An international investor who has successfully closed deals across Europe and Latin America often encounters a paradox when entering the United States financial system: the procedures appear familiar. Yet the regulatory depth is unlike anything encountered elsewhere. Federal banking legislation, state-level licensing rules, and a dense web of anti-money-laundering obligations combine to create a system that punishes the unprepared with speed and finality. Accounts are frozen, facilities are declined, and transactions are reversed – not because the underlying business is problematic, but because documentation was incomplete or a compliance box was left unticked.
Banking and finance legal services in the United States cover a broad range of instruments – from structuring credit facilities and negotiating loan agreements to managing regulatory compliance under federal and state banking law. International clients seeking access to US capital and banking infrastructure must satisfy Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations before any facility is extended. A process that typically spans several weeks to several months depending on entity type and ownership structure. The primary regulatory bodies are the federal banking agencies – including the Federal Reserve, the OCC, and the FDIC – alongside the Securities and Exchange Commission (SEC) for securities-linked finance transactions.
This page explains the key instruments available to international clients, the procedural steps and timelines involved. The most common pitfalls in cross-border banking mandates. Additionally, the strategic considerations that arise when US banking activity connects with Brazilian or EU operations.
The regulatory environment for international banking clients in the United States
The United States operates a dual banking system. A bank may be chartered at the federal level or at the state level, and each path carries different supervisory obligations. For international business clients, this duality matters because the choice of banking partner – federal or state-chartered – affects which regulator reviews the client's onboarding documentation and which enforcement agency has primary jurisdiction over disputes.
At the federal level, banking legislation imposes rigorous obligations on all institutions regarding beneficial owner identification. A company seeking a business bank account must disclose the identity of every individual who owns or controls a defined threshold of equity. Since the implementation of the Corporate Transparency Act under federal law, this obligation has also extended to direct reporting to the Financial Crimes Enforcement Network (FinCEN) for most US-registered entities. A Delaware LLC (limited liability company registered in the state of Delaware) is among the most common vehicles used by international investors, but its formation does not exempt the entity from beneficial owner disclosure. Failure to file or maintain accurate records triggers civil and criminal penalties that can be applied to both the entity and its controllers.
AML obligations run parallel to KYC requirements. US financial institutions must maintain transaction monitoring systems, file Suspicious Activity Reports when unusual patterns appear, and apply enhanced due diligence to clients categorised as higher risk. International clients – particularly those with ownership chains crossing multiple jurisdictions – routinely fall into the enhanced due diligence category. This is not a judgment on the business. It is a structural outcome of correspondent banking rules, which require US banks to apply heightened scrutiny to cross-border fund flows.
Correspondent banking relationships themselves have become more restrictive over the past decade. Many US banks have reduced their correspondent banking networks, particularly for flows originating from Latin America and certain Central and Eastern European markets. International clients who rely on a correspondent bank to clear US dollar transactions may find that their local bank's correspondent has been terminated or that clearing now routes through an intermediary with additional compliance requirements. Identifying this chain before structuring a transaction is essential – not optional.
The SEC's jurisdiction is relevant when banking activity involves securities-linked instruments: credit facilities secured against listed securities, margin lending, or any arrangement that meets the definition of a security under federal legislation. Practitioners in the United States note that the boundary between a conventional loan and a regulated securities transaction is not always self-evident, particularly in structured finance mandates. Crossing that line without proper registration or exemption triggers enforcement exposure that is disproportionate to the underlying transaction value.
Key instruments: credit facilities, account structures, and finance agreements
International clients accessing US banking markets typically rely on one of three primary instruments: a credit facility, a deposit account structure, or a securities-backed financing arrangement. Each carries distinct conditions, timelines, and risk profiles.
Credit facilities in the United States are governed by a combination of federal banking legislation and the Uniform Commercial Code as adopted by each state. A bilateral credit facility between a single borrower and a single lender is the simplest structure. It requires a loan agreement, a security agreement if collateral is involved, and – for real estate collateral – a mortgage or deed of trust executed in the state where the property is located. Syndicated facilities add an inter-creditor agreement and an agent bank, extending the documentation timeline by several weeks. Legal fees in the United States for credit facility documentation start in the tens of thousands of dollars and scale with transaction complexity.
The condition precedent to drawdown on any facility is the completion of KYC and AML review. For a newly formed entity or an entity with an international ownership chain, this review rarely concludes in under four weeks. In practice, where ultimate beneficial ownership runs through offshore holding structures or involves politically exposed persons, the process frequently extends to three months or longer. Clients who underestimate this timeline and build the drawdown date into an acquisition schedule often find themselves in breach of their purchase agreement before the facility is available.
Business bank account opening for a foreign-controlled entity follows a similar KYC path. Most US banks require: certified constitutional documents of the entity, a resolution authorising account opening, evidence of the entity's business activity in the United States. Identification documents for all beneficial owners, and. increasingly. a physical presence or registered agent in the state of incorporation. Some banks also require a minimum initial deposit or a minimum average balance commitment. Rejection rates for international entity applications are significant. A common reason is that the bank's internal risk appetite does not accommodate the entity's jurisdiction of incorporation or the nationality of its controllers, regardless of the strength of the underlying documentation.
For international clients whose primary operations link to Brazil or the EU, an alternative pathway is available through US branches of foreign banks that maintain correspondent relationships in those regions. These branches often have established due diligence processes for clients from their home markets and can complete onboarding more quickly. The trade-off is product range – a branch may not offer the full suite of credit products available from a US-headquartered bank.
Securities-backed financing involves pledging listed or unlisted securities as collateral for a loan. Where the securities are listed on a US exchange, margin rules under federal banking legislation apply and set limits on the loan-to-value ratio. Unlisted securities – including equity stakes in private companies – may be pledged under a more flexible structure, but valuation and enforceability questions must be addressed in the security agreement. Practitioners note that enforcement of a pledge over private company equity in the United States can be contested if the pledge agreement does not anticipate the specific transfer restrictions in the company's organisational documents.
For a detailed analysis of securities-linked finance instruments and capital raising structures in the United States. See our coverage of capital markets services in the United States. This addresses the intersection of banking instruments and securities regulation in greater depth.
To receive an expert assessment of your credit facility or bank account structure in the United States, contact us at info@ferrazwhitmore.com.
Common pitfalls and what international clients routinely underestimate
The gap between what US banking legislation requires on paper and what banks actually demand in practice is wide. Understanding that gap is the difference between a transaction that closes and one that stalls indefinitely.
The first and most frequent mistake is treating the Delaware LLC formation as the primary task and the banking compliance process as an administrative follow-up. In reality, the compliance process is the critical path. Many international clients incorporate a Delaware LLC within days. legitimately so, since formation is rapid. and then discover that their bank requires an operating history. US-based references. Alternatively, documentation of the purpose of the account that the newly formed entity cannot yet provide. The entity exists; the account does not open for months.
The second pitfall involves beneficial owner disclosure. International ownership chains often involve multiple layers: an individual controller sits behind a holding company, which sits behind a fund, which sits behind a trust. Each layer must be documented and traced to natural persons. Where a trustee is the nominal owner, US banks require disclosure of the trust's beneficial owners as well. Clients who present an incomplete ownership chart at the outset will face repeated requests for additional information. Each request resets the internal review clock at many institutions.
The third common error is ignoring the state-level dimension of banking regulation. A credit facility secured by real estate in California must comply with California's specific lending legislation in addition to federal rules. A facility secured by assets in New York encounters New York's version of the Uniform Commercial Code, which differs from other states in commercially significant ways. Treating the United States as a single jurisdiction for banking purposes. as one might treat a civil law country with a national code. is a foundational error that experienced practitioners in the United States consistently flag as the most damaging misconception among newly arrived international clients.
A fourth area of risk involves dispute resolution. US banking agreements typically include a choice of law clause and a forum selection clause. Many institutional lenders insist on federal court jurisdiction – specifically the US District Court (the federal trial court of general jurisdiction). Others accept arbitration under JAMS (Judicial Arbitration and Mediation Services) or AAA arbitration (American Arbitration Association) rules. An international borrower who signs a credit agreement without negotiating the dispute resolution clause may find itself litigating in a US federal court rather than in a neutral arbitral forum. The cost and duration of US federal court litigation can be substantially greater than institutional arbitration, particularly for a foreign party unfamiliar with US discovery procedures.
A non-obvious risk arises in the context of cross-border fund flows involving countries subject to US sanctions programmes. The Office of Foreign Assets Control (OFAC) administers a sanctions regime that applies to all US-dollar-denominated transactions, regardless of where they originate. A Brazilian holding company whose subsidiary supplies goods to a sanctioned jurisdiction may find that its US bank account is blocked without prior notice. Sanctions screening is the first automated check applied to every incoming and outgoing wire. Legal advice on OFAC exposure should be sought before, not after, a transaction is structured.
Cross-border strategy: US banking in the context of Brazilian and EU operations
International clients rarely operate in the United States in isolation. The more common pattern is a business with operational roots in Brazil or continental Europe that seeks US banking access as part of a broader treasury, investment, or financing strategy. The interaction between these legal systems creates both opportunities and friction points that must be addressed at the structuring stage.
Brazilian clients face a specific challenge. Brazilian corporate legislation requires that outbound capital flows be registered with the Brazilian Central Bank. When a Brazilian entity funds a US subsidiary or pledges assets as collateral for a US credit facility, this registration obligation applies. Failure to register – or registering incorrectly – can result in the Brazilian entity being unable to remit payments under the facility or to repatriate proceeds when the transaction closes. US lenders are generally unaware of this requirement. The Brazilian client's counsel must coordinate both sides of the transaction to ensure that the Brazilian capital registration is completed before the US facility draws down.
EU-based clients encounter a different set of constraints. EU data protection legislation – specifically the rules on cross-border data transfers – applies when a US bank's KYC process involves transferring personal data of EU-resident beneficial owners to systems located in the United States. Many large US banks have addressed this through standard contractual clauses or other transfer mechanisms, but smaller institutions may not have done so. An EU-resident beneficial owner who provides identification documents to a US bank without a proper transfer mechanism in place may inadvertently expose the entity to a data protection regulatory inquiry in its home EU jurisdiction.
Tax structuring adds another layer of complexity. A US credit facility extended to a foreign entity may give rise to withholding tax obligations on interest payments under US tax legislation, subject to reduction under an applicable tax treaty. Brazil and the United States do not have a comprehensive income tax treaty in force. This means that interest paid by a Brazilian borrower on a US-law-governed credit facility may be subject to US withholding tax at the full statutory rate. EU-resident borrowers with a relevant treaty in place fare better. However. Treaty benefits require specific procedural steps. including the filing of the appropriate withholding certification with the lender. that must be completed before the first interest payment date.
Enforcement of US judgments and arbitral awards outside the United States is a strategic consideration that is frequently overlooked at the term-sheet stage. A US federal court judgment obtained against a Brazilian defendant is not automatically enforceable in Brazil. Brazilian courts apply their own recognition procedure, which includes a review of procedural fairness and reciprocity. An ICC or SIAC arbitral award is generally easier to enforce in Brazil under the New York Convention framework, to which Brazil is a party. US parties who insist on federal court jurisdiction in their banking agreements may therefore find that their judgment. While valid in the United States, is difficult to enforce against a counterparty whose assets are located in Brazil or the EU.
For international clients with operations in both the United States and Brazil. Our team's cross-border experience in banking and finance matters in Brazil provides an integrated view of how both systems interact and where the compliance gaps typically appear.
To discuss a tailored strategy for your US banking and finance mandate in the context of your broader international structure, reach out to info@ferrazwhitmore.com.
Self-assessment checklist before initiating a US banking mandate
US banking and finance engagement is appropriate and ready to proceed if the following conditions are met. Review each item before instructing counsel or approaching a financial institution.
Entity and ownership documentation:
- The legal entity to be used in the United States is incorporated and in good standing in its state of formation.
- A complete beneficial ownership chart is available, tracing ownership to all natural persons who hold or control a defined equity threshold.
- Identification documents for all beneficial owners are current and certified as required by the relevant bank's onboarding policy.
- Any trust, foundation, or nominee arrangement in the ownership chain has been documented and the underlying beneficial owners identified.
- The entity has filed its beneficial ownership report with FinCEN if required under federal corporate transparency legislation.
Banking and compliance readiness:
- The entity's business purpose and source of funds are documented and can be explained to a compliance officer without reliance on informal descriptions.
- OFAC exposure has been assessed – no counterparties, suppliers, or owners appear on US sanctions lists.
- The correspondent banking chain for cross-border fund flows has been identified and the correspondent's compliance requirements are understood.
- State-specific lending or account requirements in the relevant US state have been reviewed, not merely federal requirements.
Cross-border and tax readiness:
- For Brazilian entities: Central Bank registration of the outbound capital flow has been initiated or completed.
- For EU entities: the data transfer mechanism applicable to the US bank's KYC process has been identified and is in place.
- Withholding tax exposure on interest payments has been assessed and – where a treaty applies – the required withholding certification has been prepared.
- The dispute resolution clause in the proposed banking agreement has been reviewed in light of the enforceability of the chosen forum's decisions in the jurisdiction where the client's assets are located.
Strategy triggers – when to reassess the approach:
If the initial bank approach is declined based on the entity's jurisdiction of incorporation or ownership nationality, the appropriate response is not to re-approach the same institution with the same documentation. It is to reassess whether the entity structure, the banking partner, or the transaction timing requires modification. A US branch of a foreign bank familiar with the client's home market may provide a better initial access point. If the mandate involves securities-linked financing, the SEC dimension must be addressed before the facility is documented. If the dispute resolution clause cannot be negotiated away from US federal court jurisdiction and the client's assets are located abroad, the risk allocation in the agreement must be reconsidered.
A comprehensive guide to the procedural steps for establishing a US legal entity as the banking vehicle is available in our guide to company formation in the United States. This addresses the formation. Tax registration. Additionally, operational setup steps that precede the banking mandate.
Frequently asked questions
- How long does it realistically take for an international company to open a US business bank account?
- The timeline varies significantly based on the entity's ownership structure, the nationalities of its beneficial owners, and the bank selected. For a straightforward Delaware LLC with individual beneficial owners whose KYC documentation is complete, the process at a mid-sized US bank typically takes four to eight weeks. Where the ownership chain involves offshore holding structures, trusts, or politically exposed persons, the enhanced due diligence process can extend the timeline to three to six months. Engaging a lawyer with experience in US banking compliance before approaching the bank – not after a rejection – reduces the average time substantially.
- Is it a common misconception that a Delaware LLC automatically provides banking access in the United States?
- Yes. Delaware LLC formation is rapid and inexpensive, which creates the impression that banking follows automatically. In practice, formation and banking are entirely separate processes governed by different rules. A Delaware LLC is a legal entity; a bank account requires a separate KYC and AML approval that the bank conducts independently of the state of Delaware. Many international clients form the entity and then discover that their preferred US bank does not onboard entities from their home jurisdiction or with their ownership profile. Working through the banking compliance requirements before – or simultaneously with – entity formation avoids a costly sequencing error.
- Can disputes under US banking agreements be resolved through international arbitration rather than US federal court?
- Many US banking agreements can be negotiated to include JAMS or AAA arbitration clauses, and some institutional lenders accept ICC arbitration for cross-border mandates. However, this is a matter of negotiation, not a default position. Large US banks with standardised documentation frequently resist departing from their standard forum selection clauses. The willingness to negotiate depends on the transaction size, the sophistication of both parties, and whether the borrower has counsel experienced in US banking law who can present a commercially sound case for arbitration. Engaging a law firm in the United States with international arbitration experience improves the likelihood of achieving a neutral forum clause.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions on banking and finance matters, cross-border transactions, and dispute resolution. Our banking and finance practice covers credit facility structuring, KYC and AML compliance strategy, correspondent banking analysis, and securities-backed financing across both civil law and common law systems. The firm's dual tradition – Portuguese civil law expertise combined with English common law heritage – provides a particular advantage in mandates that require coordinating US banking requirements with EU or Brazilian regulatory obligations. Our attorneys have experience before US federal courts and in proceedings under JAMS and AAA arbitration rules, as well as in enforcement matters before courts in EU and Latin American jurisdictions. The firm is a member of leading international legal associations and participates in cross-border practice groups focused on banking regulation and financial services law. As an international law firm serving clients who need a lawyer in the United States with genuine cross-border perspective. Ferraz &. Whitmore provides integrated advice across the full transaction lifecycle. from entity structuring and bank account opening through to credit facility negotiation and dispute resolution. To explore legal options for your US banking mandate, schedule a consultation at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.