International, or offshore merchant accounts, can be a requisite for many business owners who operate in what is regarded as a high risk industry. This is one of those things that sounds like bad news at first, but is actually quite advantageous once you get put into this position. There are a lot of benefits to having an offshore merchant account that you might never have discovered had you not been categorized as a high-risk merchant. Of course, it’s always a good idea to try and keep your risk level as low as possible, but having to sign up for an offshore account is not one of the downsides to running a business in a high-risk industry.
Here’s what you need to know:
International Merchant Account: Are You At Risk?
For merchants who are using offshore accounts, there’s usually one of two different reasons factoring into their choice to go offshore. Either they work in an industry that faces a lot of regulatory and legal friction, or they’re working in such a high volume that it’s almost unreasonable to expect a local merchant account provider or bank to handle the big business that they’re bringing in. That second one’s not the worst problem to have.
So what do we mean by “regulatory and legal friction?”
Well we’re not talking about illegal trade, if that’s what you’re thinking. Companies that use international accounts, if they’re doing something that’s just flat out against the law, then they’re doing a very good job at hiding it from the merchant account providers. It’s not impossible for the IRS and FBI to figure out what’s going on with one of these accounts, and they only need to prove that a merchant account provider knowingly worked with a drug dealer or an illegal arms dealer once for their whole business to be shut down. So whatever you may have seen in action movies, that’s not really how offshore accounts work.
Rather, the legal and regulatory friction we’re talking about comes from the sometimes-unpredictable nature of doing business in the United States when you’re working in certain industries. There’s a lot of stuff here that’s totally legal, but every once in awhile a politician or a local sheriff or a regulatory committee will decide that it’s a problem that has to be dealt with. Maybe they’re trying to appease the voters, maybe they just have a personal ax to grind, maybe it was a slow day and the lawyers were looking for something fun to do.
Whatever the case may be, the regulations pertaining to certain areas of how business is conducted in the United States can change from day to day at times. When working with an international merchant account, at least in the area of how you’re managing your money, you’re only subject to international law, which tends to be a bit more stable. Your governor might decide that he doesn’t want online casinos being run in his state, and if you have a local account to hold your earnings from your online gaming company, then you’re going to be scrambling to find somewhere else to do business.
To put it one way: International accounts are not, in fact, the safe-haven for criminals that they are often thought to be. They are, however, a safe-haven for people who are tired of being treated like criminals. It is completely legal in this country, as long as you do it within certain boundaries, to sell alcohol, firearms, “head shop” products, ecigs, adult entertainment, online casino chips and so on.
But there are more than enough senators, legislators, governors, sheriffs, activist groups and copyright lawyers to go around, and there are whole cottage industries and political movements built around making life a little more difficult for people who operate businesses in these fields. You can do everything one hundred percent above board, one hundred percent legal, and still be the target for people who are promising to “clean up” this state around election time.
If you’re working in a legal industry, you can outmaneuver these new regulations, but keeping your money in an international account means that you don’t have to do as much outmaneuvering as you otherwise may have had to.
When it comes to high volume monetary activity, it’s simply a better idea to work with an international merchant account provider who’s used to that kind of thing. It’s not unheard of for a bank to simply freeze someone’s account because this week’s deposit was too big. Yes, you’re subject not only to legal and regulatory friction, but friction stemming from someone’s own personal judgment on that particular day, or to put it less diplomatically, their whims and fancies. This isn’t a concern when working with an international merchant account provider.
Just having an international account for your business can be encouraging. If you weren’t sure if it was time to open up that second location or bring on more staff, if you weren’t a hundred percent certain on whether or not it was time to upgrade your services and products and start seriously growing your business, having the freedom provided by an international high-risk merchant account provider on your side can be just the boost you need to get you running full speed to your next major business goal.
Think of it like buying a big house so that you can start a family. If you have any choice in the matter, you don’t have kids and then move into a bigger house, you do it the other way around.
Do I Need An International Merchant Account?
A better question than whether or not you need an international account is: Do you now, or will you at some point in the future?
If the answer to either half of that question is yes, then it’s better to get up sooner than later. It’s better to establish a relationship with an account provider before you need them so that you’re fully prepared as your business grows.
You might never need one, of course. Local businesses that work in low-risk industries don’t need offshore accounts. If you have a medium sized business with no interest in growing and you don’t have a lot of regulatory hiccups or anyone putting your activity under a microscope, then an offshore account might not be for you. Although it still might be worth considering seeing as it comes with certain privileges come tax-time, but you probably don’t absolutely need an international account for a business of this nature.
As with anything in matters pertaining to business, it’s better to have it and not need it than need it and not have it.
So think of it this way: Can you foresee yourself needing an international account at some point in the future?
If so then you might as well be prepared. You’ll wind up with fewer taxes to pay because nobody’s coming knocking for Uncle Sam’s cut just because you’re storing your money. You’ll have tightened security surrounding your account because these merchant account providers are notorious for the discretion they practice in regards to their clients.
Higher security is a big plus to using an international account. Many local banks and local merchant account providers may be a little too willing to share information on you and your customers, but an international account provider is generally going to be used to working with big clients, clients working in politically sensitive fields and so on, and are a little more tight-lipped about your financial comings and goings.
Selecting An International Merchant Account Provider
In more ways than not, selecting an international merchant account provider for your business needs isn’t so different from selecting a local merchant account provider. You’re going to go through roughly the same process that you would when researching and selecting a partner in any area of your business, be it a supplier, a manufacturer, a legal team, an outsourcer and so on.
You will, of course, want to start by narrowing your search down. International merchant account providers tend to cover a wider range of high-risk merchant industries than many local merchant account providers might. However, there may be limitations in some cases. Even without as much of the regulatory friction involved, there are high-risk merchant account providers who won’t work with online casino companies, or alcohol vendors or etc. Once you’ve crossed all of these people off your list, you’ll have a solid starting point from which to start investigating your candidates further.
Something that we advise being a stickler for: 24/7 service.
Here’s the thing: You never know when a problem is going to come up, and you never know when it’s going to be one of those problems that you need to deal with immediately. A financial hiccup can be like a leaky pipe. You let it go unattended for just a few days and all of a sudden you’ve got a three hundred dollar water bill. The longer you wait to manage these problems, the more expensive they get to fix. 24/7 help desks allow you to get the assistance you need at all hours of the day.
This is especially important when working with an international company, where their three in the afternoon might be your three in the morning, and vice-versa.
And of course there are the reviews. Not every international merchant account is going to have a lot of reviews online or a rating with the Better Business Bureau, but you should be able to dig up something on them and how they treat their customers. As a general rule, a happy customer might not always rave about a service that they’re content with, but a jaded customer will always find the time to complain. When you find a merchant account provider that leaves behind dozens, hundreds of angry clients in their wake, then that’s a clear red flag.
One or two negative reviews just come with the territory of doing business in any line of work in the internet age. Sometimes someone was just in a bad mood that day. But once those negative comments start stacking up and you’re hearing way more bad than good, you can generally bet that this is a brand that you do not want to be in business with.
An international merchant account can be a tremendous boon for your business. Having the freedom to grow without any concerns about what your merchant account provider is going to say, without worrying about having to set up a new account at the bank every time you see an uptick in your income, it takes a load off your mind and helps you worry about what you got into this line of business to worry about in the first place: Running your company to the best of your abilities.