Content:
Opening a bank account is one of the first and most crucial steps when establishing any business. However, for companies operating in high-risk sectors, this process can become a real challenge. Online casinos, cryptocurrency startups, pharmaceutical companies, and many other businesses face specific requirements and obstacles from financial institutions. The introduction of strict regulatory standards, increased fraud risks, and the need for stringent compliance policies — that`s all complicate the opening of a bank account.
In this article, we will discuss the steps needed to successfully open an account, what documents to prepare, what to pay attention to when choosing a bank, and how to deal with potential difficulties. Regardless of your business specifics, following our recommendations will significantly increase your chances of successful interaction with banks and payment providers.
What is High Risk and How Do Banks Determine It?
High risk in the context of business refers to activities associated with an increased likelihood of financial, regulatory, or operational problems. Companies operating in such industries often face difficulties when interacting with financial institutions due to the following reasons: high levels of fraud, stringent regulatory requirements, market instability, reputational risks, etc.
Examples of High-Risk Businesses:
- Online casinos and gambling
- Cryptocurrency exchanges and wallets
- Pharmaceuticals and online medical services
- E-commerce with prepayments
- Tourism and air transportation
- Dating and online matchmaking
- Financial services and microfinance
- Multi-level marketing and direct sales
It should be noted that each bank or payment system determines its own list of activities that they consider high-risk, so this list is not exhaustive. Interestingly, many banks classify newly registered companies as high-risk. New companies often lack a credit history and financial statements, making it difficult to assess their reliability. Startups also have a high failure rate in the first few years, which increases the risk for banks.
Additionally, clients from sanctioned countries are also considered high-risk for financial institutions. This is due to the legal and reputational risks that sanctions on certain countries can create for banks and other financial organizations. Consequently, many banks and payment systems may refuse to serve clients from sanctioned countries or impose additional checks and restrictions on them. For businesses working with clients from sanctioned countries, this can mean additional difficulties in opening accounts and conducting financial transactions, as well as the need to comply with extra legal and regulatory requirements.
Features of Opening an Account for High-Risk Businesses
One of the main features of high-risk businesses is the difficulty of opening an account in a traditional bank. Many banks are reluctant to cooperate with high-risk businesses due to their increased risks associated with fraud and money laundering. Therefore, specialized payment systems often become the best alternative. Such providers:
- Have experience working with high-risk businesses, and some specialize in these industries.
- Possess the flexibility and understanding of the specifics of high-risk businesses.
- Can offer solutions that are not available in traditional banks.
- Offer faster and more modern compliance procedures.
Increased Fees and Enhanced Scrutiny
However, high-risk businesses should be prepared for higher service fees for accounts and transactions. This is because financial providers offset their risks by increasing the cost of their services. Often, fees for high-risk activities are listed separately from general rates, and these rates are significantly higher than for low-risk businesses. Additionally, payment systems may request extra fees for compliance, which will be more in-depth than for other straightforward types of businesses.
Detailed compliance is an integral part of opening an account for a high-risk business. Financial providers will inevitably conduct a thorough analysis of the business to ensure its legality and transparency. These procedures include:
- KYC (Know Your Customer): Providers will require detailed information about the owners and managers, business plan, partners, counterparties, payment history in other institutions/banks, etc.
- AML (Anti-Money Laundering): Thorough checks for compliance with anti-money laundering laws.
- Financial Reporting: Detailed examination of the company's and beneficiaries' financial information and sources of funds.
Therefore, to successfully open an account, it is necessary to prepare a complete set of documents. The main documents include:
- Company Registration Documents: Charter, certificate of registration, extract from the trade register.
- Documents Confirming the Identity of Owners and Managers: Passport, driver's license, or other identification documents, resume, documents confirming residence (e.g., utility bills, bank references where personal accounts are held).
- Financial Reporting: Accounting reports, tax returns, bank statements.
- Detailed Business Description: Business plan, description of activities and ownership structure, company website detailing products and services, target audience, geography of operations, currencies. Currently, having a good company website is a mandatory condition for opening an account in most payment systems.
- Licenses and Permits: If the activity is regulated and requires special licenses.
- Proof of Wealth of the Company and Beneficiaries: Financial reports, tax returns, bank statements, property appraisal reports, inheritance documents, dividends or other passive income documents, salary/pension documents, etc.
Recommendations for Opening Accounts for High-Risk Businesses
Opening an account for a high-risk business can be more successful if you seek help from lawyers or consultants specializing in this area. For example, with the help of lawyers from Campio Group, you can properly prepare for the process and minimize the risk of refusal. However, if you decide to act independently, it is important to follow several recommendations.
First, choose reliable payment systems that are willing to serve high-risk businesses. After that, gather all the necessary documents required for opening an account, including company registration and financial documents, as well as documents confirming the identity of the owners and managers. The more documents you have that confirm the transparency of your business, the better. Reviews and recommendations from your partners, clients, or professional connections can additionally confirm your reliability and reputation. They highlight your experience, business qualities, and reliability in the business sphere. It is important to present your activities as transparently as possible to convince financial providers of your reliability and seriousness of intentions.
Next, submit applications to several providers to increase the chances of approval.
Maintain maximum transparency in your activities, strictly follow reporting requirements, and regularly update necessary licenses, avoiding cooperation with prohibited and sanctioned individuals or countries. This will help you maintain your bank account and sustain the trust of financial institutions in your business.
In case of problems or any questions related to opening merchant accounts for high-risk businesses, contact Campio Group, as we are always happy to provide your business with the best financial strategies.
