Detailed questions from a bank do not automatically mean that there is a problem with the proposed currency exchange business. Banks must assess each customer on the basis of their individual risk profile and obtain sufficient information to monitor future transactions. A business involving cash and multiple currencies will therefore usually require more supporting information than a less risk-sensitive business model.
1. Banks have their own AML obligations
A bank is an obliged entity under the applicable AML framework. Before opening an account, it must identify the customer, establish its ownership and management structure, understand the purpose of the business relationship and assess the associated money-laundering and terrorist-financing risks.
The Czech Financial Analytical Office expressly notes that, when opening a current account, the bank will establish the expected transaction volumes and the source of the funds. The amount of information and documentation requested will depend on the customer’s individual risk profile.
2. Currency exchange businesses involve several risk factors
A currency exchange office will typically handle cash, multiple currencies and often foreign customers. Its bank account may receive regular cash deposits, significant transaction volumes or payments connected with the purchase and sale of foreign currencies.
The European Banking Authority identifies certain money service businesses as sectors that may be associated with a higher money-laundering or terrorist-financing risk. It has also issued dedicated sectoral guidance for providers of currency exchange services. This does not mean that every currency exchange business must automatically be classified as high-risk. The bank should consider the specific business model and the controls implemented by the individual operator.
3. What information may the bank request?
Requirements differ between banks. A currency exchange operator should nevertheless be prepared to provide:
information about shareholders, beneficial owners and senior officers,
the Czech National Bank authorisation or information about pending authorisation proceedings,
a concise description of the business model and business premises,
expected monthly turnover and the volume of cash deposits,
the currencies, customer groups and countries involved,
evidence of the source of the initial capital and operating funds,
AML documentation and a description of customer due diligence, PEP and sanctions-screening procedures.
Completing the bank’s KYC questionnaire may not be sufficient. In higher-risk cases, the bank may also request agreements, accounting records, tax returns or other documents supporting the information provided by the customer.
4. Monitoring continues after the account is opened
AML due diligence is an ongoing process. The bank compares actual account activity with the information provided by the currency exchange operator during onboarding. It may consider whether transaction volumes, cash deposits, counterparties and international payments are consistent with the declared business activity.
If the business changes substantially or a transaction falls outside the expected profile, the bank may request additional explanations and supporting documents. The operator should therefore inform the bank of material changes, such as the opening of another business location, a significant increase in turnover or a change in ownership.
5. When can a bank refuse to open or operate the account?
Where the bank cannot complete customer identification or due diligence, or the customer fails to provide the necessary cooperation and supporting documents, AML rules may require the bank to refuse the business relationship, decline a particular transaction or adopt another appropriate measure.
However, belonging to a particular business sector should not replace an individual assessment. The European Banking Authority has warned that refusing entire categories of customers without considering their individual risk profiles may constitute unwarranted de-risking.
A well-prepared bank onboarding package can make the account-opening process significantly easier. The information contained in the Czech National Bank authorisation application, AML documentation, business plan and bank KYC questionnaire should be consistent and provide a clear explanation of who owns the business, how it will operate and where the account funds will come from.
