Foreign exchange is everywhere. Anytime you want to buy a product or service in another country, your home currency needs to be exchanged for the currency of the country that sells the product or service. Thus, the help of a currency exchange service is necessary. Most of the time, consumers use their bank to do the exchange, which can be very expensive, 3 to 5 per cent of the total transaction. Foreign exchange companies, however, can process the transaction at a lower cost.
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Incorporate in your home state where you will operate your foreign exchange company.
Register your business with state and federal government. Contact your state's finance commission about registration; check under money exchange/transmitters. The business also needs to be registered with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. Each state has its own set of registration filing fees.
Assemble your business' operations manual. The manual is required in order to be compliant with your state's rules for operating a foreign exchange business. FinCEN and your state regulators will provide information regarding this task. It is their objective to make sure your foreign exchange company has certain operational procedures in place when taking on new customers and expediting their foreign exchange requirements. Your regulators also will help you take the necessary precautions so that you do not innocently take part in money laundering or other illegal activities. These are known Know Your Customers (KYC) procedures.
Set up your business' accounting system. It advisable to speak with your accountant about your foreign exchange business. She can help with consolidating your various multicurrency accounts and prepare the necessary Internal Revenue Service forms that apply to foreign exchange companies.
Locate banks in various countries with which you intend to clear your foreign exchange transactions. Start with a large bank that has an office or branch in that particular country. For example, the U.S. dollars account will be held at the New York branch, the British pound account will be held at the London, England, branch and the Canadian dollar account will be held at the Toronto, Ontario, branch. A clearing bank that provides online banking displaying all your multicurrency accounts is a major advantage.
Hire a good web developer who can provide live feeds for currency quotes and other financial information. Have him optimise your website so that your prospective customers can find you quickly on the Internet.
Tips and warnings
- New companies can contact an existing foreign exchange company by establishing an account with it. The company will be more than happy to share the profits with you provided you bring in some good business.
- Keep your books up to date. This is a regulated business, and you must be disciplined in your record keeping.
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