Internet Privacy For The Online Business: privacy and security issues for the offshore company owners

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Internet Privacy For The Online Business

There are many reasons to seek the Internet privacy and anonymity while running business. Many small and mid-size businesses are migrating now offshore (big guys always were there), taking advantages of low tax environment and liberal laws. Internet makes it possible to manage offshore business from any part of the world, covering all the aspects of company functioning: emails, faxes, phone calls diverting, voice mailboxes and autoresponders, online banking, web presence, etc. Because of today’s Internet technologies you can build 100% virtual presence in a chosen offshore jurisdiction, and no one will be able to determine where your actual office is located. Unless you will forget to take care of your Internet anonymity…
Before we explain the importance of Internet privacy for offshore company owners let us find out why the majority of open-minded entrepreneurs are going offshore. Here are some major reasons.

To get tax benefits and asset protection. Running Internet business through the offshore company will allow you to save on taxes. Most offshore jurisdictions have no tax on income, tax on sales, corporate and property taxes. Offshore companies are ideal vehicle for running Internet business, international trade, financial services, insurance business, software development, etc. It should be noted that tax avoidance is not the same as tax evasion. There are many ways to run an offshore company legally and save some part of taxes, offering better prices then competitors can offer. Also, offshore banking can provide strong asset protection and offer better investment options for your hard earned money.

To get protection from most of lawsuits. Locating your Internet business offshore will allow avoiding many annoying lawsuits, saving your time and money. It takes much more time and it is much more complicated and expensive to sue an offshore entity. Running business offshore provides protection against the “your-hot-dog-was-too-hot-and-I-will-sue-you-to-get-the-compensation” lawsuits, making them not profitable for the lawyers working on contingency. Also, when running business offshore your company is acting under the law of the offshore jurisdiction, in most cases far more liberal then in “onshore” jurisdictions.

To bypass domestic business regulations. Large part of profitable businesses like gambling, adult services, and financial advice services are restricted or require expensive licenses in most of “onshore” jurisdictions. You should remember, that what is not allowed or expensive in your home country can be legal and cheap in other countries. Obtaining gambling license in offshore jurisdiction takes less time and is less expensive, and some business activities do not require licensing at all.

To get better prices for products and to get more customers. Providing the information on where is your business located can affect product price, and even affect the amount of clients you may have. For example, you are in software development business and your developers and management staff are located in India. Most of your clients will not wish to pay US prices for the products developed in a country with low development costs, i.e. in the country with low prices on job market and low living standard. Many problems can arise because you business is of the African or Eastern European origin. Some clients do not wish to deal with companies registered in African countries or other “risky” countries.

And the last but not the least are privacy concerns. Offshore jurisdictions offer privacy protected by law both for business owners and their customers. Domestic law regulations and reporting rules can make it impossible to run business when the customer privacy is an issue. When your customers need privacy or it is required by nature of your business, you should consider using an offshore company.

Moving business offshore offers huge benefits for business owners. Unfortunately not all engaged into offshore business are realizing risks associated with it. We will leave the questions of privacy with registering offshore companies, opening offshore bank accounts and offshore merchant accounts to offshore professionals, and focus on online privacy issues. Quite often offshore business owners do not care about security and privacy of their Internet communications. And this can be the fatal mistake. A single email message with the real IP address or a single fax sent over the unencrypted connection can ruin the privacy of the offshore funds owner spending huge amounts into development of complicated schemes with offshore companies and offshore bank accounts.
Many offshore business owners have suffered serious damages when ignoring the online privacy issues. If you wish to protect your offshore business and yourself, you have to think about security of your Internet communications before it is too late. Below are the main points you should take into consideration when establishing your offshore company Internet presence or using Internet for communication.

  1. Anonymous domain registration. Having own domain name is a must for a business. Using own domain in emails, having the web site you can refer to, will add credibility to your business and will add customers for you. But when registering a domain you will have to state clearly the domain owner, and this information will be available to public. Providing your real identity will break your privacy, since by running WHOIS query any curious can find out the domain owner’s name and address. To protect their online privacy some people are registering domain names on fictitious names. Right, registrars in most cases do not verify domain owner’s details, but it is unwise to register domain name on nonexistent person or company. There are cases in business practice when you will need to confirm that domain is yours: when you need the SSL certificate for your online store, or when you need to sell it for example. The only solution to gain privacy and to preserve your rights on the domain is to register new or transfer existing domains to the offshore company with nominee directors and shareholders. How anonymous is it? Offshore company registration agent will know the identity of the real shareholder (it is a general requirement in this industry), but government authorities in the offshore jurisdiction will have records with nominee’s personal details only. Unless you commit a serious crime indeed, you will be safe from tracing.
  2. Offshore hosting, offshore dedicated hosting, offshore collocation services and offshore email hosting. When you already have your domain name registered anonymously on your offshore company, or you just planning to do so, it is time to think about offshore hosting for your domain. Offshore hosting can be the only option for many businesses limited by domestic legislation. Adult sites, gambling sites, offshore investment companies, international trading companies using tax saving schemas, all of them need offshore hosting. As a general rule, when you run an offshore business, you should consider using offshore hosting. Even of you do not need a web site for your domain, you can use offshore email hosting to secure your email correspondence. Companies providing services with intensive network and computer resources usage can take advantage of offshore dedicated hosting and offshore collocation services. When choosing a jurisdiction for your offshore hosting you should check for the established electronic privacy laws and modern network infrastructure. Some countries do not have laws that regulate ecommerce and Internet activities, and this can add some uncertainty in future for your business. A good example of jurisdictions with developed electronic privacy laws and network infrastructure can be Bahamas and Malaysia.
  3. Protecting your Internet communications. Running offshore business requires performing various tasks online. This can be online banking, uploading files to the website, emailing to customers and business partners, sending/receiving faxes and voice messages, etc. Doing all this in privacy without providing your real IP address (e.g. identity) is of prime importance. Please read about the details, which can be determined from your IP address on our "Internet Privacy" page. As we have noted earlier on this page, revealing your real location can bring your business to success or failure. Other threat you should count with is data interception. Government agencies are widely using Internet monitoring systems like Carnivore or Echelon to locate the persons using online banking with offshore banks, offshore e-currency services or offshore investment companies. Once you are on a list of “suspected” in using offshore financial services, all your Internet communications will be monitored: emailing, browsing, ICQ, web pages uploading via FTP, etc. After they collect enough evidences they will visit and question you. We have covered Internet monitoring in deep on our "Data interception" page. Fortunately Internet data communications can be protected quite easily by using anonymizing services supporting encryption. You may learn more on how to protect your online activities on our Internet Security Solutions page. Here we will stress again that you should avoid using US based anonymizing services. They can be monitored by government agencies in the first place. Other important Internet service that is used extensively by offshore entrepreneurs is email. When you use “fax to email”, voice mailbox services, communicating with your offshore banker or offshore broker over the email you should take care of your email security. Government monitoring systems can monitor the email traffic by destination or by keywords, adding you to the “suspected” list. You may read our "Email Security and Anonymity" page to learn how to protect your confidential emailing. When choosing the anonymizing service you should avoid partial solutions or services not utilizing encryption. Only protecting all aspects of your Internet communications with strong encryption algorithms can give you peace of mind.
  4. Using e-currency payment solutions. Most of e-currency providers are registered offshore and providing high financial privacy protection for both buyers and sellers. Although you should be ready to undergo the account due diligence if the account exceeds some turnover level. To pass the due diligence procedures the account should not be registered on fictitious names. If you have an offshore company, register e-currency account on it. Just to remember, always use anonymous web browsing techniques to manage e-currency accounts online. Even if you work with SSL protected pages, government agencies that perform data interception will be able to find out that you are using e-currency and ask the questions you would not like to answer.
  5. Local computer security. Local computer protection is an integral part of the efforts to protect your online privacy. Failing to protect your computer from viruses and network attacks can result in serious damages for your business and privacy. Data loses, stolen confidential documents, stolen access details to your offshore bank account or offshore investment account – all these problems may arise if your computer protection is ignored. What measures you need to take to ensure protection for confidential data on your computer hard drive and removable media? Firstly, you should take care of your network security by installing a personal firewall on your computer. It will protect from network attacks, network worm viruses and some trojan viruses. Secondly, consider using good antiviral application. Antiviral software should be able to detect and remove not only known viruses, but also warn about suspicious activities and software on your computer. This ensures that viruses like "Magic Lantern", an FBI program that can monitor keystrokes, can be detected. And thirdly, use encryption for all your hard drives and removable media used for backups (you are doing backups regularly to protect from data loses, don’t you?). Do not use “folder hiding” software, it can be cracked by kids with one month of computer experience. Do not relay on “boot protection” utilities. When disks with such a protection are removed and installed on other computer as a “slave” drive, data on it can be read like a morning newspaper. Do not relay on data wiping utilities. Using special technologies on examination remanent magnetism (this technologies are available to government agencies) even files wiped ten times can be restored. The only way to protect data when your computer is stolen or can be accessed without your knowledge is to encrypt it in whole including system areas, not only selected folders or drives. Only the person knowing the password will be able to boot the computer protected in this way and access data files. More details on choosing the right software to protect your computer can be found at our "Computer Security" page.

And a few last notes. Do not save on your online privacy and security. You should remember that a penny saved on this could make your business loose thousands. Always include the expenses on Internet anonymity into your offshore company business plan. Gaining Internet anonymity and protecting Internet communications from interception is much the same as protecting money both for the offshore company owners and average Internet users.

The main point in going offshore is to find the jurisdiction where you can run business legally (what is illegal in your country can be legal in some other countries) with minimal costs (cutting business running costs on taxes and license fees) and minimal regulation requirements (saving time and money on paperwork). But there are activities prohibited by law in all countries. Individuals and companies that are engaged in fraud, spamming or child pornography will never have peace. No anonymous services, offshore companies and offshore hosting will provide protection for the business of this kind. But when you run legitimate business in offshore jurisdiction and take all the measures to protect your Internet privacy, you may feel secure.