High Risk Business Bank Account

What is a “high-risk” activity?

A “high-risk” activity status does not necessarily mean the business is illegal. The “high-risk” classification is just a category used by the banks to collectively refer to industries that are exposed to or have a higher potential when it comes to financial instability or fraud.

Businesses with high-risk classifications include:

• Gambling – This industry includes but is not limited to casinos, lotteries, online gambling, sports betting, and more;

• Cryptocurrency – This industry involves the overall operations of cryptocurrency, a digital or virtual currency secured by cryptography;

• Adult entertainment – This industry consists of businesses that either directly or indirectly provide adult entertainment-related products and services. For example, the management of one or more OnlyFans profiles;

• Forex – The Forex business serves as a marketplace for exchanging national currencies, also popularly known as Forex trading;

• Precious metals – This industry caters to buying and selling precious metals such as gold and silver;

• Estate management – This sector involves the operations, control, maintenance, and oversight of real estate and physical property.

Even if a business is considered “high-risk”, it can still open a bank account. However, the process is much more complex- enhanced due diligence, higher fees, and additional documentation will be required. This status tagging, implementing stricter measures, and enhanced scrutiny are initiatives from banks in order to safeguard themselves and the public.

Why open a bank account for my high-risk activity?

A high-risk bank account is a specialized financial instrument offered by banks solely to cater to businesses and individuals operating in high-risk industries. There are three reasons why high-risk businesses should open their high-risk bank accounts.

The first reason is for high-risk accounts to handle their corporate expenses efficiently. Businesses, high-risk or not, surely have corporate expenses to settle for every given period. This includes but is not limited to wages and salaries, rent, and operational and admin expenses. Having a working bank account will streamline the efficient management of the fundamental aspects of business operations.

The second is to cater to incoming and outgoing consumer transactions. When making transactions, customers would surely ask for the payment method, which is why a bank account should always be readily available. They prefer to send payments to bank accounts because they perceive them to be more secure and reliable than putting their card details online.

The third is to establish legitimacy towards business partners, suppliers, and consumers. When a business entity has a bank account, it shows that it is a credible company, capable of conducting business professionally.

For corporate entities, especially for high-risk businesses, having a bank account is not just a convenience but a necessity. It allows them to function properly, meet regulatory requirements, and avoid potential issues in the future.

How much does it cost to open an account for my high-risk business?

There is no definite cost of opening a high-risk business bank account. This is because the price varies according to the specific industry businesses are trying to open an account for and the extent of requirements needed to have them approved. The specific bank where a business will opt to open, the country, and the specific activities of the company will also affect the cost.

It is advisable to anticipate, however, that these accounts will typically include higher service fees, and transaction fees, and may require additional reserves in case of disputes.

Another factor that may add to the cost is the processing of required documents which may include detailed financial statements, proof of business legitimacy, comprehensive background checks, detailed business plans, projections, and proof of regulatory compliance.

To determine an estimated range, businesses may opt to have a quotation done by experts like LegalBison. They have a team dedicated to helping high-risk businesses successfully open a bank account by providing a personalized business assessment and computation of estimated costs that specifically apply.

In which country should I open an account?

There is no such thing as “best country” for opening a high-risk bank account. There are claims that it is best to open high-risk accounts in offshore countries. These are island jurisdictions popular for corporation, investment, and corporate bank accounts set up. These places offer perks and are “friendly” towards high-risk businesses especially Forex trading, gambling and adult entertainment industries. Some examples of these offshore jurisdictions are the Bahamas, the Cayman Islands, and the Seychelles.

However, businesses may also open bank accounts in other jurisdictions apart from offshore countries. What matters is which bank, the regulations within the countries where businesses wish to establish themselves, and the high-risk industry or business model that they belong to.

LegalBison can help identify the most suitable jurisdiction that aligns with your high-risk business needs to ensure both operational efficiency and compliance.

What are the banking options for high-risk businesses?

When it comes to high-risk business banking, you have a choice between traditional banks and electronic money institutions (EMIs) also known as online banks or payment service providers. Traditional banks offer the usual banking services and have high security and trust. They have strict requirements and scrutinize high-risk businesses closely. EMIs, on the other hand, offer more flexibility and are more accessible for high-risk industries. They offer digital solutions and allow online processing. However, businesses should be aware they usually have lower limits and higher fees.

There are specific banking services required to run a high-risk business. These include bank wires for international and domestic transactions, credit card processing for customer payments, and a transaction ledger for financial tracking and compliance. Secure online banking and good customer service support are also required.