Offshore Merchant Account Protect’s Business Cash And Receivables

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I’ve said before that I have learned about some of the cleverest asset protection tools from my clients. An new asset protection client owned a very successful internet based business. The business generated revenues of over $ 1 million each month- that’s $12 million or more annually.

Because the business was entirely online, revenue is entirely credit card payments. the bank processing credit card payments “holds back” a cash reserve against disputed charges. The hold-back money belongs to the client and eventually would be paid to him if he discontinues his relationship with the bank processing his credit card receipts.

This client is threatened by potentially large civil claim. He is concerned about a creditor attacking the merchant bank’s hold-back money as well as his business account at the merchant bank where business receipts are deposited.

The margins are small so that the merchants fee for credit card transactions charged by the credit card bank are significant. In addition, a smaller hold-back reserve would release cash which the business could either distribute as profits or invest in marketing.

The client told me he found an alternative  merchant bank to whom he is considering moving his credit card business. The new bank charges significantly lower processing fees, and it requires a hold-back fund against charge backs which is only 1/3 the amount presently retained by the current merchant bank.
The new merchant bank is not in Florida; it is not in the United States. The new merchant bank is located in Estonia, a small eastern European country formerly part of the Soviet Union. Like most merchant account banks, this Estonian bank requires that business maintain business checking accounts at their same bank.

If the client’s business is sued the judgment creditor could garnish the business bank account and any credit card payments held as part of a reserve. There may be a way for a U.S. creditor to garnish a merchant bank in Estonia, but it cannot be easy. I don’t know if U.S. judgments are valid in Estonia or whether that country permits garnishment of bank funds.  I think it would be difficult (not impossible) for a judgment creditor to make a case that a debtor’s affiliation with a merchant bank offering better financial terms is voidable under fraudulent transfer statutes.

Some business owners may feel there are unacceptable  business risks with offshore merchant accounts. Maybe, in today’s shrinking world and easing electronic banking it does not matter much where business process credit card receipt. In any event, this client seems to have found a way to combine financial planning and asset protection planning. I think his plan is creative and effective.