It’s easy to get lost with so many different terms in the offshore world even if you’re an investor interested in such services. Two of these is correspondent accounts and merchant accounts. For some reason, people tend to link them. Nevertheless, when we talk about a correspondent and merchant account, we’re talking about two widely different things. Here we’ll explain you what each of them means.

Merchant accounts

An offshore merchant account is a bank account for e-merchants established in a country where they do not reside in. It allows the merchant to process payments to their business’ website and handle other transactions and banking processes.

Any online business needs a merchant account to process payments easily. However, high-risk internet-based businesses, like crypto or e-gaming generally face tough restrictions. Most onshore jurisdictions don’t like to open bank accounts for these businesses.

Why should you open an offshore merchant account?

1. A local account may have a limitation over the volume of sales, which will hinder your business growth. Offshore jurisdictions are usually more beneficial in this case.

2. An offshore account allows for more privacy and will let you transfer your funds wherever you want.

3. Offshore merchant accounts come with tax benefits because you can open the account in a jurisdiction with a territorial tax system. This means you will only be taxed in that country on your locally sourced income, which will likely be zero.

Where to open a merchant account? We suggest, above all, Panama. Yes, we know Panama requires heavy paperwork, but that’s why we’re here for. We have our own law firm in Panama that can help you with everything. Read our banking article right here.

Correspondent accounts

A correspondent account is what gives life to any offshore bank. A good offshore bank will always allow you to open a bank account where you can save your money in a strong currency, such as USD, EUR, and GBP. To do so, the bank needs a correspondent account in the said jurisdiction.

To name an example: if an offshore bank in Belize wants to receive wire transfers from the UK and hold accounts in GBP, it needs a UK correspondent account because only a UK licensed bank can provide these services to foreign banks. Correspondent accounts are what give life to offshore banks. Losing a correspondent account can shut down a major part of the operations of the bank.

Correspondent accounts for offshore banks are at an all-time high of difficulty to get, especially for small banks. Why? Simple. Small banks operate in a high-risk environment. Banks that issue corresponding accounts look at profitability vs risk, and the US government is fining US banks for any action of their correspondent. If you’re bringing a potential $50k income to the correspondent bank, but also a potential $1m fine… There’s no chance you’ll get the account.

What can you do in this case? Is it even worth it to open your own offshore bank? Of course it is! And we have one jurisdiction for you: Puerto Rico. First, you’d be naturally operating in USD, and you’d be doing it in a highly optimized and profitable jurisdiction. Second, instead of going through a never-ending licensing process, we can help you buy your own bank with all appropriate licenses and which are Fedwire-eligible, eliminating many risks and difficulties on the way.

A correspondent account is the keystone of any offshore bank. Any person who wants to expand their businesses should have a bank account in a strong and convenient jurisdiction, an it´s important to do it with the help of experts so that you can be in compliance with all the regulations. Contact us immediately and we will walk you through the details of our potential opportunity.

Contact us