A bank reference is also one of the usual documents for “know your client” (due diligence) purposes. Bank references are routinely asked from new clients at new bank account openings. Bank references are required from all individuals involved with the new account, including the beneficial owner of the company. Requests for bank references from new clients, especially foreign clients, are standard procedure in most banks. As part of our own due diligence procedure, we also require a bank reference or a professional reference from previously unknown clients.
A bank reference is a short letter from the bank where You have an account. A reference should simply state that You are their customer for a number of years (preferably, 3 or more) and should confirm that your banking relationship has been normal, 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 may 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.
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 or You may black them out by yourself. 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 a company in the name of a “ghost”, a dead person, or based upon a stolen identity.