An offshore license to conduct financial, gambling and forex activities until very recently was a very profitable and reasonable asset. An offshore license allowed you to quickly start a business, save on start-up costs and operate in many countries and jurisdictions, including accepting payments and deposits from clients.
However, more and more countries require a local or at least a “reputable” license that meets international requirements in order to make money from their citizens. The reason is simple: offshore companies make profit and do not pay taxes on it, while countries need to support their population, as well as players and investors, who in most cases lose (according to several studies, about 80% of investors lose money when trading on the stock exchange, and among poker players the percentage of players who lose is from 85% to 95%).
Besides, the requirement to get a license, is an attempt to protect citizens from direct fraud, when a fictitious company is created, which collects money and runs away with the profit, without offering anything in return.
The main problem of offshore license
The problem with offshore is not the license. In this matter, some jurisdictions are striving to comply with international rules. For example, Curaçao is changing the rules in 2023, increasing transparency, asking operators to increase their real presence.
Other licenses also retain the ability to offer services in many countries around the world. But the blow comes from the other side: from banks and payment solution providers.
Offshore banks have been considered “risky” in their own right for several years, and their licenses for many are even more so. Payment service providers are wary of traffic from such companies and try to limit it, and not because of its illegality (the license is present), but because of the reputational risks.
It is hard not to fear the negative opinion of officials, lawyers and ordinary citizens, if for 10 years we have been constantly asserting that offshore is the main source of evil in the financial world (the active phase of international deoffshorization began in 2013).
So, what should be done to keep reliable and affordable remittances to continue business with an offshore license? Here are a few principles and solutions.
Consider the risks. High risks
You’re in a high-risk business, which means you need to consider this more than all of your partners. It is the high-risk businesses that will be the first to be disconnected from payment providers in case of any problems. It is wise to check not only your business for sustainability and compliance, but also your payment service provider:
– Make sure you know the exact fees for transfers (not the promotional promises from the company’s home page or vendor)
– That the company has a policy for dealing with risky businesses
– Check to see if the provider’s portfolio includes companies like yours and how they are doing
For example, we work with several payment services that are willing to accept offshore companies and businesses. But this is done only after consultation and verification. And only after studying the company and assessing the level of risk is when the exact system of commissions is offered.
Don’t touch what works.
If you already have a payment provider, and he continues to cooperate with you, takes into account your reputation and previous experience together – keep that relationship and the partnership. There are new players coming in all the time now, offering their services, but you face two risks with them:
– How stable are these very new players, do they have a credible resolution?
– Can you get along: Will they accept you as a client? Will you be satisfied with their terms and relationship? Won’t it happen, that a month after connecting, you will have your account blocked?
Diversification is the key to stability.
On the other hand, having only one payment service provider is a separate risk on its own. We always recommend creating more than one solution and this applies not only to the offshore payment provider, but to everything else:
– 2 or more offshore bank accounts
– 2 or more offshore providers
– Availability or ability to promptly obtain a second license for their activities (brokerage, forex, gaming license)
For example, Vanuatu has dramatically changed the rules for Forex operators and gave a deadline to implement the changes until March 10, 2023. Those who had a second license (or at least the first one) can easily survive the transition period. The rest need to either close their business or use the license of the Comoros islands.
Payments are not just cards.
When the public began to have plastic cards, it spurred online businesses with incredible force. So much so that many entrepreneurs believe it is the only way to accept money from customers. Visa and MasterCard control everything in this field: they make demands, they can shut down transactions.
But if we’re talking about emerging markets – the ones where offshore operators retain access – often customers use alternative payment methods.
WeChat in China, YooMoney and WebMoney in Russia, mobile operators everywhere, cryptocurrency wallets. Using these and other methods avoids expensive and rigid card issuers.
The task for you becomes to motivate clients to use alternative methods. The first way: learn the most popular payment methods in each country and show your customers that “we make it convenient for you”. They themselves will be happy to pay the usual way.
The second way: make using the method you want to be beneficial for the customer. The classic way: get +15% to your deposit when you pay with dashcoin/whatever. Make depositing as convenient and easy as possible, even entertaining, and the dependence on cards will decrease.
You can also combine both methods.
Get insider information.
Lately, the term “insider information” is more often associated with the negative (insider trading, spies, and so on). However, in general, you need to understand how an industry works from the inside, especially if your business depends on it directly.
We recommend that you find an expert who can advise you on the specifics of payment solutions currently on the market. Someone who sees processes from the inside and who can help you establish relationships with new providers (remember the point about diversification). Or that can study your situation and explain why another provider turned you down.
We have people like that on our team and they are willing to help with your project.
In any case, the International Wealth and Offshore Pro Group team offers you help with the company registration, offshore licensing, account opening and business consulting. Learn more and ask your questions at email@example.com.