Banks corporate secrecy laws typically impose civil and criminal penalties for unauthorized disclosure of confidential information, including information on the beneficial ownership and control of corporate vehicles. These laws diminish the capacity of authorities to obtain and share beneficial ownership and control information when they not provide mechanisms for domestic and international authorities fulfilling their regulatory/supervisory or law enforcement functions to access records.
Above is part of an article we found on a website of OECD. The purpose of the entire article is to inform people about the illicit use of bank accounts for laundering money or to hide money from tax authorities.
The main purpose for an offshore bank account is to have it opened in the name of the offshore company to be able to get all the benefits from your offshore company operation. Beside the tax benefits and asset protections possibility, often such offshore vehicles are used to be established by people which live in countries where they are unable to open an bank account.
Another widely used reason for opening an offshore bank account and an offshore company is if the business conducted is Internet based. The card associations has divided the world in about 6 regions and prohibit people from one region to clear credit card transactions in another region then where the company and the business is conducted. To work around this problem it is common to open an offshore company which fells into the region of where the Acquiring bank is located with whish the transactions should be cleared.
Other aspects are the legal issues of certain product or services, for example the distribution and selling of replicated products of brands is prohibited in most parts of the world if they are not licensed. In some countries it is however, possible to sell those products; typically China is such a country. To be able to sell such products on the Internet you will need to become a credit card acceptance agreement with a bank in the region where it is legal to sell the product. But those banks (as already explained above) require you to be incorporated in the same country as the Acquiring Bank. To work around this you will need to establish an offshore company for instant in China; since it can be overwhelming to open a company there it could be of benefit for you to have the Chinese entity to be owned by a “more close to you” company which in worth case can be liquidated and in that way not harm you or your economy.
Some payment processors allow you to use their company and merchant account to process transactions, these are called 3rd party processors and are most common for small business entities our entities which sell services and products for which it is almost impossible to obtain a separated merchant account with an Acquiring Bank. Examples of 3rd party processors are 2co, ccbill and a few others which have been in the marked for many years and which can be used without any problems on a long term. Those companies have however limitations on which services and products they allow to be sold. Now if you are doing a quick search on for instant google, you will find a lot of 3rd party processors which say they have can accept certain business and for instant also replicated products to be sold, they often also have nice looking websites and proper documentation in place for the legitimating of the operation.
What you need to consider and carefully read is the liability they put on your company and most of them will ask you for a huge setup fee which not surprising is in the range of 3 to 5000 USD. That you need to pay the setup fee is the first risk, but using your well established company with these companies is another risk. It is highly advisable to put some offshore company in between the relationship of you and the 3rd party processor.
You will now ask why? Very simple, if something goes wrong you are not protected if you not follow the advice above. If you are in a business which is considered high risk or in some countries even considered illegal, then things can go wrong. Often 3rd party processors register their “sub merchants” with the card association to cover their own business. If something should go wrong now, then it is the sub merchant that has to pay the bill and take the responsibility for the account. There are many things that can go wrong, to give some examples, you can get into a steam of stolen credit cards used by people to get your products for free, often this will result in massive chargeback’s, not enough that you have to pay the chargeback’s fee, you will also pay penalties in the amount of USD 25.000 and even worth you will get blacklisted worldwide, even it wasn’t your fault. If you don’t have any protection from this happening, you will lose your entire business and never get into it again, at least not in an Internet based edition.
To use an offshore company in between and be that company the beneficial owner of the merchant account is the best you can do to avoid such incidence.
Thank you for your reading and we hope to be able to serve you once in a while when you decide to register a Cyprus Offshore Company or need a Cyprus Bank Account or just want to Accept Credit Cards on your Website. Then please contact cclogic.com | Please also feel free to visit our Merchant Servise Discussion