Offshore FinTech Bank License

A new breed of offshore bank license is coming. The banking license in demand in 2017 is the FinTech banking license. Here’s how to secure an offshore FinTech bank license in the Caribbean and Puerto Rico.

First, keep in mind that the United States sets the tone for US banking licences, offshore licenses throughout the Caribbean, and for the US territory of Puerto Rico. If the US blesses the FinTech industry, that  goes a long way to opening the doors for offshore FinTech banking licenses.

On March 15, 2017, the FinTech industry received approval from US regulators to apply for national banking licenses. The Office of the Comptroller of the Currency, the regulator of Federally chartered US banks, is in the process of creating a specialty license for FinTech firms.

This will allow FinTech firms in the United States to apply for a national license rather than applying for separate licenses in each and every state where they do business, as they do now.

To support these new banking licenses, and as reported by the NY Times and The Australian, President Donald Trump’s pick to become permanent head of the CFTC, J. Christopher Gian­carlo, said recently that he had instructed his staff to examine the role the agency could play in promoting fintech in the multi-trillion-dollar derivatives markets it oversees.

“We must open wider our CFTC agency doors and regulatory minds to benefit from FinTech innovation,” Mr Giancarlo said, speaking at a Futures Industry Association conference in Florida. “The CFTC must be a leader in adopting the ‘do no harm’ approach to financial technology similar to the US approach to the early internet.”

Mr Giancarlo has tapped a top CFTC staffer, Jeffrey Bandman, to head the agency’s FinTech ­efforts. The review, due to be completed soon, comes as other federal financial regulators are reviewing their rules to see how they should be applied to FinTech firms and those that team up with banks. The Consumer Financial Protection Bureau late last year announced its “Project Catalyst”, which aims to encourage the development of innovative consumer financial products that meet regulatory requirements.

Again, this article is about offshore fintech bank licenses in the Caribbean and Puerto Rico. The reason I’m going on about US federal banking policy is because it sets the tone for the region. The fact that the US government is pursuing FinTech banking will help those seeking offshore licenses to sell their business model. Even more important, this US policy shift will help offshore FinTech banks to secure correspondent accounts in the United States.

The top “pure” offshore jurisdiction for a FinTech bank is Dominica. You can get this offshore banking license with $1 million in capital. An office and a few employees are required on the island, but there are no hard and fast rules about where the work of the bank is performed.

Dominica is my top pick in 2017 for an offshore bank license because the current government is very business friendly. They’re focused on bringing jobs and business to the islands and will look for reasons to approve you, rather than reasons to deny the application, as you will find in other jurisdictions.

Regarding capital, you’ll get your offshore banking license with a deposit of $1 million. However, you will need substantially more than this to get up and running with a correspondent bank account. I suggest a bank from Dominica will need $5 million or more to secure a correspondent banking partner.

For more information on negotiating an offshore banking license from Dominica, see: How to get an Offshore Bank License in Dominica.

The most popular FinTech banking jurisdiction in 2017 is the US territory of Puerto Rico. Their Act 273 banking license allows you to set up in this US territory, gain access to the US banking system, and operating with a tax rate of only 4%. Setup this same business in New York and you’re corporate tax rate will be closer to 40%.

Act 273 is the best license available for an offshore FinTech bank operating with a minimum of 5 employees and won’t accept US customers. If your bank in Puerto Rico accepts deposits, makes loans, and accepts US customers, you must offer FDIC insurance, which is a cost and level of regulation offshore operators usually wish to avoid.

I suggest that Puerto Rico is the best offshore FinTech bank license for those providing services to customers outside of the US and Puerto Rico but want direct access to US dollar clearing and the US banking system. It’s unique status as a territory with a direct link to the US banking system make it a high value play for international operators.

• NOTE: I refer to Puerto Rico’s Act 273 an “offshore” license because the US tax code doesn’t apply in Puerto Rico. That is, Puerto Rico sourced income is exempt from US taxation, so PR can offer a 4% tax rate on Act 273 profits. Keep in mind that most other Federal laws apply in the Territory.

One reason I suggest Puerto Rico is a top pick for offshore FinTech banking license is the low capital required and the low cost of operation compared to the United States. The minimum capital for a FinTech banking license under Act 273 is $550,000. Of that, $250,000 is paid in capital of the corporation and $300,000 is on deposit with the banking commissioner of Puerto Rico.

For more on Puerto Rico’s FinTech banking license, see: Lowest Cost Offshore Bank License is Puerto Rico.

But, don’t let these low costs lead you to think Puerto Rico is for small underfunded offshore banks. This isn’t Belize… it’s a major banking license with direct access to the US system operating in a tax efficient jurisdiction.

There are a number of large Act 273 banks in Puerto Rico. For example, an internet bank from Latin America has 400 employees in it’s Act 273 bank. Some of these 273 banks have more capital than the entire banking industry of Belize.

I hope you’ve found this article on how to secure an offshore FinTech bank license in the Caribbean and Puerto Rico to be helpful. For more on offshore banking licenses, see: Top 5 Offshore Bank License Jurisdictions for 2017.

If you would like assistance in setting up an offshore bank in Puerto Rico or the Caribbean, please contact me at info@premieroffshore.com or call us at (619) 550-2743. We’ll be happy to work with you to draft the business plan, secure the license, and get up and running.

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