What Are Offshore Merchant Accounts

There are of course a number of organisations who will provide applicants with Merchant Status, but however attractive some of these can seem initially, there is generally a catch – there is a high set-up cost – you must lease expensive card terminals or software – you must have a US bank account and Federal Tax ID – you must have 2 years trading history, you must be prepared to pay a commission of between 15/20% etc., etc. We’ll repeat that whilst it is of course possible for a new business to get Merchant Status, it can be very, very difficult, especially if you’re ‘offshore’.

What Are Merchant Accounts

A credit card merchant account is basically an account at your bank which has the facilities to process credit/debit card information through one of the organisations who have direct on-line links to clearing centres run by the major credit card organisations like Visa. The current account information of every card holder world-wide is held on these systems and, in some cases, real-time verification of card and account information is available.

The Merchant Accounts we are currently offering with a leading Baltic Bank are not real-time (although plans to provide real-time secure card verification over the internet is planned for mid-1998) but verification and authorisation of the card details, and the corresponding transfer of funds to your account, is normally carried out the same, or within 1 working day. All communications between the customer and the bank are by ‘direct-dial’ computer to computer link and are fully encrypted using PGP. The software for this is provided as part of the account package.

What Do I Need To Open A Merchant Account

If you have already tried to open an account elsewhere you’ll already be aware of the number of conditions you need to meet and the terms with which you must comply. Full I.D. and existing bank references are a ‘must’ and if you or the bank through whom you are dealing uses the US clearing system, all transactions on the account are liable to be monitored by FinCEN and the IRS at any time. If, however legally, you are moving offshore, this monitoring and invasion of your personal and financial privacy is the last thing you want or need.

• Regardless of your existing banking arrangements, you must open a Corporate Account at a leading Baltic Bank (included within the cost).
• You must agree to the Terms and Conditions (below) regarding the operation of your Merchant Account.
• You must provide a more or less protracted business plan stating the character of sold services or products, the expected size of a typical transaction, the expected size of the weekly/monthly turnover, as well as any info you may believe to be relevant. It is also essential for the bank to know is whether the merchant is going to let his/her customers sign authorization slips and to obtain card copies from them or will be accepting orders by mail order/internet.

Credit Card Fraud

Regrettably there is a huge incidence of fraud with credit cards, especially so when the buyer is operating at a distance from the supplier as in the cases of mail order and internet trading. We are not implying that you are likely to mismanage your account, rather that some of your customers may try to ‘pull a fast one’ on you – it’s happened to us on a number of occasions, fortunately we always wait for clearance of any payment before we complete the transaction, but if you simply take customer’s details then immediately supply your goods or services before a card is verified, if the card use is fraudulent, you bear the ultimate responsibility, however any initial refund which may need to be made will be the responsibility of the bank!

Details presented to you may be from stolen cards; from card details ‘copied’ from a genuine card in someone else’s possession and used without their consent or knowledge; from cards with altered numbers and a false name, made to seem totally realistic; card accounts may seem to be within their credit limit when a credit check is carried out, but an immediately previous transaction not yet on the system could wipe out that limit by the time your payment is due to be made; customers may order goods or services, accept them, then claim they were wrongly supplied and demand a refund – whether you eventually get your property back or not. When you are in a ‘face to face’ selling situation there are frequently clues to potential problems by visible behavioral characteristics of the person who’s given you the card, but when trading remotely this ‘advantage’ is no longer present.

Merchant Account Terms & Conditions

Since the Bank are prepared to take you and your business on as Merchant Account Customers with the minimal formalities and no credit referencing, the bank do need to make provision to cover themselves against the possibility of fraudulently presented cards, as detailed above.

This provision is implemented as follows:

The bank will require the placement of a security deposit. Its size depends on the character of the business outlined in the applicant’s plan but cannot be less than US$5,000. The permitted monthly limit of transactions to authorize will constitute a certain percentage from such deposit. Clients who can provide the bank with signed authorization slips and copies of credit cards (i.e., for ‘face to face’ transactions) will be allowed to place lower deposits and to clear a higher percentage of cards. All incoming credits will be held in a ‘blocked’ account for a period of up to 6 months. Other than detailed below you will not have access to these funds for that time. Funds held in this ‘blocked’ account will be used by the bank should they have to pay out any refunds or charge backs which your customers may present. At the end of this period, the balance of the ‘blocked’ funds will be released to your main account. Realising that customers do need access to incoming funds, the bank will release these ‘blocked’ funds to your main account at the rate of 15% (or more by negotiation) per month. Since you are denied access to them, the bank will consider ‘blocked’ funds to be ‘on deposit’ and will pay a 5% interest on the average annual balance held in the ‘blocked’ account. This interest will be credited to your account.

These terms will be reviewed by the bank at the end of the first 6 month trading period and if there has been a good trading history during that time – i.e., no or minimal payments back to customers – very serious consideration will be given to either reducing the ‘blocking’ period or increasing the 15% per month release rate. We are also hopeful that a new negotiation with the card organisation used by the bank will result in Carlton Press clients accounts being given reduced terms right from the start. All existing clients will be informed and any changes will be announced here if and when these reductions are implemented.

Costs – Opening A Merchant Account

The costs involved are two-fold. Firstly there is a ‘one off’ payment to cover the opening of a new Corporate Account at a leading Baltic Bank (clients must already have an existing registered company – location immaterial) to accompany the actual Merchant Facility.

Corporate applicants only. We can of course also help you incorporate an offshore company in connection with your merchant account, if you don’t already have one! We charge a flate rate fee of just US$1,000 for your merchant account setup.

If you are not accepted for Merchant Status (unlikely if you meet the basic requirements, – ‘What Do I Need To Open A Merchant Account’, above), your Merchant Application Fee will be refunded. To avoid the hassle of this, Carlton Press suggests that corporate applicants submit their e-mailed business plan before paying any fee – we will forward this to the bank and if accepted, we will then invoice for the account fee.

These prices are all inclusive of both the main checking account and the Merchant Facility – for further details of the respective account types, please see elsewhere on this web site.

Secondly, there is also a ‘per transaction’ commission charge levied by the bank on all credits to your account. Currently this is 6% with a minimum of US$0.50, but discussions are currently underway to reduce this charge. This charge may also be reduced by the bank after an initial 6 month trading period where the account management has been satisfactory, but this is subject to individual discussion with the bank by the account holder. Refusals to accept cards are also subject to a US$0.50 charge.

A fully functioning reference-free Offshore Bank Account which can be used independently of the Merchant Account A completely set up Offshore Merchant Account to accept both Visa and MasterCard cards The availability of both ATM Debit Cards and Secured Credit Cards linked to your own account (at extra cost) No Reporting Requirements, US clearing or other financial obligations No tax on any funds held in the accounts Many privacy related account facilities not available elsewhere