Bank accounts for High-Risk activities
On the one hand, such types of business as Forex, Gambling, Dating, Casino, ICO, Adult bring high income, but on the other hand, they are associated with high risks. Among the serious problems is opening an account in a bank or payment system.
If you have already encountered this problem, or are just planning to develop a project that belongs to the High-Risk segment, Lawrange law firm is ready to provide support in opening an account and a merchant account for receiving payments. Professionalism, business connections and experience – all this helps us to successfully solve even the most complex tasks of legal support for international business.
Basic information about opening bank account for High-Risk activities
Under any circumstances, opening an account for High-Risk activities is difficult and time-consuming. If previously problems had to be faced only in onshore jurisdictions, nowadays banks are systematically refusing to service High-Risk businesses even in midshores.
For all that, a solution can be found! Attorneys and lawyers of Lawrange law firm have the relevant information on the current jurisdictions of banks and payment systems. Depending on the clients’ specific type of activity, our team is ready to offer the best options for opening an account. Among the jurisdictions our team currently working with are the Czech Republic, Cyprus, Spain, Singapore, Portugal and ect. You can always get more information and recommendations upon request.
Is it possible to open an account for high-risk activities remotely? – Yes.
How long does it take to open an account in the payment system? – From 1 to 10 days.
Is it necessary to open a merchant account for a High-Risk business? – Yes.
Criteria for classifying a business as a high-risk activity
The degree of business risk is assessed by representatives of the bank or payment system personally, mainly this is a subjective process. But in the primary order, objective aspects are taken into account. The type of activity and documentation of the company, financial indicators, website and other sites of Internet presence are analyzed.
Among the main criteria for classifying a business as High-Risk (There are two main criteria for classifying a business activity as High-Risk):
Probability of chargebacks (returned payments)
The funds withdrawn from the card are returned to the buyer or consumer of services. This procedure is initiated by the buyer if he believes that the seller has not fulfilled its obligations, therefore the funds were withdrawn illegally. For example, the goods were not delivered or the service was not provided, the goods of inadequate quality were sold, and etc. For the acquiring bank where the seller’s account is opened, such a development of events is extremely disadvantageous.
Claims against the beneficiaries of the company from the tax authorities
Both banks and payment systems carry out the Know your client (KYC) procedure and the identification of beneficial owners without fail. The procedure is carried out within the framework of compliance with the norms on combating money laundering. Today, there is no way round it. Claims against the client by the tax authorities attract unwanted attention to the bank or payment system, and can also damage the reputation.
Also among High-Risk markers are:
- the company was put into the “black lists” MATCH or TMF (Terminated Merchant – terminated seller);
- the company does not have a credit history (for example, if the company is registered recently) or a negative credit history (delays, delays in payments, complaints);
- payment for goods, services or services in several currencies at once;
- conducting numerous small (less than 500 USD) transactions;
- the sale of goods or the supply of services to customers in countries with a high level of fraud and an unstable financial situation;
- monthly turnover is overstepping the mark 20,000 USD;
- business activity connected with seasonal demand or other periodic ups and downs.
Important! These criteria should not be considered as peremptory reasons for classifying a business as a high-risk activity. Banks and payment systems consider each business client personally. The commercial indicators of the enterprise are taken into account.
Opening an account for High-Risk business in a bank
For a company whose activities are related to online payments, it is necessary to open an account with an acquiring bank or a payment system. The acquiring bank provides an acquiring service – accepting non-cash payments from cards.
Despite the likelihood of difficulties, problems on the part of customers and claims from regulators, some banks are ready to cooperate with high-risk businesses. Lawrange law firm experts are ready to name examples of such banks for consultation, and select a specific bank upon request.
For the information! You may have to settle for a high-risk merchant account, which will entail special rates.
As an example, let’s take the Czech Republic – a country in whose banks you can open an account for High-Risk business on favourable terms. Among the features and advantages of the Czech Republic as a financial jurisdiction are:
1) the possibility of opening an account remotely by proxy (but with confirmed business relations in this country – the representatives of Lawrange law firm will take care of this issue);
***Notice: The economic relations of a foreign company with the Czech Republic can be justified by registering a new company in this country. Then a contract is concluded between this “Czech” company and a foreign company. This will be the rationale for business relationships.
2) minimum requirements for documents (in the documentation package for the company – a certificate of registration, an official register of directors or shareholders, a share certificate, documents for the beneficiary, including proof of citizenship and tax residence);
3) no minimum deposit requirements (for example, to open an account, you may need to transfer only 1,000 CZK – about €40);
***Notice: It is still desirable to keep a minimum balance of €1,000 on the account, since Czech banks have a negative attitude towards accounts with a negative account balance.
Opening an account for High-Risk business in the payment system
Aside from opening a bank account, an alternative way remains in reserve – opening an account in a payment system. Typically we are talking about an account with a special rate, which is higher than for other customers. It all depends on the specific type of activity of the enterprise and the reputation of the payment system.
Notice! Payment systems are more flexible than conservative banking institutions in responding to new types of business. Upon request, you can get up-to-date information on the payment systems our team works with.
Among the advantages of opening an account in the payment system are:
- the possibility of passing the procedure remotely;
- obtaining a personal IBAN;
- minimum terms for consideration of documents (1-10 working days);
- making multi-currency payments – USD, EUR, GBP, UAH, RUB, and ect, and sometimes working with cryptocurrency;
- convenient online banking.
Solving the issue with a merchant account for a High-Risk business
Merchant account is a prerequisite for any sale or provision of services online. Payments from clients’ cards are transferred exactly to this trading account, and only then they get to a regular current account.
In fact, a merchant account is an account (identification code) in the electronic payment system, which receives the client’s money after he pays for a product, service or goods. Payments are accepted round the clock from around the world. After being debited from customers’ cards, the funds go through the processing center. Chargebacks are removed from the merchant account in cases where customers request a refund. Only the amount remaining after the chargebacks is transferred to the current account.
A merchant account can be obtained from an acquiring bank or a payment system. At the same time, the bank / payment system is fully responsible for the merchant’s chargebacks. As such, getting a merchant account for such activities is more difficult than for other types of business.
Important! You should prepare for the provision of additional information and documents, as well as high commissions charged on payments made.
Acceptance of High-Risk payments is associated with certain difficulties for the processing center. First of all, we are talking about the need to process customer complaints received by the bank. But the significant potential profit from high-risk activities stimulates the provision of financial services in this area, despite the risks.
Opening a merchant account for High-Risk step by step:
Step 1. Determination of acceptable conditions and tariffs for opening an account in order to satisfy your needs without overpaying.
Step 2. Monitoring current offers in the international financial services market.
Step 3. Choosing a bank or payment system, checking reliability and reputation.
Step 4. Submission of an application for opening an account along with a package of documents. Preparing responses to additional requests, if any.
Step 5. Communication with bank or payment system employees responsible for security.
Step 6. Underwriting – final risk assessment and decision making on the client’s application.
Step 7. Getting access to the account – the ability to accept payments, fully conduct your business.
Even for the complex tasks of clients, the Lawrange law firm team will find acceptable solutions. We are waiting for your requests!