Puerto Rico
Financial Licenses

Offshore banking licences: set up your own bank in Puerto Rico, interview

10/2/2020 8:00:00 AM
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The ancient and wisest cultures of humanity teach us one lesson: in times of a crisis, you need to be on the side of growth. We at Mundo are continuing to grow especially during this 2020 crisis and we encourage our readers to do the same. Today, our topic is going to be establishing your international bank. For this reason, we have contacted our expert in banking licences at Mundo and he has agreed to answer the questions for this interview, explaining about the best jurisdiction for these licences today: “la isla del Encanto”, Puerto Rico.

The first thing our expert has explained is what an offshore banking licence is. This licence is sometimes referred to as a Cass B bank or second-floor bank. With this licence you will be able to offer all kinds of banking services to clients located outside of your country of operation. This means you can provide banking services both to foreign companies and individuals.

For example, an offshore bank licence in Puerto Rico could accept clients from any country outside Puerto Rico and the US and open accounts for them.

Next, we share the interesting conversation we had with Christian about his favorite and most recommended jurisdiction for a banking licence, Puerto Rico. If you want to contact our expert, please click on the Contact Us button below.

-Christian, it is a pleasure to have you onboard our Mundo portal. To most people setting up a bank is surrounded by mystique and mystery, what are the steps you need to take to establish one?

Firstly, you need to organize an IFE in Puerto Rico and then establish a physical office in a building approved by the regulators. Then you are going to need to hire at least 4 employees including a duly qualified compliance officer.

After this, it will be necessary to acquire a banking system which you need to implement and test and negotiate a correspondent account.

After completing these steps and applying for your FedWire account you´ll need to prepare your compliance manuals and training materials.

Another requirement you are going to need is having your own website and marketing collateral. After this, you need to apply for a Swift code.

After you have completed all these steps, then you need to go through an audit after which, upon approval, you will be able to operate as a bank in Puerto Rico.

-I understand you can establish a bank in many jurisdictions, which is your favorite and why?

Firstly, it is important to realize that the banking licence market has been considerably shrinking due to the economic crisis caused by the massive lockdowns. All the offshore and banking industry has suffered during this year 2020. A major banking jurisdiction, the Cayman Islands has gone from 250 offshore banks to 133 in the last 5 years.

In the same way, Luxembourg, one of people´s favorite European jurisdictions, has gone from 220 international banks to 135 in a span of less than 40 years. Moreover, if we look at the Americas, we find more of the same with one of the strongest banking countries, Belize, that has not issued any new licenses in many years.

Although Luxembourg has issued a few new licences, there was a net loss of banking licences from a recent high of 141 in 2014 to 135 by the end of 2018.

The only exception where we can see growth in the offshore banking sector is in Puerto Rico, “la isla del Encanto”. This is the only jurisdiction where the demand for offshore banking licences is outstripping availability.

I consider Puerto Rico to be the best banking sector and the best jurisdiction where to establish you bank because it currently has 81 offshore banks licensed on the island. About 50 of these banks have been licensed during the last 3 years. This is a clear proof of the reliability and the financial opportunities that this charming island offers.


-Roughly, how much would it cost to establish a bank from scratch in Puerto Rico?

Roughly, establishing a bank in Puerto Rico starts from $120,000 not including capital and third-party background checks, nor professional fees. I recommend contacting me for a consultation in order to prepare a formal quotation.

-Can you help with every aspect of bank set up?

Yes, indeed. We can help with all the steps from organizing an IFE to establishing a physical office, applying for your Swift code and FedWire account, creating your website and also going through the auditing process to finally start operating.

-How safe is Puerto Rico as a banking jurisdiction?

Puerto Rico is safe for many reasons, starting with the fact that it has the only international license linked to the US and the US Federal Reserve via Fedwire.

Also, IFEs are treated like State licensed Banks in the United States and can apply for FedWire services with the federal Reserve of the United States. This would make the Fed your correspondent bank. Since they are registered in the United States, banks in Puerto Rico can set up EFT systems rather than sending funds via wire.

With all these benefits, Puerto Rico has a low capital requirement which is extremely competitive if we compare it with other jurisdictions. The minimum capital required is 500,000USD while other jurisdictions ask for a minimum of 10 million, this is a very important advantage especially if we consider that we are talking about a US territory.

One of the most attractive and unique advantages of a banking licence in Puerto Rico is that this jurisdiction has no FATCA nor CRS. Not having CRS will surely attract 90% of the clients, since no CRS is a feature you can almost no longer find in other jurisdictions due to the increasing pressure of the OCDE. Also, once you attract the clients, they have a very good reason to stay with your bank due to the correspondent accounts.

-If a family office wants to own their own bank, is that a good idea? how does that help them?

Yes, a family office can operate as an International Financial Entity in Puerto Rico under Act 273. They can apply for the following services: asset management, alternative investment management, management of private capital investment activities, management of hedging funds or high risk funds, pools of capital management, administration of trusts that serve to convert different groups of assets into securities, escrow accounts administration services, provided that such services are offered to foreign persons.

A family office will not use the word “bank” in its name but can operate as a private bank for the family. It may not take deposits from the general public and they will benefit from the advantages of Puerto Rico as a jurisdiction part of the US.

Our banking expert in Puerto Rico is available for consultations and advice and is offering special offers to Mundo readers. Contact us now to find out the special promotions we offer and ask for a consultation.

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