowing clients to deposit and withdraw money from the trading platform.
Clients want to have an ability to deposit and withdraw in their local or convenient international currency, which demands a CFD brokerage to provide collection accounts that meet such standard. In addition, having an ability to collect and payout in a multi-currency fashion helps in acquiring international clients and maintaining the deposit and withdrawal costs under the check.
Nowadays, client wish to deposit and withdraw also in crypto not only fiat. New solutions are coming to the market where banking platforms can host and facilitate both: crypto and fiat currencies under the one roof. This helps CFD brokerage especially in serving clients that are from underbanked jurisdictions. Such clients would have to incur enormous costs depositing funds with the brokerage while crypto stable coins allow them to do so seamlessly and cost effectively.
If you would like to open collection and client money accounts for both fiat and crypto currencies, reach out to us and we will supply you with a list of CFD brokerage friendly banks.
On the other hand, the dedicated accounts contribute to increased transparency, facilitating audit trails and regulatory oversight, especially when clients funds are being separated from the own brokerage capital.
Moving forward, onboarding CFD brokerage for client money accounts by default requires enhanced due diligence from the bank side. Different banks tend to have different understanding about enhanced due diligence, however we would like to share some insights on what kind of documents you should prepare:
- General pack of incorporation documents
- UBO and director identifications (POA and POI)
- Copy of relevant licenses and POA of the business
- Last audited accounts
- AML/KYC/CDD policies or Wolsferbg’s Questionnaire or both
- There is a high chance that bank will seek to receive an external AML audit
- AML, CDD and customer risk assessment data files
These are crucial pieces of documentation that banks want to analyse internally.
Even more, we do highly suggest to first start the commercial discussion before the onboarding as pricing structure might not be in line with management expectations and time can be wasted while onboarding the business for nothing.
From our experience, it is always better to establish several banking relationships as banks tend to close CFD broker accounts with a short notice and having several options are always handful. Also, having several banking providers will enable you to cater to a broader network of currencies and payout capabilities hence serving a broader base of clients.
Conclusion
In conclusion, the process of opening bank accounts for CFD brokerages involves navigating regulatory requirements and understanding the distinct purposes of operational, safeguarding, and collection/client money accounts. Undertaking enhanced due diligence is paramount, and establishing multiple banking relationships is advisable for resilience and broader service capabilities.