Lowest Cost Offshore Bank License is Puerto Rico

Want to setup an offshore bank? Looking for an international banking license? Obtaining an offshore bank license and negotiating offshore correspondent accounts have become extremely difficult in every jurisdiction except one. The lowest cost offshore bank license is Puerto Rico. Yes, the US territory of Puerto Rico is the best island in the Caribbean to negotiate an offshore bank license.

Puerto Rico is the lowest cost offshore bank license available anywhere in the world. And, it comes with the ability to get US correspondent banking relationships more efficiently than other offshore bank licensing jurisdictions.

Let me first clarify two terms.

When I write about an offshore bank license, I mean a banking license that allows you to do all types of international banking business. The only limitation is that you can’t accept clients from the issuing jurisdiction. So, an offshore bank licensed in Puerto Rico can accept clients from anywhere in the world (including the United States) except Puerto Rico. Likewise, an offshore bank licensed in Panama can accept clients from anywhere but Panama.

And, when I say Puerto Rico is the lowest cost offshore bank license jurisdiction, I mean the lowest set up, capital, and operating cost by a long shot. I mean that an offshore bank license in Puerto Rico can be had for a fraction of the cost and capital of any other jurisdiction.

To give you an idea of the cost difference, it would require 10 times the capital of Puerto Rico to set up in the country of Belize. The cost of operating in Cayman would be 17 times higher than the cost of operating in Puerto Rico.

• The annual fee for the international banking license in PR is $5,000. This compares to $85,365.85 in Cayman. The cost of labor and all other services are dramatically higher in Cayman than Puerto Rico.

Puerto Rico has been aggressive in courting financial service, hedge fund, and banking companies since 2013. Their Act 20 which any US business to move to Puerto Rico and pay only 4% in tax. They also approved Act 22 which cuts the capital gains rate to zero for any American who moves to Puerto Rico and spends at least 183 days per year on the island (becoming a legal and tax resident of Puerto Rico).

An offshore bank licensed in Puerto Rico under Act 273 receives the same  4% tax rate. This tax holiday is guaranteed for 15 years. Also, full property and municipal license tax exemptions, 6% income tax rate on distributions to PR resident shareholders and a 0% tax rate on distributions to non-PR resident shareholders, are available to offshore banks licensed in Puerto Rico.

• This article focuses on Act 273 and not Act 20  and 22. When doing your research, note the distinction between 273 for banks and 20 / 22. For example, Act 273 guarantees you a 4% rate for 15 years where Act 20 guarantees you the same for 20 years. Act 273 requires 4 employees where the latest version of Act 20 requires 5 employees.

Here’s a summary of the offshore bank license options in Puerto Rico:

Puerto Rico Full International Banking License – Requires capital of at least $300,000 to held by the central bank or in a bond (as stated in the Act: $300,000 financial guarantees acceptable to OCFI). Authorized shares are to be at least $5 million. Of this, only $250,000 must be paid-in.

Puerto Rico Restricted International Banking License – Capital held by the central bank or in a bond of $300,000 (as stated in the Act: $300,000 financial guarantees acceptable to OCFI). The authorized capital stock or the proposed capital, as the case may be, shall not be less than $500,000, out of which at least $50,000 shall be paid in full at the time the license is issued. This can also be referred to as a captive license.

In most cases, a full international banking license is required. Of the many banks licensed in Puerto Rico, only 1 has a restricted license.

A full international license in Puerto Rico allows you to provide financial services to other international financial institutions or to persons outside of Puerto Rico.  “Financial services” are any service which is generally accepted in the banking industry of the United States and Puerto Rico including:

1. Accept deposits and borrow money from non-residents of PR.
2. Accept deposits and borrow money from certain government institutions
3. Place deposits in any PR bank and foreign banks organized in PR.
4. Make loans to non-residents of PR. Issue letters of credit to non-residents or PR.
5. Issue letters of credit for export activities to both PR resident and non-residents.
6. Discount money orders and bills of exchange to non-PR residents.
7. Invest in securities and stocks as well as PR government bonds exempt from tax
8. Carry transactions in any currency and gold or silver and foreign currency trade.
9. Underwrite and trade notes and debt instruments issued by a non-PR residents
10. Engage in trade financing of import  and export of raw materials and finished goods.
11. Act as a fiduciary, executor, administrator, registrar of stocks and bonds, custodian, trustee, agent and any other fiduciary capacity with non-residents of PR after obtaining a special permit from the government.
12. Acquire and lease personal property on behalf of non-PR residents.
13. Buy and sell security outside of PR on behalf of non-PR residents.
14. Act as a clearinghouse of instruments of foreign persons
15. Organize and manage international financial entities not related to residents of PR.
16. Lend or guarantee loans originated in some governmental institutions.
17. Purchase sub-standards non-performing loans from a PR bank.
18. Establish branches outside PR in the continental USA or in other foreign country.
19. Provide the following services:
    • Asset management.
    • Management of alternative investments.
    • Management of private capital.
    • Management of hedge funds
    • Management of pools of capital
    • Administration of trusts
    • Management of escrow  funds for non-residents of PR.

An offshore bank licensed in Puerto Rico gives you access to the US market and a wide range of corresponding banks.  In addition to the usual suspects, corresponding bank options include:

• Scotiabank *
• FirstBank Puerto Rico
• Banco Popular de Puerto Rico
• Banco Popular North America (US Bank at https://www.popularcommunitybank.com/)
• Centennial Bank (a US bank in FL https://www.my100bank.com/)
  
  * Scotia has a partnership deal with Bank of America that can be leveraged.

Puerto Rico is the second largest offshore banking jurisdiction in the Caribbean after Cayman Islands. The Cayman Island has decades more history, 40 of the top 50 banks in the world, and a total of 196 banks licensed as of the end of June 2015.

This compares to about 50 offshore banks operating from Puerto Rico. That’s more than all of the other Caribbean islands combined… not counting Cayman, of course.

So, next time you hear about offshore banking jurisdiction “hotbed” like Belize with 6 banks, all combined holding less capital than one bank in Puerto Rico, you will have some sense of scale.  

Here is a partial list of the active banks in PR.

• Pfizer International Bank – Int. License
• Santander Overseas Bank – Int Lic.
• Bank of Nova Scotia – General
• Chase Manhattan – Int Lic
• Citibank – General, but operate as an international bank
• Popular Bank – General & Int. Lic ( publicly traded, operated in PR for 120 years, 52 yrs in US)
• Puerto Rico International – Int. Lic
• Metro America Int – Int Lic
• Amtrade International Bank of Georgia – General
• Charles Schwab Bank – General
• BNC International – Int Lic
• FirstBank International – Int Lic
• Santander Overseas – Int Lic
• WesternBank – Int Lic
• OBT International – Int Lic
• SB Pharmco (owned by Glaxo) – Int Lic
• Bank of Southeast Europe – Int. Lic.
• First Bankcorp – Int Lic
• Oriental Bank – This is one of the larger local banks
• VS International – Int Lic
• Face Bank – Int Lic
• BST – Int Lic
• BBO Private – Int Lic
• Paramount International – Int Lic
• Bancredito Int – Int Lic
• Italbank – Int Lic
• Activo – Int Lic
• ARCA – Int Lic
• Nodus – Int Lic
• Andcapital – Int Lic
• Elite International – Inc Lic

For more information, please review my articles on offshore bank licensing and operation. I’ve been working in offshore banking for over a decade, so there are a few older posts floating around the web. My recent articles on the topic are:

• Best Offshore Banking Jurisdictions
• Offshore Bank Advertising Rules (a review of Reg. S)
• Offshore Banking Licenses (on lowtax.net)
• Capital Reserve Requirements (on lowtax.net)
• Correspondent Accounts for Offshore Banks (on escapeartist.com)

I hope you have found this review of offshore bank licenses in Puerto Rico helpful. If you would like to setup a licensed bank in Puerto Rico, please contact me for a confidential consultation at info@premieroffshore.com or call (619) 483-1708.