Best Offshore Bank License Jurisdictions

Best Offshore Bank License Jurisdictions

02/11/2015 - 10:05 AM
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Offshore Banking License

The offshore banking license industry was knocked down by FATCA, but it’s back on its feet and carrying on. Below are my best offshore banking license jurisdictions for 2015. You might also like to read my 5 Best Offshore Bank Licenses for 2017.

Please let me start with a little history.

International Banking is Still Alive

From 2012 through 2014, the offshore banking license industry was on life support. To be honest, I pronounced it dead in mid 2012 in an article titled Offshore Bank Licenses Go the Way of the Dodo. Fortunately I was wrong and international banking making a comeback.

Beginning in 2012, the US IRS declared war on offshore banks, shutting the small ones down and extracting millions in tribute from those large enough to pay.

Fines are still being levied on those with unreported US accounts. For example, the US and UK authorities announced plans to hit HSBC Switzerland in February of 2015.

Piling on, the US Congress passed the Foreign Account and Tax Compliance Act (FATCA) that requires all international banks to report US account holders each year. Basically, this law turned offshore bankers in to unpaid IRS agents.

Well, FATCA was delayed for years and no one had any idea how it would be implemented. This uncertainty made it nearly impossible to acquire a new offshore banking license and, if one was granted, you had little chance of getting a correspondent account.

Bottom line, no one was willing to take a chance on a new bank. They were busy cleaning up (or hiding) past sins and did not want to deal with a startup.

Now, in 2015, the war is over, the smoke has cleared, and the bodies of those unable to pay the ransom have been removed from the battlefield. The IRS came out victorious and just about every bank in the world has signed on to FATCA.

With uncertainty behind us, new formations are beginning to pick up. Of course, these new banks will find it a very different world… one where they must be responsible global citizens.

Note: This article is from 2015. You might also like to read my 5 Best Offshore Bank Licenses for 2017.

Best Offshore Banking License Jurisdictions

In my experience, the best offshore banking license jurisdictions are:

  • Andorra
  • Anguilla
  • Bahamas
  • Barbados
  • Bermuda
  • Belize
  • Cayman
  • Dominica
  • Lebanon
  • Luxembourg
  • Montserrat
  • Seychelles
  • St. Kitts & Nevis
  • St. Vincent & the Grenadines
  • Vanuatu (Republic of)

Each of these countries specializes in a different form of international banking license… is focused on a specific target market. Here are a few tips on selecting the best offshore banking jurisdiction.

When I analyze a jurisdiction, and compare it with a client’s objectives, I often start with the reserve capital. Some statutes require $500,000 to $3 million for a captive bank license and $1 million to $7 million in capital is standard for a small international bank. Jurisdictions like Panama and Luxembourg may require $30 million for a general license .

To further narrow down your choices, here are a few things to consider:

  • Andorra and Luxembourg issue licenses to large private banks.
  • The Cayman Islands prefers investment advisory and captive banks.
  • Vanuatu is a common jurisdiction for captives with on European parent companies.
  • St. Kitts and Dominica licenses link the bank in to the Eastern Caribbean region, which means they operate under a regional central bank.
  • Belize might be the preferred jurisdiction for a deposit taking bank, but it’s high capital ratios need to be accounted for.
  • Many international banks are domiciled in Panama because of the lower labor costs, top tier connectivity, availability of executive visas, and the world class reputation.

Types of Offshore Banking Licenses

Captive Bank: A bank with a captive license may only do business with those named in the license. So, each client / owner of the bank must be approved by the central bank. Captive offshore banks are typically used by large family offices, groups of wealthy individuals (say 10 to 15 partners), or multinational corporations, to manage their lending and worldwide tax obligations. A captive bank may not market its services to the general public.

International Bank: The license we most commonly associated with the offshore industry is the international banking license. This allows you to conduct all types of banking business with cutomers outside of your country of issuance. For example, if you operate an international bank in Belize, you may do business with anyone except Belize citizens and residents.

General Bank: A general license allows you to conduct business with both local and international clients. Of course, central banks want to protect their citizens first, thus capital requirements and regulation of generally licensed banks are tighter than international banks.

Purchase of an Existing Offshore Banking License

From time to time, captive and international banking licenses become available. Usually licenses are sold by operators who went through the process and lost their funding somewhere along the way.

I would like to point out that each owner of a bank must be approved by the regulatory authority. That is to say, you don’t just take over a license and begin operating. The new ownership group will need to go through an extensive background check, a new business plan approved, and personal financial statements must be provided. Expect this process to take several months.

To account for this delay and potential risk, you need to run the purchase of an existing offshore banking license through an escrow agent. Condition a portion of the purchase price (usually 25% to 50%) on the approval of the central bank

Services Offered

Note that the usual formation and licensing costs for an international bank are $175,000 to $650,000 depending on the jurisdiction, the quality of your business plan, whether you already have a license from another jurisdiction, and the bonafides of the partners..

To apply, a detailed business plan, KYC and anti money laundering docs, and a well qualified board of directors will be required… all of which we can assist with.

I hope you have found this post on international banking licenses helpful. If you would like assistance in identifying a jurisdiction, searching for a new license, negotiating the takeover of an operating bank, or forming a new offshore bank, please phone me at (619) 550-2743 or send an email to Christian Reeves at info@premieroffshore.com.

My other recent articles on the topic are:

 

 

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