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Would this remittance business setup work ?

Billneon

New member
Hello Folks. Thanks for all the contents and valuation information here.

My friend and I have been thinking of starting a small remittance business which would heavily focus on Asian clients. We do already have a lot of partners who have many customers looking to convert their own currencies ( South East Asia currencies , NO china ) into USD/EUR/GBP or vice versa.

So we are thinking of getting an offshore payment license in Mauritius and set up a corporate account that accept SWIFT along with SEPA account by leveraging third party. The key point is how to collect money from Asian clients. Fortunately, we can open a bank account with one Singaporean bank allowing us to get correspondent account across Asia countries so thus sending and receiving funds from respective markets.

Would this business structure be okay to facilitate this international transaction ?

Thanks for your advise in advance.
 

Martin Everson

Offshore Retiree
Mentor Group Gold
Elite Member
My friend and I have been thinking of starting a small remittance business which would heavily focus on Asian clients.
Very good business idea but highly competitive.

So we are thinking of getting an offshore payment license in Mauritius and set up a corporate account that accept SWIFT along with SEPA account by leveraging third party.
So you go to Africa to setup a remittance business for Asia market?

The key point is how to collect money from Asian clients.
You may want to collect cash and allow destination cash pickup or direct to account or e-wallet sending or similiar. Sorry but too much competition in digital only payment space in Asia. Some cryptos already fill this space. If your not collecting in cash and doing things purely digital why would anyone come to you rather than go online and use instarem etc.

Fortunately, we can open a bank account with one Singaporean bank allowing us to get correspondent account across Asia countries so thus sending and receiving funds from respective markets.
You want to check out rules in every asian country as many have capital controls and you need to conforms with those rules, remittance licenses, forex legislation, currency controls etc. You may just want to nest on the back of an existing payment network with all these issues figured out such as earthport. In end you may just want to use white label service.

Would this business structure be okay to facilitate this international transaction ?
No
 

Billneon

New member
Very good business idea but highly competitive.



So you go to Africa to setup a remittance business for Asia market?



You may want to collect cash and allow destination cash pickup or direct to account or e-wallet sending or similiar. Sorry but too much competition in digital only payment space in Asia. Some cryptos already fill this space. If your not collecting in cash and doing things purely digital why would anyone come to you rather than go online and use instarem etc.



You want to check out rules in every asian country as many have capital controls and you need to conforms with those rules, remittance licenses, forex legislation, currency controls etc. You may just want to nest on the back of an existing payment network with all these issues figured out such as earthport. In end you may just want to use white label service.



No
I do really appreciate your reply.

The one important thing that i have not shared is that we already have pinpointed partners who will onboard to our remittance platform right away. We are not looking to compete with those digital remittance players in Asia. We are looking to build up the remittance platform which only our closed partners can only have an access to. (So only B2B transaction)

From my perspective, as long as we established a licensed payment company which allows us to get a bank account which will be used for remittance business so thus carrying out the business legally.

Also, through leveraging correspondent bank network that we would get from our partner bank, i don't think that it would violate capital control rules & policies in respective markets unless we touch RMB

Again, Would this business structure be still not okay to facilitate this international transaction ? I really need your advice Martin.

Thanks
 

Martin Everson

Offshore Retiree
Mentor Group Gold
Elite Member
We are not looking to compete with those digital remittance players in Asia. We are looking to build up the remittance platform which only our closed partners can only have an access to. (So only B2B transaction)
Ok

From my perspective, as long as we established a licensed payment company which allows us to get a bank account which will be used for remittance business so thus carrying out the business legally.
Do you need just a corporate account for company or are you looking for a bank to provide a custody account into which clients send in funds for you to remit? The later is very high risk and you are better working with a provider who has all this in place and then just have your corporate account.

Again, Would this business structure be still not okay to facilitate this international transaction ?
No.

Have you considered compliance infrastructure? Have you identified which banks you could work with after you get your African payment license? Are you planning to set everything up and then find out no bank will touch you? How far along are you with the planning costing and checking forex and currency control rules etc?
 

Billneon

New member
Ok



Do you need just a corporate account for company or are you looking for a bank to provide a custody account into which clients send in funds for you to remit? The later is very high risk and you are better working with a provider who has all this in place and then just have your corporate account.



No.

Have you considered compliance infrastructure? Have you identified which banks you could work with after you get your African payment license? Are you planning to set everything up and then find out no bank will touch you? How far along are you with the planning costing and checking forex and currency control rules etc?
Thanks again for your comments Maritin,

I have thought of the later one to be honest. For example, If i had an account (HKD account ) with one Hong Kong bank which has corespondent bank account network with for example Thailand, then my client in Thailand who has his local currency with him transfer that money to my Hong Kong account through wire transfer with his Thailand local currency, then Thailand domestic correspondent bank of the Hong Kong bank will remit the local to Hong Kong bank and Hong Kong bank will remit me in HKD. If i'm not mistaken, this is how correspondent works. Please let me know whether this would work in this way or not. It might be wrong because of my lack of knowledge in the industry.With this being said, I cannot understand using Bank's correspondent bank account network would be high risk thing.

Yes - We have thoroughly identified potential partner banks which can work with us. And actually our network have networks with the banks such as one bank in Germany and Cyprus respectively to accept SEPA and one domestic mauritius bank and Singapore and Hong Kong bank to accept SWIFT. Those two banks in Singapore and Hong Kong do have correspondent bank network across SEAs where we are looking do transaction.

Thanks again and look forward to your advise.
 

Martin Everson

Offshore Retiree
Mentor Group Gold
Elite Member
I have thought of the later one to be honest. For example, If i had an account (HKD account ) with one Hong Kong bank which has corespondent bank account network with for example Thailand, then my client in Thailand who has his local currency with him transfer that money to my Hong Kong account through wire transfer with his Thailand local currency, then Thailand domestic correspondent bank of the Hong Kong bank will remit the local to Hong Kong bank and Hong Kong bank will remit me in HKD. If i'm not mistaken, this is how correspondent works.
Yes it kind of works like that. But the Thailand account of the HK bank is called the Nostro account. The money stays in the Nostro account in Thailand and does not leave Thailand. However when an exchange from THB to HKD is needed the HK bank puts in the Thailand Banks Nostro the THB from its Nostro account at a Thailand bank and the Thai bank puts into the HK bank the HKD out of its Nostro account held in HK bank. Basically there is no movement of currency in or out of HK or Thailand. That is how correspondence banking working. The money NEVER leaves the actually country but is held on the banks behalf inside the respective country issuing the currency. I could explain more but it would take tooooooooo looooonnnng.

Please let me know whether this would work in this way or not.
Yes it would work

With this being said, I cannot understand using Bank's correspondent bank account network would be high risk thing.
It is high risk as the money is transferred around between banks in your company name which conceals the actual party submitting the payment which can be a terrorist. Correspondence banks are then forced to do spot checks on remittance wires in case the underlying party, that only you would know, is a terrorist or sanctioned person. For example if you did a remittance via your company for Osama Bin Laden it will be a wire from your company to the end party. You will be sending the wire in your company name concealing the actual sender. They may also insist you adopt expensive AML software to satisfy there needs before they work with you. Also very few remittance companies bother to send wires in the name of the sender as it requires extra infrastructure and real international wires to be done. Instead thye put maybe the senders name in the reference field of a local wire which is not full proof. Not even Transferwise does this for all paths and sends wires mostly in its own name because it is way cheaper to pay out of one of their local accounts in the respective countries then to do a full scale swift transfer with sender details. I think only Euro and GBP and a couple of other is sent in your name. The rest is sent as "Transferwise" as sender...but I digress.

Yes - We have thoroughly identified potential partner banks which can work with us. And actually our network have networks with the banks such as one bank in Germany and Cyprus respectively to accept SEPA and one domestic mauritius bank and Singapore and Hong Kong bank to accept SWIFT. Those two banks in Singapore and Hong Kong do have correspondent bank network across SEAs where we are looking do transaction.
If you have a banking partner ready to work with you then no problem. The problem I see is that banks categorically avoid this sort of service to startups and nobody small companies due to risk of money laundering and general incompetence. They tend to only work with WELL funded companies with large sophisticated operations, KYC and AML implementations and volume. There are exceptions obviously i.e if you know someone at the bank or if the bank is a small garbage bank desperate for business. If the economics make sense the go for it thu&¤#
 
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Billneon

New member
Thanks for your supportive advises all the time :)

It is high risk as the money is transferred around between banks in your company name which conceals the actual party submitting the payment which can be a terrorist. Correspondence banks are then forced to do spot checks on remittance wires in case the underlying party, that only you would know, is a terrorist or sanctioned person. For example if you did a remittance via your company for Osama Bin Laden it will be a wire from your company to the end party. You will be sending the wire in your company name concealing the actual sender. They may also insist you adopt expensive AML software to satisfy there needs before they work with you. Also very few remittance companies bother to send wires in the name of the sender as it requires extra infrastructure and real international wires to be done. Instead thye put maybe the senders name in the reference field of a local wire which is not full proof. Not even Transferwise does this for all paths and sends wires mostly in its own name because it is way cheaper to pay out of one of their local accounts in the respective countries then to do a full scale swift transfer with sender details. I think only Euro and GBP and a couple of other is sent in your name. The rest is sent as "Transferwise" as sender...but I digress.
I understood what you are talking about. But what about we will be only dealing with businesses (only B2B business) with all the supporting documents like invoices and investment documents ? then the likelihood of us being scrutinised by the bank will be lower right ?

Have you considered compliance infrastructure? Have you identified which banks you could work with after you get your African payment license? Are you planning to set everything up and then find out no bank will touch you? How far along are you with the planning costing and checking forex and currency control rules etc?
In terms of the compliance infrastructure, can we actually leverage third-parties' platform to have right infrastructure in place ?

Thanks :)
 

Billneon

New member
Do you need just a corporate account for company or are you looking for a bank to provide a custody account into which clients send in funds for you to remit? The later is very high risk and you are better working with a provider who has all this in place and then just have your corporate account
And here the provider that you are talking here may indicate payout partners or other companies providing sub-account and do remit the money on behalf of us charging a small fee ?

Thanks
 

Martin Everson

Offshore Retiree
Mentor Group Gold
Elite Member
I understood what you are talking about. But what about we will be only dealing with businesses (only B2B business) with all the supporting documents like invoices and investment documents ? then the likelihood of us being scrutinised by the bank will be lower right ?
No

In terms of the compliance infrastructure, can we actually leverage third-parties' platform to have right infrastructure in place ?
Yes most companies do. There are many companies like Eastnets etc that offer this service plus additional services.

And here the provider that you are talking here may indicate payout partners or other companies providing sub-account and do remit the money on behalf of us charging a small fee ?
I don't fully understand your question conf/(%. But they give their baseline fee for a transfer and you add a markup to your B2B customer. Your using their existing network of local currency accounts etc that they hold in each country.
 
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