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Open a new bank account immediately, when you need it

The difficulties in opening new bank accounts are here for many years, if not forever. Know Your Customer difficulties are legendary, but there is a solution: Virtual Accounts.

The benefits

There is a long list of benefits claimed for virtual accounts (Accenture analysis):

  • Substitute for cash management offerings
  • Centralization of treasury functions
  • Viable alternative to other liquidity management offerings
  • Increased cost efficiencies
  • Increased STP reconciliation
  • Rationalization of accounts and banking relationships.

While Cashfac claims that they place control of client bank accounts into their hands. Flexible account structures allow segmentation of the business more precisely and allows them to gain greater transparency and control over cash.

  • Simplification: A single view and a single platform for any number of accounts linked to multiple banks
  • Compliance: Cashfac Virtual Accounts identifies and protects client monies by segregating client funds in dedicated client accounts.
  • Speed: Instant creation of multiple bank accounts so that client onboarding limitations are removed and payments can be managed immediately.
  • Scale: Quickly scalable to meet the changing needs of corporations, enabling them to improve how they client money management.
  • Audit: continuous reconciled views of client cash and internal ledgers to demonstrate necessary segregation of client money and clear records of all transactions to support all associated audit and reporting requirements.Client Friendly:  Cashfac Virtual Accounts provides corporations clients with a portal to see their own accounts, reducing internal administration and creating transparency across the cash management process.

But the simplest solution may be the most important: opening bank accounts immediately.

Speed of account opening = the key benefit

Virtual accounts allow creation of multiple bank accounts so that onboarding limitations are removed, so that corporates can setup new accounts when they want. This is is why:

CTMfile take: In the bank account opening nightmare of today (and many years to come), the simplicity of opening new Virtual Accounts really an example of a ‘frictionless’ service and it works. Does your account structure need to be adapted to incorporate virtual accounts?

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By MW on 11th Aug 2017:

I do not really agree that virtual accounts (VA) are a solution to avoid KYC. At least not if those accounts are to be used outside an inhouse bank (IHB), i.e. for making or receiving payments.
If used for payments and collections, this becomes Payments on behalf of (POBO) or collections on behalf of (COBO) (sometimes also referred to as receivables on behalf of (ROBO)). In this case the bank needs to know the ultimate debtor or creditor. There might be differences in the legal interpretation of AML and KYC requirements by different banks, but in general an IHB would only be allowed to use the VA for those entities for POBO/COBO once the bank has done at least a “light” KYC.
If the IHB (and maybe a third party VA provider) should be “secretely” doing POBO/COBO I am just waiting for the news that company XYZ or the VA provider have been fined a few hundred million USD for breaking AML laws.
And maybe also the unsuspecting bank because they did not detect the misbehaviour of their client (i.e. insufficient KYC procedures). After all, almost all regulators nowadays seem to expect banks to be AML criminal investigators with all their clients being possible suspects until proven innocent.

By Jack Large on 11th Aug 2017:


You are right my piece was too general.

Setting up virtual accounts can be both good and bad, and have very different scale. A local council setting up accounts to manage their distribution of benefits to their residents is very different from a POBO/ROBO payment factory in scale, however, in many ways they are very similar as both have the potential for fraudulent transactions.
In KYC terms virtual accounts can be:
- a nightmare: who decides about opening a virtual account and how they are used? Is it you, the banker, or the corporate operating the account? Do banks want to approve every virtual account with all the delays that causes?
- a boon: (which is what my piece was about) as the user can set up bank accounts almost instantly.

Sadly, virtual accounts do can, in some situations, make the KYC problems worse. Who is liable for the money laundering from a virtual account based liquidity scheme?

KYC is a complex multi-faceted, global problem. Who would be a banker or a regulator?

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