Opening Accounts in Luxembourg for PE and VC Funds - Challenges and Solutions
For Private Equity (PE) and Venture Capital (VC) funds domiciled in Luxembourg, opening an account in Luxembourg is essential. It helps to maintain trust with investors, provides access to the local payment scheme, and fulfils Luxembourg tax substance requirements. However, for PE or VC funds operating cross-border, opening an account with a Luxembourg bank may be challenging.
Here, we will look at the difficulties faced by PE and VC funds in setting up in Luxembourg and possible solutions to set up their fund in Luxembourg faster and hassle-free.
Challenges faced when opening an account in Luxembourg
The client onboarding processes
The client onboarding processes run by Luxembourg based banks to ensure compliance with Anti Money Laundering (AML) and Know Your Customer (KYC) requirements can possibly take up to 3-6 months. During the onboarding process, quite often, no clarity is provided on if or when an account will be opened for a client.
Funds with specific characteristics
Funds with specific characteristics like having an entity in an offshore jurisdiction in the structure (for example, Cayman or Jersey), funds managing less than 100m USD Assets Under Management (AUM), or funds that only require transaction banking services (no depository or lending) tend to see even longer onboarding times or are forced to look at opening an account with banks outside of Luxembourg.
Lengthy onboarding times
Lengthy client onboarding times are not well suited to the pace of PE or VC deals, where time is of the essence, and any hold-up can lead to missed deal deadlines or delayed fund launches. This makes operating in Luxembourg as a PE or VC manager challenging.
Reasons for delayed onboarding
There are two main factors leading to long client onboarding times with Luxembourg banks:
Niche specialisation in AML/KYC teams and processes in Luxembourg banks
This may lead to AML/KYC officers being required to cover the full spectrum of client types, from SMEs to corporate holdings and funds to individuals.
Limited competition between Luxembourg banks
The success of Luxembourg as a domiciliation jurisdiction has resulted in many potential clients approaching banks for transaction banking services with a limited number of Luxembourg banks to service them.
A high-cost base combined with a limited client onboarding capacity may make Luxembourg banks prioritise clients that generate high revenue and are easy to onboard (for example, non-complex structures and the absence of offshore jurisdiction in shareholding).
This sometimes results in Luxembourg banks focusing on clients where they can provide 'full service' (for example, depository services, lending, deposits, etc.) whether in Luxembourg or globally versus only offering transaction banking services.
How Ebury can help Private Equity and Venture Capital funds open an account in Luxembourg
Ebury is a specialist provider with a streamlined operating model purpose-built for clients requiring transactional services such as accounts, payments, foreign exchange, and cash management.
As regulated by the National Bank of Belgium in Belgium and by the Financial Conduct Authority in the UK, combined with a specialist operating model, results in a significantly lower cost base and lower per-client revenue requirement than most traditional providers in Luxembourg.
From its Luxembourg branch, Ebury services many PE and VC funds with accounts, payments, and foreign exchange solutions in Luxembourg.
Global account solutions
We help you open transactional accounts in key jurisdictions, including Luxembourg, Singapore, USA, Hong Kong, Dubai, and more easily and quickly. Plus, manage funds across 35+ currencies.
Currency risk management
A strategic approach to currency risk management for funds, managers and investors with tailored hedging solutions.
Global payments
An all-in-one payment platform to send and receive funds from all over the world. Specialisation in payments and collections from Africa, Asia, MENA and Latin America.
Here are a few ways we can help Private Equity and Venture Capital funds open a Luxembourg account:
2-week onboarding
Ebury has a specialised fund & corporate holding client onboarding team which understands the PE and VC fund setup and leverages technology to streamline the client onboarding process. Our experience in servicing PE clients, specialised products, and global footprint helps speed up the account opening process.
Luxembourg accounts
Accounts are tailored to the requirements of PE and VC funds with features such as Luxembourg blocking certificates, real time foreign exchange execution, account pledges, tailored account permissions and authorisations, and online account statements.
Dedicated support
With our 38+ offices across the globe, including key investment jurisdictions – we can provide dedicated local support in operating the Ebury payment platform, payment execution, foreign exchange operations, and cash management.
The information provided herein is general in nature and should not be construed as financial or investment advice. The information provided here is not legally binding. The information, data or views expressed here is for the exclusive use of the recipient and is subject to changes without any notice. You may ask the support team or your dedicated relationship manager to provide additional information regarding Ebury products.
