Offshore Banking License

Offshore Banking License

• The process of applying for a banking license or an offshore banking license may be complicated if you are unaware of the exact steps and requirements. By leveraging Tetra Consultants’ years of experience in the industry, you will be able to dedicate your time and resources to other more important business channels.

• With our lean-and-mean mentality, you can rely on our team of experts to provide you with a seamless experience throughout the whole process of obtaining an offshore banking license.

What is an offshore banking license?

• An offshore banking license is mandated by law for any organization aiming to function as a bank. According to most state laws, a company cannot use words like bank, insurance, or national in its name unless it has the appropriate banking license.

• As a result, offshore banking licenses enable organizations to provide services like managing personal and corporate accounts, issuing debit and credit cards, and processing foreign currency transactions. It also implies that the license holder is a well-known financial institution that protects its consumers’ deposits.

What are the types of banking licenses?

There are different types of banking licenses as it depends on the banking regulations of the proposed jurisdiction for incorporation. However, the standard types of banking licenses can be enumerated as –

General banking licenses (Class A)

• Under this type of license, you will be authorized to carry on all types of banking business including accepting deposits from the public at large. This type of license is usually referred to as a full banking license or Class-A license for banking business.

Offshore Banking licenses (Class B)

• Under this category of license, you will be authorized to carry on banking business but with the restriction to not provide the services under the local limits of jurisdiction. As such, it restricts the territorial limit of conducting banking business. This type of license is usually called a restrictive form of license or Class-B license for banking businesses.

NBFCs license (Non-Banking Financial Companies)

• This type of license is granted to financial companies which are not as strictly regulated as compared to other commercial banks of the respective jurisdiction.

Why do you need an offshore banking license?

• An offshore banking license will enable you to receive all types of deposits, especially demand and interbank deposits, transfer funds in international banks, and other financial institutions. In addition, credits can be issued, confirmed, negotiated, or refinanced along with participating in any lawful banking transaction involving any currency, gold, or silver, as well as currency exchange enterprises.

What are the positive implications of obtaining an offshore banking license?

Depending on your long-term business goals, an offshore banking license is an effective tool for the following purposes:

• Smooth access to the financial market

• A strong and loyal customer base entailing a way to retail deposits

• Competitive edge over small banks, EMIs, or startups

• Private ownership results in a higher profit margin

• Tax benefits

• Once the license is approved, a financial institution is protected from unauthorized probes into their business activities

What are the regulatory requirements and documents for obtaining an offshore banking license?

For a typical offshore banking license, international regulators will most likely request the following:

Detailed Business Plan

• The business plan has to entail the good character of your firm and shows that your team has considered the risk and compliance of setting up an offshore banking business. It should include details such as corporate structure, financial services provided, transaction volume, transaction flow, and other important considerations.

Capital Adequacy Requirements

• Another important consideration you should consider before applying for an offshore banking license is the minimum capital requirement of the jurisdiction. Most regulators will require you to provide proof of income and source of wealth to illustrate the source of the paid-up capital.

• For example, if you are looking to set up an offshore bank in Dominica, the Financial Services Unit (FSU) under the regulation of the Offshore Banking Act,1996 requires you to have a required capital of US$1,000,000 on deposit with the government bank.

• On the other hand, before you can successfully complete an offshore bank set up in Puerto Rico, the Office of the Commissioner of Financial Institutions (OCFI) will require US$250,000 of paid-up capital plus US$300,000 on deposit with the government.

License Fee

• For most offshore banking licenses, there will be license fees during application as well as on a renewal basis. For example, if you are looking to renew your Cayman Islands international banking license, the renewal fee is US$85,000 to maintain.

Tax Considerations

• The corporate taxes payable after attaining the offshore banking license largely depends on the jurisdiction where the company is located. For example, an entity with an international banking license in Puerto Rico will be subject to a 5% corporate tax and a US$5,000 annual fee.

• For more clarifications regarding your tax obligations, we will recommend you to consult our team of Chartered Accountants for non-obligatory tax advice.

Required Documents

For a typical offshore banking license, financial regulators will most likely ask for the following additional information and background documents:

• Bank name and its legal structure

• Names and CVs of the bank directors

• Certificates of proof that there is no criminal liability of applicants and directors

• Bank and business references

• Submission of information about economic management of the beneficial owners, and applicants.

• Identification of shareholders of the bank

• Information regarding the type of issued shares and their denomination

• Proof of deposited minimum capital requirement

• Capital structure

• Information of registered office in the respective jurisdiction

• Identification data of registered agent and representative

• Identification data of the shareholders holding more than 5% of the issued capital

• References of auditors and lawyers registered in the host country

• Document entailing the territorial range and type of intended services of the bank

• Legal documents of the company like MOA & AOA

• Any other documents which can support the application form

Process of obtaining an offshore banking license

Offshore banking licenses in different countries will have different steps, requirements, and processes during the course of setting up and application. Tetra Consultants has summarized the more common steps that will be required in a typical engagement for attaining a banking license.

Step 1: Choosing the correct jurisdiction and banking license

• Depending on your intended business activity and the jurisdictions of your customer base, Tetra Consultants will advise on the most suitable jurisdiction and license for your business.

• Our team of experts will provide you with the requirements of the license including paid-up capital requirements, local economic substance requirements, timelines, and processes prior to the start of the engagement.

Step 2: Company registration

• Tetra Consultants will conduct a due diligence check on the directors and shareholders of the company. Once we receive all KYC documents, incorporation forms, and power of attorney, we will proceed to register the company with the local Companies Registry.

• Once the company is successfully registered, we will send over the corporate documents including the Certificate of Incorporation, Memorandum and Articles of Association as well as the other internal documents.

Step 3: Preparation of documents

• Tetra Consultants’ legal team will prepare the required documents for the license application. These documents will include the business plan, AML/CFT policy, and insurance policy depending on the local requirements.

• Once the documents are prepared, Tetra Consultants will send over the drafts for your review. Thereafter upon confirmation, we will send them to you for e-signature and prepare for license application.

Step 4: Meeting local economic substance requirements

• In the event the local regulator requires you to have economic substance, Tetra Consultants will assist you to meet them. Our team will assist with the recruitment of local qualified employees to join the team.

• Tetra Consultants HR team will conduct the shortlisting and initial interview with the candidates. Thereafter, you can shortlist the final list of candidates to determine who is most suitable to join the team. Once the candidate is chosen, Tetra Consultants will assist to prepare an employment contract with the terms and conditions that are agreed upon.

• Our team will also shortlist a list of physical offices and send them to you. We will include important considerations such as monthly rental, location, size, etc so you can better decide which is most suitable for you. Once the office is chosen, Tetra Consultants will prepare the lease agreement to be signed between you and the landlord.

Step 5: License application

• Once the above is completed, Tetra Consultants will submit the application to the local regulator. Depending on the jurisdictions, you may be required to attend an interview with the regulator prior to license approval. In this case, Tetra Consultants will prepare you for the interview and assist with the follow-up actions required by regulatory authorities.

• All going well, your firm will receive the banking license and will be required to start business operations within the stipulated time frame in order to maintain the license.

How long does it take to obtain an offshore banking license?

• This ultimately depends on the jurisdiction that you choose. In most cases, offshore banking licenses will take a shorter amount of time as compared to reputable banking licenses.

• Prior to the start of engagement, Tetra Consultants will send you a project plan with the timelines stipulated for company registration, preparation of documents as well as license application. This is to ensure that all parties are clear on the upcoming project.

Validity of an offshore banking license

• Even though an offshore banking license is not granted with the specified validity period, it does not mean that once it is granted it cannot be revoked by the issuing authority under the terms of the law.

Revocation of an offshore banking license

• Revocation of an offshore banking license is not the end of the corporation itself; however, it means that the corporation is no longer authorized to execute banking business due to the activities not conducted in accordance with the license so granted and also when a bank violates the banking laws and regulations of proposed jurisdiction.

• Therefore, it is to be regarded that, laws of different Jurisdictions have formulated regulatory measures to revoke such licenses if there is a possible failure to conduct the banking business.

• According to the research conducted by International Monetary Fund, a banking license can be revoked in various jurisdictions due to the reasons considered as-
  • When there is contempt of any banking legislation, agreement, and accord
  • When the bank has violated serious nature
  • When the bank’s liabilities are not being fulfilled as they mature
  • When the interest of creditors and investors is being jeopardized
  • And, when it is determined that the activities of the bank are detrimental to the interest of the public at large.

How much does it cost to obtain an offshore banking license?

• The total engagement fee depends on the services you need from Tetra Consultants. We provide you with multiple services ranging from assisting you through the incorporation process to obtaining the offshore banking license. The total fee that will be charged is inclusive of the company registration fee, license fee, and any additional cost that may arise.

• We will discuss with you the total engagement fee in detail before we begin the registration process so that you have a better understanding of what you are paying for. Tetra Consultants strives to be transparent with the engagement fees prior to the start of any engagements. All these terms and conditions will be stated clearly in our appointment letter.

Our services

• Tetra Consultants will assist you with the comprehensive set of services to obtain an offshore banking license which will include the evaluation of different jurisdictions in which the bank may be established, a compilation of necessary background information to submit an application for an offshore bank license, assisting in the formation of a corporation that will apply for an offshore bank license.

• Additionally, Tetra Consultants will be providing advisory services to our international clients in connection with full-fledged assistance in preparation and assistance for the submission of license application, providing professional help once the license has been obtained with respect to any yearly compliances.

• Moreover, Tetra Consultants will be providing recommendations of banking software for the business, placing the bank into full operation once it gets required certifications and licenses, obtaining background information for the bank, and ensuring its smooth functioning, along with ensuring that the bank’s registered office is secure.

• Tetra Consultants will assist you with communications with the local Central Bank, regulatory authorities, and government officials throughout the whole course of the engagement.

• In addition, Tetra Consultants can also assist with attaining other offshore financial licenses depending on your long-term business goals.

Find out more!

Contact us to find out more about how to obtain an offshore banking license. Our team of experts will revert within the next 24 hours.

FAQ

How do you get a banking license?

What do you mean by licensing of banks?

What are the basic criteria for a new bank licensing?

What is an RBI license?

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Are there any restrictions on choosing a bank name for a banking license?

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