With ever-expanding KYC and AML obligations and new VISA and VAT rules for distance selling, our clients are looking for ways to establish an online company in a jurisdiction that is both a) acceptable for banks and processing compliance requirements and b) tax efficient and easy to manage. The wish list might also include confidentiality protection, fast corporate bank account services and many other benefits that are actually quite challenging to combine into one easy structure — but let's give it a try!

KYC/AML transparency for acquirers
Ultimately, acquirers must discharge their KYC/AML obligations, which essentially means laying their entire company structure bare to their UBOs and individual controlling individual directors, etc. In today’s world, it is hard to use legal structures to conceal ownership, and even the most opaque company structure is only one regulator’s letter away from full transparency.

It's always best to keep things as simple as possible, both to make it easier to set up banking arrangements and to pass the acquirer’s due diligence tests, which is quite a bit tougher.

Something to consider here: there is a new set of Visa rules regarding merchant outlet location that go into effect on 15 October. In a nutshell, Visa is trying to crack down on merchants who are not actually based in Europe accessing its European card acquirer network by setting up a European company. The new rules stipulate that it is not enough for the merchant to have a European company; the 'merchant outlet location' must also be in Europe. What does this mean?

Generally speaking, it’s where the business is operated from: where the offices are located, decisions made, etc. It also refers to where the customers are. If the merchant is not physically located in Europe, then the expectation will be that a fair amount of its processing traffic comes from Europe.

There are a number of other requirements and conditions, but the overall idea is that merchants wanting to use acquiring services in Europe should have a bona fide European operation and/or European customers.