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How to Apply for an Offshore Banking License

How to Apply for an Offshore Banking License

The process of application of an offshore banking license requires the provision of a number of forms and personal information that allow the banking authorities of the offshore jurisdiction you select to have a certainty of the business you are planning.

Offshore jurisdictions are classified according to their prestige and the soundness of their regulations:

First Class: Cayman Island, Anguilla, British Virgin Islands, Gibraltar and the Channel Islands (Jersey, Guernsey and, Isle of Man), Bahamas have signed international treaties and the US-Foreign Account Tax Compliance Act (FATCA). In these jurisdictions, an offshore banking license application is usually given to existing banks but there are exceptions to the right application.

Licensing is divided into two types in each offshore jurisdiction:

  • Type A: for banks taking deposits within the offshore jurisdiction.
  • Type B: for offshore banks.

The application process is divided into two stages:

First stage: to prepare a presentation to be delivered in person to the Head of Banking Authority covering :
  • Conduct a full and thorough due diligence review in the proposed owners and directors,
  • Review in detail the business plan, and
  • Consider the access the bank has to additional capital, should that need arise.
Second stage: to prepare all the documentation required for the application including a personal due diligence and statements of net worth and other documentation required including:
  • Collecting notarized copies of due diligence of the owners and directors, completing personal questionnaires,
  • Statements of net worth on owners with 10 -20% or more interest – they must have a minimum net worth of the greater of US$10 million not including prime residence in the case of Cayman,
  • Detailed business plan, and financial model, which includes stress testing,
  • Details of internal policies and procedures to be adopted.

Once submitted, Banking Authority will require further documentation and provide a written response, with questions and observations about the application.

Timeline

From commencing work it may take 6 weeks to prepare for the initial meeting with Banking Authority but it will be shorter if the applicant is clear on what they are trying to achieve from the beginning and produce all the required documentation.

It will take another 8 weeks to prepare the documentation for the application. After that Banking Authority responds within typically 5 months, depending on the complexity of the banking business and ownership structure, but it’s best to keep things simple.

Costing

  • To create the initial presentation and conduct the opening meeting with Banking Authorities.
  • Developing the detailed application pack of documents like business plans and applications.
  • Selecting local directors, finding office space, software, correspondent banking, etc.

The cost for the entire process turn-key type project is approximately $400K.

Banking Authority charge up to $100K for the application and between $5-10k for the annual license renewal.

Capital

Offshore type B license typically requires capital between $500K and $1 million, depending on the offshore jurisdiction. But this capital is available for the bank operations since inception and you don’t need to keep it as a reserve.

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. This article cannot serve as a substitute for such professional services or advice. Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation. This article is subject to change at any time and for any reason.

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Fulton Abraham Sanchez, CPA

Fulton Abraham Sánchez, CPA I am Certified Public Accountant, specialized in Tax Planning & Offshore Strategies for Real Estate, Hedge/Equity Funds, Fintech, Crypto, Expats, IRS Debt Resolution. You can email me fa@fascpaconsultants.com and follow us on Facebook : FAS CPA & Consultants.

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