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The Underrated Island: Obtaining a banking license in Puerto Rico

calendar 6/11/2020 8:00:00 AM
author Aldemaro Financial and banking
Financial licenses, in general, are tough to obtain. Requirements are stringent as such licenses generally need a high level of compliance and expertise if jurisdictions want the world to take them seriously.

And among financial licenses, banking licenses are, by far, one of the hardest.

Offshore banking is also increasingly harder, and many jurisdictions that were considered offshore and that protected secrecy until no so long ago, are starting to surrender, providing the financial information of their accountholders, increasing taxes, among many other measures.

But one man’s trash is another man’s treasure. This is awful for the offshore banking world overall, but it can be an opportunity for those willing to take the chance.

There are still incredible legit options out there. Many jurisdictions that were not much known before are starting to shine as they offer solid asset protection and tax planning possibilities.

That means that starting a bank in one of those robust jurisdictions that haven’t capitulated to international pressure can bring otherworldly benefits.

And we bring you one today: Puerto Rico.

This gorgeous Caribbean island, also known as la Isla del Encanto (the island of enchantment), is better known for its unearthly beaches, baseball, and musical legends.

But Puerto Rico is also one of the banking jurisdictions that have been benefited by the last changes in the offshore banking world.

Puerto Rico is a US Commonwealth, which means it is self-governed but is a semi-autonomous territory of the US.

And this has one fantastic consequence. Puerto Rico isn't part of the Common Reporting Standard (CRS), which means the island's banks don't automatically share the financial information of its accountholders to foreign authorities, which adds an extra layer of confidentiality to your asset protection and tax planning strategy.

The post-financial crisis pressure of the US Government and the FACTA uncertainty led to a substantial reduction of license emissions between 2011 and 2015, and those who were lucky enough to obtain one had a hard time opening the corresponding accounts.

But, since 2016, offshore banking licenses are again on the rise, and we can help you apply for such licenses in Puerto Rico in Mundo Offshore.

Some of the most famous jurisdictions, such as Belize and Panama, have increased costs or reduced their secrecy benefits, which has turned Puerto Rico in a top jurisdiction for those wishing to establish an offshore banking business with reduced government fees and capital requirements.

Moreover, the island is a popular destination for US citizens that want a more beneficial tax policy. In the US, the top federal income tax is almost 40 %. Furthermore, states may also tax an additional income tax. Some, such as Texas, Florida, or Wyoming, don't, others charge a small state income tax, such as North Dakota (2.9 %), but in other states, the income tax is more than 10 % (we’re looking at you, Hawaii and California).

Puerto Rico applies a series of tax incentives that can reduce the income tax rate to a microscopical 4 %.

In fact, financial entities enjoy tax benefits such as a 20-year exemption of tax payments for their foreign-sourced income and the same meager 4 % on their locally-sourced income.

La Isla del Encanto has much more to offer than only Héctor Lavoe and Roberto Clemente.

It’s one of the most underrated offshore jurisdictions on the planet. Those that start operating in it right now will reap terrific benefits.

Puerto Rican banks are controlled by the Office of the Commissioner of Financial Institutions of Puerto Rico. The goal of the authority is guaranteeing that the financial sector and all the economy is steady by safeguarding a strict regulatory system that ensures investors that their assets will be kept safe on the island.

However, the island has been in an economic crisis for much of the 21st Century. The economy has withered, and the debt has risen continuously, while the public security system is completely broken. Unemployment before coronavirus was almost 9 %, which was more than double than the US average, and the poverty rate is more than twice the poorest state in the US. And that’s before talking about the effects of Hurricane Maria.

You may ask yourself, who would put his money, and who would open a bank in a country like that?

You may ask yourself, who would put his money, and who would open a bank in a country like that?

  • First, offshore jurisdictions aren’t necessarily developed economies. As long as they have a steady financial sector and a government that allows people to do their business, offshore banking can thrive.
  • Second, this is the best moment. Since the establishment of the CRS, the offshore banking world has changed, and Puerto Rico can be one of the most benefited jurisdictions because of this.
  • Third, the island's economic shape isn't ideal, and the coronavirus crisis surely won't help. However, the government has taken serious reforms, of which we may start seeing results in the mid-term. A restructuring plan temporarily stopped debt payments, and the island is increasing its FDI flow thanks to its tax regime. All this means that, if Puerto Rico continues in the right direction, it may see an influx of fresh investment.

If you are still not convinced, let’s walk you through some of the main benefits of obtaining an offshore banking license in Puerto Rico.

Why Puerto Rico? Five reasons you should obtain a banking license in la Isla del Encanto


Welcoming tax regime

Puerto Rico has no dividends tax or capital gains tax. The corporate tax rate is territorial for foreign companies engaging in business in Puerto Rico, which means they only pay taxes on their Puerto Rican income. It can be reduced from a heavy 33 % to just 4 % thanks to a wide array of tax incentives.

Now, regarding financial entities there are fantastic tax benefits available for you. An international financial entity established in Puerto Rico enjoys a 20-year tax exemption for their foreign-sourced income in Puerto Rico and a 4 % tax rate on all locally-sourced corporate income.

Perfect location

Puerto Rico is in the Caribbean but is part of the US. Thus, it's the perfect entryway for Latin Americans in the US. It's a fantastic first step towards starting operations in this country. Likewise, it is a popular destination for American retirees and businesspeople who want to optimize their taxes.

Solid banking confidentiality

Puerto Rico isn’t part of the CRS, which means it doesn’t automatically exchange tax information with foreign tax authorities. That makes it a top destination for investors and high net worth individuals that want to protect their assets with full privacy. Thus, it’s a fantastic opportunity for those willing to offer these services to them.

We can offer you an already-existent license

We’ll talk about this in detail later, but we can help you buy an already-established bank in Puerto Rico, which is a simpler process and will allow you to have a client base from the beginning and to start operating almost immediately.

We are offering a bank that is on sale and includes its offshore banking license, physical infrastructure, banking software, offices, corporate image, assets, and a client base. If you want to operate ASAP, this a top option for you.

Want to know more about the bank we have for sale in Puerto Rico? Check out our article right here  and enquire now!

The best of the best

A duly-licensed international financial entity in Puerto Rico is well-known as one of the most powerful financial services structures on the whole planet. These entities can offer all kinds of international banking services, investment management, and financial services from Puerto Rico for international clients.

Flexible license

Not only international banks can apply for the international financial entity license in Puerto Rico. Insurance companies, hedge fund managers, investment advisors, among others, are also some of the financial companies that usually apply for this license and reap its benefits. That means it shows it has unmatched flexibility.

Reduced costs

Other top offshore banking licenses still allow you to reap significant economic benefits. Nevertheless, the costs of licenses have increased exponentially. That is another of the reasons why Puerto Rico continues to be a top choice and one of our favorites in Mundo. A financial entity in Puerto Rico must have a $550k minimum capital, which is the smallest minimum capital requirement in the offshore banking industry.

An offshore banking license in Puerto Rico

Now, let’s get into details. An international financial entity license in Puerto Rico must have a $550k minimum capital. That is divided between a $300k deposit in another local bank and $250k that will be the minimum corporate capital. Also, the minimum total of the authorized shares of the company in Puerto Rico must be of at least $5m, but only $250k are paid upfront.

A banking license in Puerto Rico will allow you to:

  • Accept deposits, including demand deposits and interbank deposits
  • Place deposits in foreign banks and in other international financial entities
  • Emit, confirm, negotiate, or refinance credits
  • Participate in any banking transaction legally permitted in any currency or in gold or silver and participate in currency exchange businesses

Offshore international banks in Puerto Rico are barred from doing business with Puerto Rican individuals or companies, but they can do business with the Development Bank of Puerto Rico.

Documents and procedure

To start the procedure, we need the following documents:

  • Passports and CV of the final beneficiaries
  • Passports and CV of the directors
  • Copies of other financial licenses the company has (if applicable)
  • Proof of the necessary funds and their legitimacy
  • Letter indicating the intention of obtaining a financial license
  • Detailed business plan
  • Anti-money laundering policy
  • Approval policy
  • Financial analysis for the next five years

Preparing the application takes around two months, while the reviewing of the application takes about four months. The bank can start operating in about a year, but the whole process, including opening a bank account with the Federal Reserve, takes two years.

Who are we, and what can we do for you?

In Mundo Offshore, along with NTL, we have 25 years helping investors and businesspeople worldwide to handle their business freely.

Because freedom is our core value, we want to help you live, work, and invest freely, and protect the legacy you’ve built for yourself and your loved ones.

We have operations and offices all over the planet, but we started operating and offer our best expertise in the Caribbean. We have well-established experts in Puerto Rico that can help you with such a specific and complex operation as obtaining a financial license.

As we said before, offshore banking licenses are on the rise again, as many jurisdictions have become more stringent and expensive. Puerto Rico is one of the most benefited players of this process because it will lead more family offices and high net worth individuals to seek offshore banking services in la isla del encanto.

And more demand means there must also be more supply. You can obtain terrific benefits from this perfect storm.

And we’re here to help.

We can help you obtain a financial license in two ways: buying an already-existing bank or applying for a license from scratch.

Our services include:

  • Our Puerto Rico offshore banking license package includes:
  • The creation of a banking corporation in Puerto Rico
  • Business plan (unless you already have one)
  • Directors’ and partners’ due diligence
  • Completing the application for the international financial entity license
  • Obtaining the documents that back the application
  • Submit the application and follow the process until the response
  • Guidance regarding banking software
  • Guidance regarding auditing companies
  • Searching for office space and personnel

As we said, the financial authority usually takes around four months to respond to the application. When the application is approved, you’ll receive a preliminary license, which will allow you to rent an office space, hire employees, prepare your technological infrastructure, and deposit the $550k (split as explained above).

And we can help you with all that. Our package includes all steps of the legal phase (the first six months) and all steps of the corporate phase. We'll lead you to find the most appropriate and cost-effective office space and employees, based on clients’ needs.

We'll work with you to create a corporate image based on name availability and perception of the chosen name and create a strong corporate style that will be used to create a logo, website, business cards, marketing materials, forms, and all documentation.

We offer an all-in-one IT infrastructure that provides real-time customer information, infinite scalability, and a fully integrated system, with fantastic security levels and the lowest false positive rate alerts, all for a low total cost.

If you want to know more about the package and the software we offer, please contact us immediately.

Also, our team can perform all post-launch audits:

  1. Online Accounting - weekly or monthly reconciliation of all transactions
  2. Quarterly and annual compilation of financial statements
  3. BSA/AML audit
  4. Information Technology audit (SSAE 16)
  5. Financial audits

Puerto Rico offers one of the best cost-benefit balances in the offshore banking industries. In a world where the offshore banking jurisdictions practically don´t exist anymore, and costs for banking licenses in such countries grows, Puerto Rico is a place you must definitely be looking at. 

In Mundo Offshore, we believe Puerto Rico is still an underrated jurisdiction that hasn't reached its full potential. That means operating a financial institution in this gorgeous island can bring almost unparalleled investment returns for you.

Want to start the process of obtaining an offshore banking license in Puerto Rico with Mundo Offshore?

Contact us right now!

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