Rietumu Bank in Latvia will take any corporation anywhere except blacklisted states. In fact you can apply online you don't even have to visit in person. This guy could've also used Okpay, or dropped in a payment gateway like Global Payments or Stripe and had them pay out to his Okpay bank wire SWIFT code.
For a while as an experiment, I decided to see how easy it would be to break the Argentina ban on foreign exchange or money leaving the country. I simply signed up to a bunch of services like Inpay (Agentine soft bank transfers), Rapipago and DineiroMail and accepted payments in exchange for Bitcoins. I had all these payment gateways just dump into an Okpay account and then traded it on IRC. Worked flawlessly, though high fees. Still were cheaper fees than what it costs on the black market there to move money.
I also have a decoy software store that I sell to a circle of friends there Bitcoin for Argencard. I wouldn't do this for the general public of course that's risking fraud.
Poland, Belarus, Moldova, Italy, any of these countries walk into a bank with corporate docs and open an account in an hour or so. Bitcoins are of course, better suited for this guy's business of reselling software but he barely tried to get around silly bank laws in the UK.
Edit: To get money back to yourself cheaply from the Latvian bank after your payment gateway dumps funds into it (because SWIFT can be expensive with correspondent banks robbing you a percentage in fees), buy Bitcoins with SEPA from Bitstamp or another EU exchange or p2p trade. Then cash the bitcoins out locally.
Hey dobbsbob, thanks for your comment! Great info! I did try getting a Latvian bank account but even their banks seem to have clamped down on opening accounts for non-EU residents due to money laundering laws - at least in my experience.
As for payment gateways, I wanted to stick to well-known gateways like PayPal and Skrill that consumers would already have accounts with.
I'm sure that walking into a bank in Europe probably would have quickly resulted in the opening of an account, but getting to Europe posed a problem for me as I'm based in the US and didn't have the funds to make the trip. Thus, Bitcoin!
Payment gateways all take Skrill or Paypal. Just find one that doesn't charge a minimum fee per month (there's a few left that don't). You sign contracts directly with Paypal and the gateway accepts the payment, then drop it in your Okpay or Latvian account.
I also live around a few Chinese banks that opened in my country. Got an Alipay account through them in a couple of minutes by walking inside and depositing $1000 and showing corporate papers. Alipay is Chinese paypal equivalent but no chargebacks (well.. hard to do chargebacks).
There's also companies like The Currency Cloud. Although I'm not sure if this is against their rules but I used them to receive gateway payments as well.
Also I'm not an American, maybe that's why you had problems. Guess things have changed with the new very strict laws
can you comment on the kind of fees you ended up generating when you were experimenting in Argentina? i expect that fees would be different depending on the direction you went from ARS.
a bank account in an hour? opening a bitcoin business account in the US takes easily 1.5 hours, if not twice that.
Fees all depend on volume of course, so you have to weasel around with sales guys to lock them down. For Inpay I was paying 7% or so fees, and it was free to receive wires in my Okpay account because I am an exchanger with them. To become an exchanger you just buy $1,000 worth of Okpay and fill out the application/send in passport copies. Now all internal transfers, and bank fees are free.
If you want a surreal experience open a bank account in Belarus. A bulletproof limo picks you up at the airport and you go directly to the bank and receive your unlimited debit card and privacy statement they will never give your info to anybody no matter what, unless you commit crimes in Belarus. Azerbaijan is the same thing.
I'm surprised there isn't a gigantic European exchange using a Belorussian bank account. Could accept all the US wires you want and they wouldn't respond to angry requests from NY state to seize your funds because you don't have a MSB license. Of course you could end up kidnapped though for extraordinary rendition back to the US like they did all those Russians who ran gambling payment gateways :P
Min deposit was 25,000 Euros but I was told other banks it's a lot smaller, like 5,000 Euros but this is the best bank. Be aware this is Belarus, and it's a dictatorship so you're flying by the seat of your pants finances there's nothing to stop the government just taking your money but then again, US does this all the time too. If you want to open a mega bitcoin exchange there ya go. Getting permanent residency in Belarus is easy too. Plus there's no tax on worldwide income there. I hired a Belorussian lawyer to set this up.
Privatbank in Ukraine will also open for non residents if you visit in person and english is widely spoken. Small minimum deposit $100 http://old.privatbank.ua/info/index3.stm?fileName=5_2_35e.ht... however any transfer over $5,000 is reported to the tax police.
Belarus seems to have no financial police whatsoever if you wanted to withdraw a million in cash they would do it no questions asked. In fact, they didn't even ask me the source of the income when I opened the account. While getting the account you wait in a lounge while somebody pours you free drinks and watch shady Russian businessmen walk out with bags of cash and private security to take back to Moscow.
dobbsbob writes:
> Belarus seems to have no financial police whatsoever [...] they didn't even ask me the source of the income [...] watch shady Russian businessmen walk out with bags of cash
hayksaakian writes:
> This seems completely legit.
I find myself unable to tell whether you (hayksaakian) are being serious or ironic.
your scenario sounds like an ideal use case for a service we recently released, Coinvoice (https://coinvoice.com/). Coinvoice allows you to invoice in USD and receive Bitcoin (BTC) without forcing your customers to use BTC.
i have myself had a number of issues with banks in the past and can speak to the irritation it can cause when you're trying to do business. Bitcoin is a great way to get around banks that are uncomfortable with your line of business or that add too much complexity to your business.
That's very nice, congratulations. Isn't there a way to work around the risk of chargebacks? Requiring an "insurance" deposit and passing charges on to your customers, or holding payment for some amount of time?
i've run a few other businesses in the past that had some serious credit card and paypal fraud problems. to give you an idea of how bad it can get, i have been charged back USD 30K in credit card charges by a single customer who was running an extremely creative fraud system. the secret service ending up getting him, which was vindicating, but you can't get blood from a stone...
i'll have another think about it, but i expect that accepting credit cards is not going to happen. additionally, the fees would have to be pretty hefty for running such a payment gateway since it would (our fee) + (credit card processing fees).
You could always try an informal payment scheme. Find existing storefronts that have MSB licenses that do currency exchange, ask them to take payments for you. End of the day they deposit to your business account. Now you can have cash accepting storefronts. Find an easy yet secure method for these stores to notify you of cash payment and release the coins.
This is better than cash deposit directly to your bank account because of MITM fraud attacks, and because banks hate people coming in to deposit cash and quickly try to shut down the account. Again I'm not a lawyer so I don't know if you'd need a license for this in the USA but overseas it would work in countries that need this service, like Pakistan/Philippines/India.
EDIT: I would imagine, if you do quite well, you could sign a 1:1 agreement with companies like Bitpay who are looking for USD, and have BTC, and you have USD and are looking for BTC. win/win
Would you mind describing his method of swindling you out of $30K? Surely it wasn't a single transaction... Was it a single credit card? Did he use multiple cards with different names? Or we're they all same name + same address?
he was using many cards with many addresses and billing names. i didn't have a system in place to catch this behavior at the time, and it was totally on me for not having proper countermeasures in place.
iirc there were like 15 different billing addresses and card numbers in a few month period. once i saw that i knew i was going to get fucked on chargebacks.
his fraud scheme was so creative i'm not going to describe it here, for wont of someone decided to imitate it.
I'm not sure whether not describing the swindle method is more like security through obscurity or responsible disclosure. Wouldn't it be it be good to let people know what this guy was doing so we can all protect ourselves against such methods?
There are a few potential issues with this business model, and I'm curious if/how you've addressed them:
1) if you're taking software IP from one country and moving it into another, aren't you then becoming an importer/exporter of the software? That would make you liable for duties/taxes as well as export restrictions. In particular, exporting certain encryption algorithms in software can be legally problematic (http://www.fosterswift.com/publications-Software-Downloads-E...)
2) Some vendors have geographically limited software or licenses (http://www.microsoft.com/en-us/howtotell/geoinfo.aspx). In some cases the license may not allow you to run, for instance, a US version of the software primarily outside the US. Even if Germany lets you transfer the license, if the the license doesn't let you run the software in Germany, I suspect German law would agree you can't run it.
To clarify, I'm not trying to turn this banking/bitcoin discussion into a discussion about the business model, just point out that "solving" a legal problem problem in one way (moving the transaction) may introduce new problems (import/export). Also, software companies seem to have put some thought into how to restrict these sort of maneuvers.
I could see Adobe and Microsoft sicking their army of lawyers on this site. I also see it is US domain/hosted which could be yoinked regardless of German law.
I would recommend a more bulletproof domain, and hosting in Germany or with PRQ in Sweden, who has lawyers to defend DRM claims. A good German host is BS web run by Henning Brauer an OpenBSD developer. http://www.bsws.de/en/
Also I think you're right this might fall under import/export laws
My .com domain actually redirects to a .co.uk for the very reason that you mention :) And I made sure to host the site on servers in the UK as well!
Adobe has moved to a subscription based model, which makes the UsedSoft v Oracle ruling irrelevant. Microsoft may actually let you resell your used software, many companies do. In fact Adobe actually used to let you resell your used software so long as you didn't keep a copy of it.
The main companies that don't let you resell your used software are Valve (Steam), Apple (App Store), Google (Google Play) and Autodesk. I think that all of these companies are violating the UsedSoft v Oracle ruling by not allowing EU users to resell their apps, games and software, which is why I started halfpricedigital.com
Hi deeths, my site leaves it up to the seller (or buyer) to comply with restrictions on the usage of software. This seems to be how ebay deals with this issue as well. For example, there is a lot of used software on ebay that has restrictions regarding where software can be used (only in N. America, etc.)
The difference between my site and ebay is that because my company is based exclusively in Europe, my site isn't bound by the Vernor v Autodesk ruling and instead relies on the UsedSoft v Oracle ruling, at least when it comes to EU citizens. This is what allows my site to let EU citizens resell their used iOS apps or even their used Steam games. Other than the UsedSoft v Oracle issue, my site operates pretty much like ebay regarding software usage restrictions.
The problem you've run into is most likely a result of the "FATCA" provisions (Foreign Account Tax Compliance) in the HIRE Act 2010 - a US law - rather than EU money laundering regulations directly.
The result is that any non-US financial entity that don't want to incur the wrath of the US government is required to report information about their US customers to the IRS.
How is it legal for someone based in the US to setup a UK company to run his business? Isn't this a recipe to get the IRS to investigate this as a tax evasion scheme?
I mean if it's possible, then every online business should incorporate in HongKong and avoid Taxes, VAT and several other complications that the IRS put.
It's legal as long as you report any income you make from it personally. There's nothing stopping you from incorporating in the Seychelles, and getting a bank account in Latvia, Belize, or Panama/St Vincent.
Just so long as you report foreign income paid out to yourself. The foreign corporation doesn't have to report anything (this might have changed, i'm not a lawyer). That's why you see all those shady collector coin ads on latenight TV and they are always based out of Liberia.
just to elaborate here: the OP will likely need to file subpart F income for his UK-based controlled foreign corporation (CFC). this means that any income he generates from the UK entity passes through to his US taxes.
additionally, he will need to file a TD 90-22.1 with the department of treasury by june 30th of the year after the account has more than USD 50K in it.
tax avoidance is a complex beast and simply incorporating a business in another jurisdiction does not in any way exempt you from US tax liability.
> additionally, he will need to file a TD 90-22.1 with the department of treasury by june 30th of the year after the account has more than USD 50K in it.
Nitpick, but the TD 90-22.1 threshold ("FBAR") is $10,000. As an expat with a foreign bank account, I only really know about it because TurboTax flagged it, which was pretty fortunate.
But what if you end up "working" for your company? Let's assume that you are in the US and might have to put in hours to hack together a product or a service. And none of your "employees" are in Latvia or Belize. Is it still legal?
It's legal, but you increase the odds that the IRS might pay extra attention and consider whether the company is de-facto US. I don't know US regulations in that respect, but many countries give tax authorities wide latitude in determining that an entity is due tax in their country even if it's not incorporated there.
Note, though that theres still nothing illegal with it (unless you try to explicitly hide what you're doing) - it may "just" impact your tax bill.
If the company hosts it's service in Europe, sells to European customers and otherwise does not have much of a footprint in the US, chances are good they'd accept that the company is foreign.
Of course any income he takes out - whether salary or dividends - will still be taxable in the US (subject to any tax treaties if he were to do the work in the EU too).
I'd imagine that strictly speaking one would have to register the foreign company with the secretary of state as a branch or foreign company, if certain conditions were met.
Sure. Incorporation and where you do business are two completely different things. It's all legal as long as you comply with regulations of all involved countries.
My understanding is that this is mostly correct. Money held by the company probably isn't considered his and probably isn't taxed; money he pays himself certainly is (whether it goes to an account nominally in the US or not, and whether it is denominated in bitcoins or not). Obviously he should be talking to an accountant and/or tax attorney and making sure that's all straight.
His servers are in the UK and his company is in the UK. Since the 'service' is performed in the same country that the business is located, the income does NOT qualify as 'Foreign base company services income'. (see 26 USC § 954 E 1 B)
Any money repatriated to the U.S. (e.g. if he pays himself) is taxable income.
The article isn't terrible clear about it, but it's not a ruling by a German court. The German Federal Court of Justice submitted the question to the European Court of Justice, and the ECJ made the judgement; this judgement binds other national courts also.
Most large US banks or banks with a US presence will allow opening a US bank account reasonably easy. Call around. It is generally easier to open one in person (but if you make a trip, make sure you know what identification they require first as it varies wildly), but at least the larger banks tends to have no problems handling foreign account holders with the caveat that the paperwork can be a bit annoying.
I once opened a Chase account from Norway, and had to go to the US Consulate in Oslo to get an apostille on the application form (basically the consulate had to attach a document by seal that confirmed they had seen my id and matched the details to what I claimed on the application, and watched me sign the form - apostilles are expensive, I had to pay about $100 that time, and it's unusual to require it to be done at a consulate or embassy rather than "just" a recognised notary public).
TD Bank is another alternative I have more recent experience with - it's a Canadian bank group with branches in lots of US states, including Delaware, and a company I'm involved with had them open US accounts for a US company we set up, though we also had an account with them in Canada opened from Canada by a Canadian citizen, so I don't know how easy or hard it'd be to get an account set up by them from elsewhere - they did fedex me documents to the UK to sign, though. And didn't require any apostilles or other expensive verification.
Depending on your location, you may also find it possible to open a US held bank account from your home country by looking at which (if any) of your local banks have branches in the US (this applies in general for many country pairs, but especially if you want to open accounts in major financial centres - my old Norwegian bank has a branch in London, for example). Note that in many cases they will have "branches" that are not generally open to consumers and may not be advertised, so you'll want to check online and call their business banking people. Major international banks like Barclays or HSBC for example may often be an alternative.
It is also easier if you "only" need a dollar account as opposed to a US held account - many banks offer accounts in the major currencies without offer a general banking service in the relevant countries -, though I'm assuming you actually need a US account.
At least judging by the UK account fees SVB are horrifically expensive and seem to charge through the nose for everything. I'm not sure whether this is the case for a US-domiciled bank account though.
HSBC have a decent international banking department and can open accounts in different countries last time I checked.
And it creates several entirely new issues. Bitcoin for physical goods is usually safe as you can always claim it is a barter, but Bitcoin for online transactions if you are based in the US could turn in to a Mt. Gox like issues.
If you are small, your risk can be small. But if you are looking to be the next big thing or raise capital this would be a "risk" not a "solution" in most VCs eyes.
I'm not sure that this would be a problem though because the scenario would be for an American citizen that is forming a company in the EU. So the US bitcoin laws should be bypassed and you'd just be dealing with EU laws regarding Bitcoin, since your company is based in the EU.
You have to keep in mind that a company is its own entity and since my startup was formed in the UK, it is a UK company that is governed by UK laws. The UK has no problem with non-resident company directors, but setting up a bank account for a company with a non-resident director is another story.
@HalfPriceDigi, don't forget to prepare and file Form 5471 for your UK company. Screw that up and it is an automatic $10,000 penalty.
(Disclosure: international tax lawyer; have fought this battle with the IRS before).
And yes. The banking problem is the hard problem to solve.
In both directions. U.S. banks can be giant poopy-heads. Bank of America just closed the account of a foreign client of mine who had banked with them for 33 (!) years. "We don't have to give you a reason, and we are sending you a check for your money." The second such client to experience this. Both are moving to Citibank, for what that's worth to you.
Thanks philiphodgen, I did not know about form 5471 and I've formed a few startup companies in the UK already - yikes! I should probably talk to a good, low-cost international tax lawyer...if you know of any... admin[at]halfpricedigital.co.uk
it's ridiculous that banks can just close your account without giving any explanation. i have had this happen a couple times and it's very irritating.
while i can appreciate that any business can choose to not do business with any 3rd party for whatever reason, the inability to bank can be crippling, especially if you get blacklisted by chexsystems et al.
Have you tried talking to US banks that have UK branch offices? Note that even those who don't have consumer branches may still offer accounts at those branches. E.g. Bank of America has a huge presence in Europe, mainly via MBNA and Merrill Lynch, but also some other services - I don't know if they offer accounts (the way to find out is likely to talk to their US international banking team).
I know that may be non-ideal for you from a risk POV, but you may also find the UK amusingly (or infuriatingly..) bureaucratic and byzantine in that having a UK bank account is the best way to prove to another UK bank that you are worthy of opening a bank account with them afterwards.
Yes, I wasnt talking about starting a foreign company. I was talking about doing the work on behalf of that company from the U.S..
If you still live in the U.S. I assume you are connecting remotely to your servers and then writing and executing code that the U.S. might consider illegal behavior.
I'm not putting you down- I am glad people are pushing the boundaries. I just wouldnt feel comfortable taking that risk personally.
btw, would the ruling also cover in-app purchaes? Also, does the law which requires a mechanism to transfer ownership to be built in software (DRM etc)
Thanks! I'm not sure if the law would cover in-app purchases by themselves. However, you should be able to sell your used app which could probably include all the in-app purchases.
I don't know if the law requires a mechanism for transfer as much as it requires the software maker not to prevent transfers. So the process could be manual (via email), as long as a process exists. But a mechanism in the software or marketplace would make everyone's lives easier.
If you were willing to spend hundreds of dollars, why not hire a lawyer to proxy your application? With a POA the attorney should be able to sign documents on your behalf.
I don't think there's anything there that doesn't boil down to providing sufficient identity documents. Worst case making him spend a fortune with a notary public to get copies of various documents notarised and possibly having apostille's issued.
His bigger problem is likely to be US reporting requirements as I've mentioned elsewhere, that makes it very unattractive for non-US banks to handle smaller US clients.
Why is this on frontpage? This website is so poorly designed and (probably) generates so little revenue that couldn't seriously be considered as a study case for Bitcoin substituting bank accounts for business.
Hey atmosx, the site is an MVP, but yes I agree the design needs work. The site itself and its revenue is irrelevant to the issue at hand. Any US citizen (or non-EU citizen) who wants to form a company in Europe is going to run into the same banking problems I ran into. Bitcoin can provide some relief for this issue.
That's like selling used poems, or used voicemail greetings.
Hey guys! This particular hard copy of Ezekiel 25:17
from the bible is almost new! It's only been seen by human
eyes three times! Verified as authentic via flatbed
scanner and then CRC32 checksumming it's OCR results!
Hardly any wear and tear! $150 and it's yours!
I know, how about we start selling used radio waves, and used alternating current polarity cycles. (your choice of sine or triangle waves)
Used software (in the form of original floppy disks or optical media) used to be a common sight at independent computer stores. Even now, used games (usually optical media for consoles) are widely available for a fraction of the original price.
The part that's odd is that, as with any digital media, it's trivial to make copies. Traditionally, things have only been property if it's possible to possess them and keep them from others. In an industrial society with a powerful government, that's true of things like the right to print books containing a given text, but it isn't true of publicly-distributed digital media.
For a while as an experiment, I decided to see how easy it would be to break the Argentina ban on foreign exchange or money leaving the country. I simply signed up to a bunch of services like Inpay (Agentine soft bank transfers), Rapipago and DineiroMail and accepted payments in exchange for Bitcoins. I had all these payment gateways just dump into an Okpay account and then traded it on IRC. Worked flawlessly, though high fees. Still were cheaper fees than what it costs on the black market there to move money.
I also have a decoy software store that I sell to a circle of friends there Bitcoin for Argencard. I wouldn't do this for the general public of course that's risking fraud.
Poland, Belarus, Moldova, Italy, any of these countries walk into a bank with corporate docs and open an account in an hour or so. Bitcoins are of course, better suited for this guy's business of reselling software but he barely tried to get around silly bank laws in the UK.
Edit: To get money back to yourself cheaply from the Latvian bank after your payment gateway dumps funds into it (because SWIFT can be expensive with correspondent banks robbing you a percentage in fees), buy Bitcoins with SEPA from Bitstamp or another EU exchange or p2p trade. Then cash the bitcoins out locally.