Banking in Chile – Practical Tips

When a company is incorporated, the next logical step is to open bank accounts. The issue is that most companies entering Chile are caught off guard when they realize how difficult it is to open a simple bank account in Chile. The financial teams of most of these companies do not put much thought into this matter because they believe that because it is relatively easy to open an account in most countries, hence it will be the same in Chile. Nothing could be further from the truth and what is supposed to be a simple procedure, will take up several business days, thus creating a delay in critical business tasks such as paying staff, invoicing clients, paying suppliers, etc.   

To help companies understand banking in Chile, we have outlined some of the practical considerations and timelines that companies need to consider when setting up their banking relationships.

Evaluate all banks

The major banks in Chile are recognized globally so companies are well protected from a risk standpoint. However, companies need to understand how each bank operates and the banking platform they use since this will have the biggest impact on whether the relationship will work smoothly. Foreign companies often start with limited staff so ensure that the bank you choose to work with does not create extra work for your team by requiring documents to be delivered with wet signatures.  

Here are some important details you need to check for when selecting a bank:

• Details such as whether you can make international payments online without visiting a branch. Some banks require you to bring a signed document to your local branch each time an international transfer is made. 
• Details as to whether the bank will allow you to buy and sell dollars online. It is even important to ask whether you can call the executive to negotiate a better exchange rate which is important for companies who are selling or buying large quantities of dollars.
• It is important to understand whether a foreign manager can have access to the online bank accounts, what type of permissions can be added for users, whether it is standard to provide both a USD and Peso accounts, etc.

Practical Tips – Because the application process is so strenuous, it is best to spend time evaluating the bank and its online platform before going through the application process. It is important to know that it takes 3 to 5 weeks for a Chilean bank to approve a new application. Because of this, most companies do not restart the process with another bank if they find out the bank’s policies and platforms are not efficient.

 Steps to Open a New Account 

Opening a new bank account for a company with no previous operations in Chile can be difficult. The banks are extremely conservative in Chile. It is not uncommon for them to decline an application for a simple checking account. The process of opening a new account is by far the biggest inconvenience foreign companies will face after they incorporate a new company in Chile. Here are some things these companies need to take into consideration: 

• The most important consideration is that the legal representative of the newly established company has a pre-existing relationship with the bank.  
• The bank will often ask for the legal representative’s personal financial documents to support the company’s applications. They will also ask for all the corporate documentation of the company. These documents will then be reviewed by the bank’s legal department who will in some cases have observations that will need to be addressed.   
• The bank will then ask for a letter of recommendation from the parent company’s home bank and the financial reports from the last 2 years.
• The whole process will take 3 to 5 weeks (approx.)  depending on the bank being applied to, whether there are observations by their legal department, and how fast you respond to the various inquiries.  

Practical Tips   – There is very little that a company can do to influence the bank’s process or timing. The banks will take whatever time they need. They will provide observations that often do not make sense and need to be refuted. The most important thing for companies is to consider the timing it takes to open the account so that it does not affect other parts of the business which may be advancing.  

Access to Online Banking for Foreigners and Staff 

Once the bank account is open, it is important to consider what is needed for the foreign management team to have access to the account. The initial account will be set up with the legal representative having full access. It can be difficult to get foreign managers to access the account because log-ins are based on a local Tax ID (RUT) which only residents will have.  

• The process for getting a foreigner access to the account generally involves the bank creating a “fictitious” Tax ID for the person, banking powers provided to each person who will need access, and then sending the digital passes to the person by mail.  This process can take up to 2 months.  
• Local managers or staff who may need access to the account, the process is relatively straightforward, and access can be granted in about one week.   
• While going through this process for local staff, it is important to have a “check and balance” system. This means ensuring that there are limits to what employees can do, double signatures for transactions over a certain size and that there are clear policies and procedures for employees to follow.  

Practical Tips – Companies need to carefully choose their legal representative, since that person will have full authority over the bank account. In some cases, companies will choose to have an employee as the legal rep which can be risky. We have seen managers who have taken credit in the company’s name without any authorization, paid out amounts that were not approved, or removed access of other managers. With this in mind, we always recommend companies have an independent legal representative to monitor the day-to-day activities of the parent company. 

Credit Cards 

Obtaining credit cards for a newly incorporated company can be difficult. In most cases, the banks will only provide a credit card if the company puts a guarantee for the same amount as the credit card. Generally, this is not an issue but for a fast-growing company, it needs to be done for each credit card which takes time.  

• In some countries, you can have debit cards that have limits or prepaid. These are not available in Chile, so a credit card is generally the only option.  
• Staff will need to be trained on proper expensing. Rejected expenses can carry a 40% fine from the tax office so it is important that each expense purchased on the credit card is supported by a receipt and is properly accounted for each month.  
• Credit cards can take approx. one to two months to be issued so it is best to keep this in mind when starting the process.

Conclusion

Chile is advanced in many areas but the banking industry is still very conservative and does not live up to the expectations of foreigners. It is by far the most difficult part of getting your company operational. Even when you have found a bank that you like, many tasks are still dependent on the account executive which means that if you happen to have a bad one, your relationship with the bank will be affected.  

Our last piece of advice is that it is important to work with a legal representative that understands how the banks in Chile operate. They will be able to push when needed, provide realistic time frames around processes, and will be able to explain what can be done or what cannot. Companies can manage their operations around the bank’s approval processes if they understand the reality and timings. If nobody informs the management teams about the realities of the banks, then the process can be extremely frustrating.

Ax Legal is an advisory firm that works with foreign companies in Latin America. Our legal and commercial advisors team has a distinguished track record of helping foreign technology and services companies grow and operate in Latin America. Over the years, we have worked with starts up, mid-size businesses, and publicly listed companies. The one common factor that connects our clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.

To better understand how we can support you in the Region, please contact Cody Mcfarlane at cmm@ax.legal