
Bitcoin accidentally solved my startup's international banking problem - HalfPriceDigi
http://pastebin.com/VSjCpYxt
======
dobbsbob
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.

~~~
HalfPriceDigi
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!

~~~
dobbsbob
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

~~~
Jacqued
That might just be why. I know when doing operations at my bank in the EU,
from time to time they require a certificate that I am NOT a us citizen

------
conformal
your scenario sounds like an ideal use case for a service we recently
released, Coinvoice ([https://coinvoice.com/](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.

~~~
zorked
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?

~~~
conformal
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).

~~~
sillysaurus2
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?

~~~
conformal
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.

~~~
code_duck
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?

------
deeths
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...](http://www.fosterswift.com/publications-Software-
Downloads-Export-Laws.html)) 2) Some vendors have geographically limited
software or licenses ([http://www.microsoft.com/en-
us/howtotell/geoinfo.aspx](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.

~~~
deeths
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.

~~~
dobbsbob
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/](http://www.bsws.de/en/)

Also I think you're right this might fall under import/export laws

~~~
HalfPriceDigi
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

~~~
alextingle
Anything that undermines the awful Steam model gets my vote.

------
vidarh
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.

See this PDF for HMRC guidance for the UK regarding this:
[http://www.hmrc.gov.uk/drafts/uk-us-fatca-guidance-
notes.pdf](http://www.hmrc.gov.uk/drafts/uk-us-fatca-guidance-notes.pdf)

As a result, smaller US customers are particularly undesirable for non-US
banks these days.

------
csomar
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.

~~~
dobbsbob
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.

~~~
Brig303
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?

~~~
vidarh
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).

------
qwerta
Why author thinks that UK Paypal account would not get frozen, if someone
would complain?

Also I have serious doubts UK court would just accept ruling of German court.
In software law UK is closer to US.

~~~
rbehrends
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.

------
wiradikusuma
I'm in a very similar situation: I remotely incorporated in Delaware, US, and
now trying to open a bank account in the US (for Stripe). Help, anyone?

~~~
vidarh
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.

~~~
wiradikusuma
Thanks! I will try opening a HSBC US bank account from my country of
residence, Malaysia.

I've contacted SVB by phone. They told me to email them some details, but then
they ignore my email.

------
drakaal
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.

~~~
HalfPriceDigi
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.

~~~
latj
I'm surprised there is no law prohibiting people from telecommuting from U.S.
to bypass U.S. laws.

~~~
HalfPriceDigi
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.

~~~
philiphodgen
@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.

~~~
HalfPriceDigi
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

------
devd
Interesting hack - Best of luck.

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)

~~~
HalfPriceDigi
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.

------
Grue3
Why pastebin if you have a website?

~~~
VMG
This. Makes it also unreadable on mobile. Reposted it as a gist:
[https://gist.github.com/anonymous/6883552](https://gist.github.com/anonymous/6883552)

(Is there a pastebin-like service that focuses on plain text readability?)

------
Beltiras
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.

~~~
alextingle
I'm not sure that's true. The EU's "know your customer" rules for banks are
pretty strict.

~~~
vidarh
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.

------
atmosx
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.

~~~
HalfPriceDigi
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.

~~~
conformal
haters gon hate :)

nice response

~~~
wonkaMikeTV
But seriously... selling "used" software?

Used. Software.

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)

~~~
Zak
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.

