subject: An Offshore Money Transmission Services Business [print this page] An Offshore Money Transmission Services Business
From an offshore jurisdiction a money transmission services business can operate world wide. The common restriction in most offshore jurisdictions is the company may not do business with residents of the host country. This is huge business the potential for substantial profits. A single large, well known, money transmission company transmits nearly $5 Billion a year. There are many, many smaller operations whose total of money transmission is substantially in excess of one of the larger operations.
It is possible to offer money transmission services both in person and online. The later choice provides individuals throughout the world the opportunity to transfer funds and opens a gigantic market to the entrepreneur willing to set up shop offshore.
Licenses to operate such a business are available in a number of jurisdictions. With competent advice such an offshore business can be set up in a tax advantaged location with a combination of asset protection vehicles, discrete banking, and efficient business practices. Such a business can be very lucrative.
Who Will Use Money Transmission Services
Although there are trillions of dollars in offshore bank accounts that money will typically be transferred bank to bank, those who typically use money transmission services will often send a few hundred dollars or less. They will usually pay around $5 for the service, more for same day delivery. The company will set the exchange rate used in transactions.
Although the very wealthy have a huge amount of wealth stashed away in offshore accounts it is not being moved around, and certainly not in increments of a few hundred dollars. However, according the internationally recognized Peruvian economist, Hernando De Soto, the net wealth of entrepreneurs in Third World economies far exceeds $10 Trillion. The income of the traditional money transfer companies attests to the movement of individuals offshore from their home countries looking for work or schooling and the money being sent home by these "foreign" workers as well as entrepreneur doing business across borders.
A recent news item noted that as the US economy recovers the dip in money transfers to Mexico has gone back up, proof of increasing "off the books" employment. This sort of off the books employment happens with workers from the Philippines working in Dubai as well as Nicaraguans working in Costa Rica. No single individual sends more than a hundred dollars or so but there are a lot of folks sending money. A business that capitalizes on this continual flow of capital can profit nicely.
Developing an Offshore Money Transfer Business
Careful planning and sound advice at the outset will pay benefits for years to come. Although the principals of a money transfer business may know how to operate "back home" there will be details that a competent and trusted advisor can provide to smooth the way to a successful business operation and profits.
The advisor should not be an employee of a bank or lawyer in the jurisdiction in question as the temptation may be too great to confuse good advice with a pitch for the jurisdiction in question. Someone who does business setting up international businesses and getting licenses in more than one jurisdiction may well be a better choice.
Choosing a country for a license and from which to operate is the second most important factor in setting up an offshore money transmission business. Some nations offer licensing in a variety of services but have very restrictive rules and an anti business climate. Picking the right spot from which to do business may be critical. In setting up a money transmission business the principals will want to have low business costs, a minimum of paperwork, and access to the tax advantages and asset protection features of many good offshore jurisdictions.
When the principals have chosen a jurisdiction they will apply for a license. Typically this involves the share holders, directors, and officers answering personal and financial questions. An option in some jurisdictions is to offer bearer shares and to use nominees in many positions. Where this is possible it provides a degree of asset protection and privacy to the principals of the organization. Talking about this with trusted counsel before choosing a jurisdiction in which to apply for a license is essential in this matter.
A government issued license to carry out money transmission services worldwide will typically cost around $27,000 to set up and $12,500 to maintain, including application and other fees and yearly license renewal.
Business Operations
Capital requirements will vary with the size of the business although such a business should be set up to be scalable. Depending upon the jurisdiction there the legal requirements for capital on hand will also vary. By in large doing business in an offshore jurisdiction the principals will find the appropriate authorities and agencies to be less intrusive than in their nations of origin.
Depending on the type of business and upon jurisdiction the license may require that a certain percentage of employees will be citizens of the host nation. Because a large number of offshore jurisdictions have wage scales substantially lower than much of the industrialized world this turns into a benefit and not a problem.
Outsourcing is still an option, even if the company is set up in a country usually thought of as a labor pool for outsourced labor. Skilled jobs such as computer programming, working with sophisticated financial software, designing, constructing, and maintaining a web presence, etc. can all be outsourced to keep costs down and profits up.
Integration of the offshore business with the tax advantaged features of the host nation can be a very wise choice and should be considered early in the game. Likewise, the use of an international corporation, an international foundation, and offshore banking can all be smart choices. Working with trusted and competent counsel from the outset it will be possible to seamlessly integrate the various useful aspects of doing business in an offshore location to the benefit of the individuals or corporation setting up an offshore money transmission business.
