Key Takeaways
- Offshore companies are businesses incorporated in different jurisdictions than the owner’s country of residence, usually to access international markets or obtain regulatory benefits not found in their home region
- Offshore firms often have clients in many countries and make payments in multiple currencies
- Unfortunately, legitimate offshore firms often face banking obstacles
- The UK’s world-class financial system offers numerous choices, with several alternative financial platforms aimed at overseas firms
- Payset’s multi-currency IBAN accounts are a popular payment option for offshore companies
While offshore companies are widely associated with tax evasion and money laundering due to past high-profile scandals, that’s often a misconception that affects legitimate businesses. Setting up an offshore company is a legitimate strategy as long as you follow all applicable rules and regulations.
The challenge of finding a reliable banking partner can be daunting, which means choosing a reliable financial service that provides access to the UK’s world-class banking system can be a lifesaver for an offshore business.
Here’s what you should know about your options — including Payset’s payment services — and about offshoring your business in general.
What Is an Offshore Company?
Offshore companies are a broadly defined group, but the term generally refers to companies based outside of the owner’s country of residence, usually created to conduct significant international operations or access tax or regulatory benefits.
The company may have owners in one country, corporate entities based in another jurisdiction, and clients distributed around the world.
Offshore companies are often in high-volume industries, such as forex trading, crypto companies, payment services providers (PSPs), and affiliate networks.
Combined with handling large volumes of transfers, these companies usually need to handle payments in several currencies. And because they’re high-risk industries, they often face banking rejections, freezes, and account reviews.
Even if your company doesn’t meet a strict, formal definition of “offshore,” there’s a good chance it can still take advantage of an alternative payment solution like Payset.
Common Offshoring Jurisdictions
There are several jurisdictions that are popular hubs for offshore or international businesses, often boasting tax and regulatory benefits.
Notable offshoring destinations and their corporate structures include:
- Cyprus (Ltd.), noted for its EU membership, a low standard corporate tax rate of 12.5%, and double taxation treaties
- The UK (Ltd.), famous for its trusted regulatory regime around payments and financial activities, but with somewhat higher taxes
- Estonia (OÜ), offering zero tax on retained and reinvested profits and a Digital e-Residency program that’s ideal for remote companies
- Malta (Ltd.), boasting tax refunds up to a 6.25% effective rate
- UAE Free Zones, offering zero tax on qualifying Free Zone income and full foreign ownership without the need for a UAE partner
These locations don’t contain the entirety of the company’s operations — companies may have shareholders in Israel, Ukraine, Russia, Lebanon, China, and the UAE, or customers in the US, EU, and MENA regions, or anywhere else.
Companies in these locations are commonly accepted by electronic money institutions (EMIs) like Payset and other alternative payment platforms.
Why Do Banks and EMIs Deny Offshore Companies?
The top concern for many offshore companies is simply obtaining a bank account or payment service. Many offshore firms have come to Payset with similar stories: Wise closed them. Revolut froze them. Stripe did a risk review. Their local bank wants them to show up physically, or their existing payment provider doesn’t understand their business.
So, why exactly are banks and payment services denying these companies? There are several issues:
- Physical presence and economic substance: Offshore companies may have no physical offices, employees, or local economic activity, which is an issue if the bank needs a company member to appear in person.
- Forex and crypto: FX, multi-currency, and cryptocurrency activities are high-risk, heightening Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) obligations for both the bank and its clients.
- Other high-risk industries: Gambling, payment processing, and affiliate networks are more high-risk industries that are often rejected by banks.
- Operations in restricted jurisdictions: Banks may refuse companies in restricted or sanctioned countries, especially on FATF and other blacklists.
- Financial history: Banks often require long-term financial records, but offshore firms with a narrow focus may be unable to show this history.
- Complex organization structures: Traditional banks may not be equipped to monitor companies with distributed international structures.
- Chargeback risk: Offshore firms with retail or e-commerce sales may need to provide chargebacks under consumer law, adding additional risk.
The good news is that these concerns often result from banks’ own risk judgments, not from any obligation to deny services. Many alternative financial platforms are likely willing to work with any compliant offshore business.
Rules Your UK Offshore Company Should Follow
Whether your company is onshore or offshore, it needs to comply with laws and regulations. This isn’t just an obligation: proper compliance also means that banks and financial providers are more likely to accept you as a customer.
Even though compliance can help you get a financial account, approval doesn’t mean you’re fully compliant to the satisfaction of governments and regulators.
It’s best practice to keep a compliance team on hand, focused on these areas:
KYC/AML and Sanctions Compliance
Financial services and certain other high-risk businesses must follow Know-Your-Customer and Anti-Money Laundering (KYC/AML) laws.
If you have UK operations, you can see your AML obligations and whether you need to register for supervision. Other regions have varied requirements, but most focus on monitoring users and financial activity as dictated by law.
If your company is not in one of those areas, choosing a financial platform compliant with KYC/AML obligations to handle your payments may be sufficient.
Tax Compliance
You should be aware of global tax obligations, including corporate tax, withholding tax, value added tax (VAT), and income tax.
And if you claim tax and other benefits aimed at offshore companies, you should be certain you qualify for those benefits and be prepared to demonstrate it.
This is primarily an obligation to governments and tax bodies, with fines and penalties for noncompliance. However, banks may check for tax registration or certificates, so this step can also help with obtaining financial services.
Company Registration
You may or may not need to register your offshore firm with a government body. Obligations vary by jurisdiction, but we’ll discuss UK obligations below.
If you’re banking in the UK and are a true offshore company with no physical presence, property, or tax residence, you typically don’t need to register. Otherwise, you must register and meet the rules set by the UK Companies House.
Even if you don’t need to register in any given region, doing so can support your company’s legitimacy and improve the odds of getting a bank account.
Other Compliance Obligations
If you’re active in the UK or EU, you should be mindful of GDPR rules, which dictate requirements around collecting, storing, and deleting user data.
Commerce-focused companies should be mindful of consumer protection laws dictating refunds, advertising, and pricing. If you have overseas employees, be aware of employment laws around minimum wage, working hours, and dismissal.
Key Offshore Industries
Offshore companies can operate in any sector, but there are a few sectors that benefit the most from this setup. They also face unique banking challenges.
FX Brokers and Introducing Brokers
Offshore forex (FX) brokers handle foreign currency exchange for their clients. Introducing brokers (IBs), or intermediaries that refer clients to FX brokers for commissions, fees, or revenue-sharing agreements, are in a similar position.
By taking advantage of an offshore model, these companies may access better rates, regulations, and tax rules while offering fewer trading restrictions.
However, many banks see offshore FX brokers as a risk due to high transaction volumes and other compliance risks. For these firms, finding a provider that refrains from blocking access and imposing account limits is key.
Crypto Exchanges and Platforms
Cryptocurrency exchanges and other platforms, such as OTC crypto trading desks, crypto hedge funds, and wallet providers, face many uncertainties.
This isn’t strictly related to offshoring: even onshore crypto companies experience banking challenges, and offshoring adds extra challenges.
Unclear laws, obstacles to KYC/AML monitoring, and difficulties in crypto-fiat conversions are all challenges. This points to the need for a versatile payment platform willing to support a rapidly changing business area.
iGaming and Gambling Platforms
iGaming (or online gambling) includes online casinos, sports betting platforms, prediction markets, and other similar services.
Gambling is subject to especially varied regulations, often operating across multiple jurisdictions. It’s a risk area due to high transaction volumes, strict regulatory scrutiny, and a reputation that’s constantly in question.
Once again, finding a supportive financial service is vital. If you plan to obtain banking services for a type of gambling permitted in the UK, licensing it with the UK Gambling Commission (UKGC) can help support your application.
eCommerce and Online Storefronts
eCommerce firms can benefit from offshoring. Alongside tax and regulatory benefits, strategic offshoring can help optimize shipping and supply chains.
Banking remains a challenge. Global eCommerce companies have diverse multi-currency and FX needs that banks can’t adequately serve, alongside chargeback risks and merchandise listings that may cause rejection. Just like in any other category, alternative payment providers may provide a solution.
How Payset Can Help Your Offshore Company
At Payset, we understand the needs of offshore companies.
We have comprehensive risk management protocols that allow us to manage accounts for higher-risk offshore firms. Human judgment, not automated bans, is how we assess our clients.
It’s a robust approach that combines strong compliance standards with openness to global business activity, ensuring safety and security while allowing for virtually unlimited multi-currency transactions.
If you’d like to see if Payset serves your industry and region, our support team is always available to discuss your unique situation. Contact us here, or book a one-on-one consultation. Our sign-up process is fast and efficient, and opening an account is free.
What Does a Payset Account Include?
With Payset, you’ll get several services to help you perform payments, including:
- Multi-currency IBANs: All Payset accounts include at least one region-linked IBAN so your offshore company can transact like a local
- Payments in over 180 countries, offering true cross-border coverage
- Support for up to 34 currencies, including USD, GBP, EUR, and more
- A built-in FX exchange with real-time rates and 38 currency pairs
- Access to numerous payment rails: Transfer funds globally via SWIFT, SEPA, local UK payment networks, and more
- Support for several common offshore sectors:
- Casinos, betting houses, and internet gambling (if EEA/UK-regulated)
- Forex brokers (licensed only)
- Crypto OTC desks
- Affiliate networks
- eCommerce with suppliers in China
- And more!
Offshore Banking — Part of a Global Financial Shift
Global business is borderless, but traditional banking isn’t.
Whether your company is offshore or just has cross-border activities, you need to handle transactions with foreign clients, suppliers, and contractors.
Yet traditional banking is walled off by strict risk-reduction practices, outdated financial systems, and complex terms of service. You can expect to be denied services even if you’ve achieved full legitimacy in your jurisdiction of choice.
At Payset, we bridge this gap, giving offshore entrepreneurs the power to operate with compliance and freedom, both in the UK and worldwide.
Get started for free.
References
https://www.investopedia.com/terms/o/offshore.asp
https://whitelabelcoders.com/blog/what-is-offshoring-definition-and-benefits
https://www.offshore-protection.com/what-is-an-offshore-company
https://indeed.com/career-advice/career-development/offshoring-vs-outsourcing
https://www.ascotinternational.net/blog/why-banks-reject-high-risk-businesses
