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Top International Banking Licenses in 2017

PremierOffshore.com
21 June, 2017

This article covers the top international banking licenses in 2017 available from zero and low tax jurisdictions. It's focused on the Caribbean, South Pacific, and Latin America. While many countries issue private banking licenses and international licenses, I'm setting up banks in countries with relatively low costs and capital requirements.

An international banking license is one that allows the bank to do all manner of banking business with persons and companies outside of its country of incorporation. For example, an international bank licensed in Dominica can do business with anyone but residents of Dominica.

In compiling the list of the best international banking licenses for 2017 I consider the costs and, more importantly, the willingness of the government to issue new licenses. Just about every country in the Caribbean has an international banking statute, but very few are actively pursuing new applicants.

For example, Belize has six international banks operating in the country but hasn't issued a new license in years. For this reason, Belize has fallen off my list.

Then there's the issue of correspondent banking. Sure, countries like Comoros and Gambia are pushing their international licenses. But, what are you going to do with them? Who the heck is going to open a correspondent account from a new bank from these countries?

 

Here are my top international banking license jurisdictions for 2017.

 

#1 Dominica

The most active low cost offshore jurisdiction is Dominica. The island has 15 active international banks and 3 in process. It generally takes 2 to 4 months to get your preliminary license and permit to organize.

The corporate capital required in Dominica is $1 million. This is the amount stated in the law and the amount the government will accept. That is to say, with $1 million in capital you  will receive your preliminary license.

Before you can go live, and receive your full international banking license, you must show sufficient compliance (AML and KYC) programs, quality IT systems, and you must have a correspondent banking partner.

At this stage, you'll need significantly more capital than $1 million. Most correspondent banks will require an opening deposit of at least $5 million and some ask for $12 million.

 

#2 Puerto Rico

The most active international banking jurisdiction is Puerto Rico. Also, Puerto Rico has the lowest costs and lowest capital requirement at $550,000. I don't list Puerto Rico as the number one international banking license because it's not a pure "offshore license." As a US territory, Puerto Rico is too close to the US government to be classified as "offshore."

Other than lower costs, I rank Puerto Rico highly much easier to secure a correspondent partner as a bank licensed in Puerto Rico compared to traditional tax haven jurisdiction. FATCA and the various offshore compliance rules don't apply to Puerto Rico.

Think of it this way: a Puerto Rican corporation can open an account at any bank in the US. A corporation formed in Puerto Rico is treated just like one formed in Delaware or Nevada... you can walk into any Wells Fargo or Bank of America and have an account in 10 minutes. Try that with a corporation from Dominica and you'll find it's impossible to get a US account.

The same goes for international banks licensed in Puerto Rico. They're generally treated as state chartered banks for correspondent accounts.

Another benefit of Puerto Rico is the availability of quality English speaking workers. The population of Dominica is 72,000 and Puerto Rico's is 3.5 million. Also, any US citizen can move to Puerto Rico and begin working. So, in that sense, the labor pool is unlimited.

Puerto Rico has 63 active international licensed banks plus 12 are process. Puerto Rico has more international banking licenses than the entire Caribbean region excluding Cayman… and Cayman has a 20 year head start on Puerto Rico.

International banks licensed under Act 273 pay a 4% tax on net profits. This tax holiday is guaranteed for 20 years. Banks must maintain an office in Puerto Rico and have at least 5 employees.

The only limitation of Puerto Rico's international banking license is that you can't open accounts for residents of the island. In practice, most also chose not to do business with US residents.

While this might seem counterintuitive, the reason is that, if a bank from Puerto Rico makes loans and open accounts for residents of the United States, the bank must sign up for the FDIC. Deposit Insurance is very costly and eliminates many of the benefits of operating as an international bank. To date, no international bank licensed in Puerto Rico has been approved for FDIC.

For more on Puerto Rico see: Lowest Cost Offshore Bank License is Puerto Rico

 

#3 Cayman Islands

The most respected of the offshore jurisdictions is Cayman Islands. Cayman has 147 banks and has been maintaining this number for the last few years… one or two shut down and one or two new licenses are granted each year.

The international banking license in Cayman is referred to as a Class B Licence - Unrestricted Licence. It permits the holder to carry on offshore banking business with overseas clients (i.e. non-Cayman Islands residents). That is to say, business may be carried on in the Cayman Islands for clients and businesses located abroad.

The fees for a Class B license in Cayman range from $60,000 to $100,000 per year depending on the assets of the bank. The application fee is $70,000. This compares to $5,000 for the application and $5,300 per year in Puerto Rico.

The capital required in Cayman is $400,000 in the statute. Most open with $1 to $5 million or more.

Cayman Islands is the most expensive country from which to operate an international bank. With a population of only 52,000 in Grand Cayman, the demand for qualified local workers is high. Also, the cost of accounting, legal and other services is much higher in Cayman than in competing countries.

Cayman has also instituted a new residency visas and tax holidays intended to bring new tech businesses to the island. For more on this, see: Move Your Internet Business to Cayman Islands Tax Free.

 

#4 Panama

Panama is still the major offshore financial center in Latin America. Panama has fallen from grace for US banks, but remains the zero tax country of choice for many from Europe, Mexico, Central and South America.

Under the statute, the capital required for an international bank in Panama is $3 million and for a general banking license it's $10 million. In practice, I expect the Superintendency of Banks in Panama to require $10 million for an international license and $25 million for a general license.

Also, Panama generally won't issue an international license to a new bank. Only banks that are currently licensed in a major jurisdiction will be approved for an international license in Panama.

The reasoning is that the primary jurisdiction (home country) will oversee the international bank, so the risk to Panama's banking system is minimal.

If a new bank wants to begin operating, they need to enter with a general license and a minimum of $24 million in capital.

There are currently 24 international bank licenses in Panama and 46 banks with general licenses. Most of the international banks in Panama are trading desks and service providers for large banks in other countries.

 

#5 St. Lucia

Based on the number of pages on the internet marketing this license, you'd assume St. Lucia is a top offshore bank licensing jurisdiction. In fact, St. Lucia is one of the more difficult licenses to negotiate. The government is very cautious when it comes to international banking licenses.

Caution is not necessarily a band thing, but it's certainly more difficult and expensive to setup in St. Lucia compared to Dominica.

There are 15 banks licensed in St. Lucia. Of these, 10 are Class A international banks and 5 are Class B international banks. The capital required for a Class A is $1 million and $250,000 for a Class B international bank license.

St. Lucia's Class B license is sometimes referred to as a captive bank in other jurisdictions. The bank may only do business with persons and companies listed in the license. Captives typically serve a controlled group of companies.

Captive banks are rare and don't really rate as internationally licensed banks. For example, Puerto Rico has a captive law but only 1 license has been issued. The same for Belize. So, I would say there are only 10 true international banks in St. Lucia.

Like Puerto Rico, St. Lucia requires that the management and operation of an international bank be done on the island. Your bank must have an office, employees, etc. and all compliance and account openings should be done in St. Lucia.

Banks from Dominica and St. Lucia can elect to become a part of the Eastern Caribbean group of banks and to be regulated by the Eastern Caribbean Central Bank. This will increase your compliance requirements but will also raise the profile of your international bank.

 

#6 St. Vincent

St. Vincent is known for hedge funds and mutual funds and its international banking status has taken a few hits over the years. The island currently has 4 international banks licensed and operating and 98 funds.

The largest international bank licensed in St. Vincent, Euro Pacific Bank owned by Peter Schiff, is the the process of moving to Puerto Rico. Euro Pacific International Bank received it's license in Puerto Rico on October 22, 2016.

With an application fee of $1,000 and a license fee of $10,000, I expect St. Vincent to make a comeback in 2017 and 2018. As compliance systems improve, and correspondent banks come back on-line, look for St. Vincent to add 4 or 5 new licenses each year.

St. Vincent offers two types of licenses: A Class 1 International Banking License which allows you to conduct international banking business generally. Class 1 must have $1 million in paid-in capital and hold a deposit or invest $500,000 in a bond as prescribed by the Monetary Authority.

A Class II Offshore Banking License is a captive bank license and required $500,000 in paid-in capital and a bond of $50,000.00.

So, the capital required in St. Vincent is $1 million plus a cash bond of $500,000. You should expect a correspondent bank to require significantly more capital. In addition, the International Financial Services Authority in St. Vincent can increase the amount.

In my experience, St. Vincent will usually issue a preliminary license with $1 million in capital and issue an operating bank license once you have your correspondent bank in place. This way they don't need to debate corporate capital with the applicant, that's done by the correspondent bank.

This system also allows startups to to go out and raise money after receiving their preliminary license / permit to organize. A sophisticated investor will want to know that the bank will actually receive their license before buying shares.

 

Conclusion

I hope you've found this article on the top international bank licenses in 2017 to be helpful. For more information, check out my other articles on offshore bank licensing and operation.

I've been working in offshore banking for over a decade. My recent articles on the topic are:

 

If you're considering forming an international bank, or require assistance with a correspondent account or compliance audit, please contact me at info@premieroffshore.com or call us at (619) 550-2743. We will be happy to help you with your international banking needs.



About the Author


PremierOffshore.com

Premier Offshore Tax & Corporate, Inc. is a leader in international consulting, planning and incorporation services for offshore investors, entrepreneurs, asset protection, and U.S. retirement accounts. We are the only international incorporator that offers U.S. tax compliance. Premier has served thousands of business people, attorneys, accountants, physicians and expats. premieroffshore.com

 

 

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