How to Open an Offshore Like Bank in the EU

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Crypto and Fintech are currently the talk of the day in banking, but it is unusual to find them together into regular banking. This was the challenge faced from one of our clients when they decided to plan for a banking strategy.

The solution to the challenge was found in Lithuania new specialized banking license. Lithuania have a favorable regulatory and tax environment, good infrastructure, affordable office space and labor force. Fintech companies find it as an ideal jurisdiction to challenge traditional banking institutions and getting access to the EU banking market with the ability to open offices in many cities with the EU if desired.

 

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1. EU citizenship

The first hurdle for non-Europeans is how to invest in the EU because it is required the stockholders or applicants be Europeans. For this requirement it is key before the presentation of the application to have an associate in another EU country. The foreign applicants will also need to apply for a Foreign ID number to register with the EU their investments intentions. There is also the option of start-up visas from the Lithuanian government for innovative businessmen/women.

2.Bank Application Lithuania

The application takes over 6 months up to 1 year and requires at least two visits to Lithuania to meet the banking authorities and includes a business plan according to the services permitted under the specialized banking license applied for:

  • taking deposits and other repayable funds;
  • lending (including credit agreements relating to immovable property);
  • financial leasing;
  • payment services;
  • issuing and administering travelers’ checks, bankers’ drafts and other means of payment insofar as such activity is not covered by payment services (item (4) above);
  • issuing guarantees and commitments;
  • financial intermediation (agency);
  • administration of funds;
  • creditworthiness assessment services;
  • safe-deposit box rental;
  • currency exchange (in cash);
  • e-money issuance.

 The specialized license does not allow to provide:

  • Investment or pension fund management
  • Securities brokerage
  • Investment advice and other similar services

But you can apply for separate licenses for those services. After 90 days of the approval the specialized bank is able to open its office in Lithuania. It can also open any number offices in the rest of the EU but only providing the authorized services mentioned above.

3.Capital

Capital required is 2M Euros. The specialized banking license provide access to the Single European Payment Area (SEPA) as well as access to the banking window with the ECB. The deposits from clients up to 100K Euros are insured under the EU Deposit Insurance Scheme.

4.Operations

Similar to offshore banks, the specialized bank is allowed to do remote client verification and does not require the physical presence of their clients. It also enjoys directs access to EU financial markets. In addition to that the government of Lithuania has informed that will support the applicants thru the first year if specialized banks commit minor violations.

5.Crypto Accounts

One of the services proposed to the Lithuanian banking authorities was a crypto bank account back up with gold and it was accepted. This is a regular account that accepts deposits in crypto currency and keeps a dual balance conversion in dollars and crypto looking for reduce volatility.

Keep in mind that the specialized banking license in Lithuania requires the compliance with all regulations, which requires the assessment of the shareholders and management, provide with an appropriate internal organization, risk management, internal controls, ensure solvency and prudency in operations as well as comply with all the regulatory adequacy requirements such as Basel III and MiFi, internal audit function and annual audit report.

6.Staff

Staff needs are primarily driven by the complexity of the business model and the scale of the bank. The minimum number of staff when applying for a licence can be as few as 9 – 10 individuals. However, this does not eliminate the obligation to create and further maintain appropriate frameworks ‒ corporate governance, internal organization (risk management, compliance and audit) ‒ to ensure sound and prudent activities, comply with capital adequacy and regulatory reporting requirements, and implement internal and external audits. Click here to email us and start your project.

 

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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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