Cross-Border Payments – Remittance and Money Transfer Business Setup

Choosing a license

In most cases, opening your own cross-border payment company for money transfers abroad and remittances starts with securing a license. Is the money transfer license always mandatory? The answer is yes, but the type of it depends on the nature of the provided services and your business model. Most often, you will be required to obtain a FinTech license, either onshore or offshore depending on your project structure and aspirations. Apart from FinTech, it is possible to secure a small payment institution license or an EMI (Electronic Money Institution) license. 

A legal permit opens the doors to international money transfers for your business, which is the main purpose of its existence. The license comes with requirements to be met depending on your chosen jurisdiction but at the same time, it improves your visibility among clients and partners, contributing to the trustability of your business. It is solid proof, first of all, to clients that their funds are in safe hands.

Complying with AML-CFT

Your company must be AML-compliant, whether licensed or not. It is the duty of many national and supranational authorities to ensure that cross-border payments are not used for money laundering or sponsoring financial terrorism. When your company does not involve crypto payments, it is more transparent, which means easier to control. 

Having an AML-CFT compliance program drafted is mandatory in both cases. Before opening, your company needs to prove its compliance to the authorities. As a rule, the process consists of the following steps:

• Preparing an AML-CFT compliance program;
• Assigning a responsible compliance officer (AML officer);
• Instructing key shareholders and figures on the compliance procedures;
• Submitting regular compliance reports.

IT infrastructure and audit

An international money transfer system most likely means an online-based company. Later, of course, your business can expand to the land-based form, allocating special agent offices or booths around the globe like Western Union, an exemplary leader in the industry, does. But primarily, an online platform is formed, allowing the company to start its operations faster. 

In that case, a proper arrangement of the IT infrastructure and cybersecurity is required. Some jurisdictions will also require a proper technical audit done by a professional before allowing your company to go to the market.

Acquiring multiple banking solutions

A cross-border payment system works as an intermediary between two parties meaning to send and receive funds. Your platform will want to provide clients with multiple ways of completing transactions, the most popular being bank accounts, debit or credit cards, e-wallets, and cash pick-ups (if applicable). 

These channels of sending and receiving money require not only a meticulous technical setup but also a proper legal approach. Connecting a new transaction channel to your platform is relatively easy once you obtain a license: from there, the main objective is to find and get access to a proper banking gateway.

In addition, you won’t be able to do without a corporate bank account, which must be obtained separately. This is the bank account for your company’s internal payments, from the employee’s salaries to the overhead expenses.

Choosing a suitable license

One of the best ways to build a secure, trustworthy, and generally compliant international transfer company is to secure a license. The right type of license usually depends on the business model of the company and its activities described in detail.

A FinTech license either in an onshore or offshore jurisdiction remains the most popular choice. In some cases, it might be advisable to apply for an EMI license, such as the EMI license in Lithuania, or a small payment institution license. LegalBison has years of experience in defining business models and the best license types for particular projects, offering the best legal solutions that would cover the whole scope of their activities.

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AML-CFT & Compliance

AML-CFT compliance comes first in any novel project. It is not possible to form a company or secure a license in any jurisdiction unless the startup is fully AML-compliant. Depending on the target country of registration, the requirements might differ slightly but the general package remains set in stone:

• A properly drafted AML-compliance policy of the company;
• An assigned responsible compliance (AML) officer;
• Education of the key shareholders and employees on the AML-CFT policies.

The authorities must be convinced that your company is compliant before allowing it to step into the market. LegalBison knows how to make it possible.

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Cybersecurity & IT audit

There is a reason why cross-border institutions are preferable over banks when it comes to international payments. Transactions between two banks require both institutions to update the status of the payment, ideally working in synergy to make it go through as fast as possible. 

It is not always achievable in reality. Banks of different countries process each money transfer to a different degree of thoroughness: some require more information than others, some require specific information that others don’t, and some apply more stringent security protocols, thus delaying the transaction until all the safety requirements are met. 

Henceforth, a cross-border payment system is the most straightforward way to remit and receive money without delays since no other party apart from the institution itself participates in the transaction. This process still requires a fair share of work on internal and external security, as well as regular IT audits and reporting to the regulator in case of licensing. At LegalBison, we can assign a responsible technician who will oversee the cybersecurity of your online payment system to the highest extent.

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Developing banking applications

Another way to take your company to another level of usability and convenience is to develop its dedicated mobile app. Most reputed payment systems in the world have long introduced their applications for even quicker transactions that can be completed on the go. 

An application is a good complementary feature to your payment system but if you plan to develop one, you must know that it will require proper technical setup. Just like LegalBison assists clients with cybersecurity, we can control the process of developing an official application for your company.

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Securing a bank account

Bank connections are essential for cross-border payment systems. Obtaining a bank account must be one of the project’s primary concerns in the process of company formation. Bank accounts can serve different purposes but they are mostly used for internal corporate expenses of the firm.

Another reason why your business needs to establish connections with a bank is that your clients will likely need a banking gateway for secure and transparent transactions. Banks around the world tend to trust those companies that are built on steady legal grounds, holding official licenses from reputable jurisdictions. LegalBison’s professionalism and experience allow us to assist clients in securing banking gateways without complications.

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