Bank Account Opening Challenges for Private Trust Companies: Compliance and Practical Solutions

The 2024-2025 compliance cycle has produced a measurable tightening in Hong Kong’s corporate account approval pipeline, with private trust companies (PTCs) emerging as a disproportionately affected entity class. Data from the Hong Kong Monetary Authority’s (HKMA) 2024 Banking Stability Report indicated that the aggregate rejection rate for corporate account applications across the city’s retail and private banks rose to approximately 18.7% in H2 2024, up from 14.2% in the same period of 2023. For PTCs—structures that are neither licensed trust companies nor standard operating companies—the estimated rejection rate among the top ten private banks surveyed by the Hong Kong Trustees’ Association in Q1 2025 reached 34%. This divergence is not a function of credit risk; PTCs are typically capitalised at HKD 1.00 or a nominal amount and hold no proprietary assets. The friction stems from a tripartite compliance gap: the HKMA’s Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT Guideline, revised January 2024) requires banks to identify the “beneficial owner” and “controller” of any legal person, but a PTC’s governance structure—where the trustee is a board of directors with no equity ownership—does not map neatly onto a standard corporate ownership diagram. This article examines the precise regulatory architecture causing these rejections, the documentation strategies that satisfy bank compliance officers, and the structural workarounds available to family offices establishing PTCs in Hong Kong, Singapore, or the Cayman Islands.

The Regulatory Architecture Behind the Rejection

The HKMA’s Enhanced Due Diligence Requirements for Legal Persons

The HKMA’s AML/CFT Guideline (January 2024 revision) paragraph 4.2.2 explicitly requires that for all legal persons, a bank must identify and verify the identity of:

• Each individual who owns, directly or indirectly, 25% or more of the shares or voting rights (the “ownership prong”).
• Each individual who otherwise exercises control over the management of the legal person (the “control prong”).

A PTC, by definition, has no shareholders holding equity. The “control prong” therefore becomes the sole basis for identification. However, the Guideline does not provide a specific template for how “control” is to be documented in a non-equity structure. Banks, in practice, apply the same standard they use for general corporate clients: they request a register of members, a share certificate, or a certificate of incumbency. When the PTC’s constitutional documents (typically the Memorandum and Articles of Association in a Cayman or BVI vehicle) show that the company has a single issued share held by a trust corporation or a charitable entity, the bank’s compliance system flags the application as “incomplete beneficial ownership information.”

The consequence is a “refer to compliance” status that, in the experience of practitioners filing applications between January 2024 and March 2025, adds an average of 18 to 25 business days to the account opening timeline compared to a standard BVI trading company with a natural person shareholder.

The SFC’s Code of Conduct and the “Source of Wealth” Burden on PTC Directors

A second layer of friction originates from the Securities and Futures Commission’s (SFC) Code of Conduct for Persons Licensed by or Registered with the SFC (revised December 2023), specifically paragraphs 5.1 and 5.2 on client due diligence. While the SFC Code directly governs licensed intermediaries, its principles are adopted by private banks as internal policy. For a PTC, the bank’s compliance department must establish the source of wealth (SOW) and source of funds (SOF) not only for the settlor of the trust but also for each director of the PTC board.

This creates a practical paradox: the PTC directors are often professional appointees—a lawyer, an accountant, and a family office executive—who have no personal connection to the trust assets. The bank nonetheless requires each director to provide personal bank statements, tax returns, or a net worth statement. In a 2024 survey conducted by the Hong Kong Trustees’ Association (HKTA) among its 48 corporate member firms, 62% of respondents reported that at least one PTC account opening had been delayed by more than 30 days because a professional director either refused to provide personal financial documentation or could not produce a “clean” paper trail for their own assets.

Documentation Strategies That Satisfy Bank Compliance

The “Control Structure Diagram” and the Board Resolution Package

The single most effective document for overcoming the ownership prong gap is a formal Control Structure Diagram accompanied by a Board Resolution on Control and Management. This is not a standard corporate document; it must be drafted specifically for the bank’s compliance file. The diagram should show, in a single page, the following chain:

• The settlor (natural person or trust structure).
• The trust itself (identified by trust name, date, and governing law).
• The PTC (identified by name, jurisdiction of incorporation, and registration number).
• The PTC board of directors (named individuals).
• The protector or enforcer (if any), with a note on their powers.

The accompanying board resolution should explicitly state that the PTC has no shareholders holding 25% or more of the equity, that the board exercises full management control, and that the settlor retains no reserved powers that would constitute “control” under the HKMA’s definition. This resolution, when signed by all directors and notarised (or certified by a Hong Kong solicitor under the Legal Practitioners Ordinance Cap. 159), has been accepted by the compliance departments of at least three of the top five private banks in Hong Kong as of Q1 2025, according to practitioner reports shared at the HKTA’s March 2025 seminar.

The “Settlor’s Letter of Wishes” as a Compliance Document

Banks frequently request a copy of the trust deed to verify the settlor’s identity and the trust’s terms. The trust deed is a private document, and many family offices resist producing it to a bank’s compliance team. A practical alternative is a Settlor’s Letter of Wishes that has been tailored for compliance purposes. This letter should:

• Identify the settlor by full name, date of birth, and nationality.
• State the date the trust was settled and the governing law.
• Confirm that the settlor has transferred assets to the trustee (the PTC) and that the PTC holds those assets as bare legal owner.
• Explicitly state that the settlor does not retain any power to direct the PTC board or to revoke the trust (unless the trust is revocable, in which case the letter must state the conditions).

This letter, signed by the settlor and witnessed, satisfies the bank’s need to document the settlor’s identity and the nature of the trust without requiring the full trust deed. The HKMA’s AML/CFT Guideline paragraph 4.2.5 permits the use of “alternative documents” where the standard documents are not available, provided the bank can demonstrate the alternative is reliable. A signed and witnessed Letter of Wishes meets this standard.

Structural Workarounds: Jurisdictional and Governance Options

The “Bermuda Sandwich” for Hong Kong Private Banks

For families that require a Hong Kong bank account for the PTC but face persistent rejection from the city’s private banks, a structural workaround that has gained traction in 2024-2025 is the “Bermuda Sandwich.” The structure is:

1. The PTC is incorporated in Bermuda under the Bermuda Companies Act 1981 as an exempted company limited by guarantee, with no share capital.
2. The PTC’s members are the directors themselves (typically three individuals), each holding a nominal guarantee of HKD 1.
3. The trust is governed by Bermuda trust law, and the PTC is the trustee.
4. The bank account is opened in the name of the PTC, but the compliance application presents the directors as both the “members” (by guarantee) and the “controllers.”

Bermuda’s Companies Act allows a company limited by guarantee to have “members” rather than “shareholders,” and the guarantee amount is nominal. This structure maps directly onto the HKMA’s “control prong” because the directors are also the members, and there is no equity ownership to trace. As of March 2025, at least two of the Hong Kong offices of Swiss private banks have accepted this structure for PTC account openings, according to case studies presented at the Step Asia Conference 2025 (Hong Kong, January 2025).

The “Singapore-Resident Director” Strategy for MAS-Regulated Banks

For families establishing a PTC in Singapore (a common alternative for Hong Kong-based families with cross-border assets), the Monetary Authority of Singapore’s (MAS) Guidelines on Prevention of Money Laundering and Countering the Financing of Terrorism (Notice 626, revised July 2024) imposes a similar requirement to identify “beneficial owners.” However, MAS Notice 626 paragraph 7.3 specifically allows a bank to accept a “declaration from the legal person’s senior management” as evidence of control where no individual owns 25% or more of the equity.

The practical solution that has emerged is the appointment of a Singapore-resident director who is also a licensed trust officer (under the Trust Companies Act Cap. 336). This director provides the bank with a declaration under the Penal Code (Cap. 224) that they are the controller of the PTC for AML purposes. The declaration is accepted by Singapore-based private banks (DBS, UOB, and the Singapore branches of Credit Suisse/UBS) as a substitute for a share register. The cost of this strategy is the director’s annual fee (typically SGD 15,000 to SGD 25,000) plus the requirement to maintain a registered office in Singapore.

Actionable Takeaways

1. Before initiating any PTC bank account application, prepare a Control Structure Diagram and a Board Resolution on Control and Management as standard documents, not as afterthoughts; the HKMA’s AML/CFT Guideline (January 2024) paragraph 4.2.2 explicitly requires identification of controllers, and these documents pre-empt the compliance hold.
2. For Hong Kong private bank applications, the “Bermuda Sandwich” structure (PTC as a Bermuda company limited by guarantee with directors as members) has a documented acceptance track record with at least two Swiss private banks as of Q1 2025, reducing the average approval timeline from 25+ business days to approximately 12 business days.
3. When a bank requests the full trust deed, offer a tailored Settlor’s Letter of Wishes as an alternative; this document, signed and witnessed, satisfies the HKMA’s requirement for “alternative documents” under paragraph 4.2.5 and preserves the trust’s privacy.
4. For PTCs with professional directors, obtain a signed Director’s Consent to Disclosure at the time of appointment, permitting the director’s personal financial information to be shared with the bank’s compliance team; this avoids the 30+ day delays reported by 62% of HKTA member firms in 2024.
5. If the PTC is established in Singapore, appoint a Singapore-resident licensed trust officer as a director and rely on MAS Notice 626 (July 2024) paragraph 7.3 to provide a statutory declaration of control in lieu of a share register; this strategy is accepted by DBS, UOB, and the Singapore branches of UBS.