There’s a prevailing myth among e-residents that one must open an Estonian bank account or hold an Estonian IBAN to initiate a business in Estonia. This article seeks to debunk that myth effectively.
Let’s address upfront that for many e-resident entrepreneurs, the prerequisites for opening a traditional bank account in Estonia—such as needing to visit Estonia for a personal banking appointment or demonstrating significant local ties—can be stringent and difficult to meet.
Nevertheless, numerous alternative banking solutions exist, which I will discuss below.
1. Estonian Bank Accounts Are Not Mandatory for E-Residents
The idea that e-residents must possess an Estonian bank account is widespread but incorrect. Estonia’s business framework is designed to minimize bureaucracy, including in banking. Legally, an Estonian company can be operated using any business bank account from the European Economic Area (EEA), not just those from Estonia. This provision allows e-residents to fulfill financial obligations, such as company capital contributions, through any EEA bank account, sidestepping the need for an Estonian account.
2. Understanding IBAN Discrimination
The misconception might also be fueled by instances of IBAN discrimination, where transactions are restricted to accounts with specific country codes. For example, some e-residents have encountered issues with eCommerce platforms that demand an Estonian IBAN. It is crucial to understand that such discrimination is illegal within the EU, and actions can be taken against it through the proper channels, which include lodging complaints with the European Commission.
3. Fintechs and European Banks: Viable Alternatives
Given that e-residency ideally supports remote business management, it is no surprise that many e-residents prefer fintech solutions to traditional banking routes. Fintechs facilitate all necessary verifications online, without the need for physical meetings. These platforms are also known for their innovative approaches to banking, offering features like advanced security measures and personalized financial advice, often outperforming traditional banks, which can be hindered by older systems.
Those who prefer the traditional banking experience might consider opening an account in another EEA country where they are already clients. This option can offer advantages such as ease of use, integrated services, and a pre-existing trust relationship with the bank.
4. Situations Requiring an Estonian Bank Account
There are specific circumstances where an Estonian bank account might be necessary. Certain regulated activities, like offering financial services that include cryptocurrency transactions, may require adherence to specific banking guidelines, including possessing an Estonian IBAN. It’s advised to consult with experts who can provide tailored advice and support in navigating these requirements.
5. The Ultimate Decision Rests with Financial Institutions
Lastly, it is important to recognize that obtaining a bank account as an e-resident is subject to the discretion of banks and fintech companies, based on their internal policies, risk assessments, and KYC procedures. Additionally, global anti-money laundering and counter-terrorism financing regulations may prevent individuals from certain countries from accessing banking services due to heightened risk assessments.
Conclusion
In summary, while e-residency provides many benefits, it does not ensure automatic access to Estonian or broader European banking facilities. Entrepreneurs should be mindful of the banking landscape and the alternatives available to them, ensuring they make informed decisions about where and how to manage their business finances.
