Ask Amber: Banking and Bitcoin




Amber D. Scott, Compliance Nerd

Hey Compliance Nerd!

I’ve just incorporated my company, and I can’t tell you what the business model is yet but it’s related to digital currency, and it’s going to be awesome. When I went to my bank to open a bank account for my company, they told me they don’t open accounts for digital currency businesses. One of my friends suggested that I go to another bank and just tell them I’m a software company. Will this get me in trouble (and if so how much)?

Bankless & Ready to Go

Hey Bankless,

Sadly access to banking services has become a pain point for digital currency companies.  Traditional money services businesses (MSBs) have been suffering as well.  In fact, the problem of “de-risking” (banks refusing to deal with industries that are deemed to be too risky) has become a global issue, attracting the attention of the Financial Action Task Force (FATF), the World Bank, and the G7 (to name a few). Closer to home, the Canadian MSB Association is working with stakeholders (both in Canada and internationally) to find solutions to the issue.

It’s baffling that access to basic banking services is one of the most difficult barriers to entry for many start-ups in Canada, and while I would never advise anyone to provide misleading information to their bank, I understand why many businesses have chosen to do so.

Generally speaking, when a bank discovers that someone has provided misleading information, the account will be closed.  This may be done with very little notice or opportunity for discussion.  In some cases, this may prevent the business from opening any additional account with that bank, even years later.  While I don’t have statistics, I’ve heard that the “life expectancy” for bank accounts opened this way is estimated to be somewhere between three months and a year.

One alternative is to work with a payment processor that is well versed in digital currency, such as TAYPE or Vogogo. While this won’t eliminate the need for a bank account, it can relieve a few of the pain points for you and your bank. If you are working with a payment processor, you can include this in the business plan that you present to your bank, and let the bank know that you will only need a basic operating account.

I wish you luck in opening a reliable bank account. As the de-risking debate continues, we’ll continue to publish updates…

Cheers,

Amber

PS:  If any of our readers happen to be bankers with an appetite for banking digital currency businesses, please drop us a line!

Amber D. Scott, MBA, CIPP, CBP, CAMS
Founder & Chief AML NinjaOutlier Solutions Inc.
Amber is a long time, self-described “compliance nerd”. Amber is a firm believer in the idea that good compliance can enable good business. Find out how at www.outliercanada.com or reach out to her directly at [email protected].

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