In this 10 page post I‘ll discuss the best offshore bank license jurisdictions for 2023 and beyond. There have been big time changes to the industry in the last few years. I think you’ll be surprised at many of the list of the best offshore bank license jurisdictions for 2023 in this article.
Puerto Rico is still at the top of the best offshore bank license jurisdictions for 2023 list, but capital and regulatory changes are coming. Then there are two new jurisdictions with excellent potential, Bermuda and Gibraltar (the Puerto Rico of the EU). And Dominica, a long time low cost leader in the industry, has killed its international bank license industry with corruption.
First, allow me to define the term “offshore” bank license. An offshore bank is one that does not provide services to persons or businesses in the country where it is located. So, an offshore bank licensed in St. Lucia can provide services to people anywhere in the world except those in St. Lucia.
The purpose of this limitation is to reduce competition with local banks for local business. A jurisdiction like Puerto Rico has 60 international banks and only three local or domestic banks. If the international banks could compete with the domestic banks, the domestic banks would be pushed out of the market.
One note on Puerto Rico: this island is a territory of the United States. International banks licensed in Puerto Rico are allowed to accept clients from the United States. The only limitation is that they can’t open accounts for people or businesses located in Puerto Rico.
When I make a list of the best offshore bank license jurisdictions for 2023, I am looking for jurisdictions where I can build a productive and profitable international bank. A jurisdiction from which I can get a quality correspondent partner and one which clients will be comfortable with (will have confidence in).
The way to find the best jurisdiction for your international bank is to search for one that is compatible with your business model and has a strong regulatory body. If the country does not have a strong banking regulator and a reputation for compliance, you won’t be able to do anything with that banking charter. No quality correspondent will open an account for you and you will never get any traction for your business.
For example, offshore bank licenses from countries like Vanuatu, Comoros, and Gambia are useless. It will be impossible to turn these licenses into a profitable business because of the reputations of these countries and because of the lack of correspondent banking partners.
The key to finding the best offshore bank license jurisdiction is matching your business model to the reputable country. For example, if you want to provide USD accounts to persons living abroad, and you want to join the US banking system so you can market your bank as a “US bank,” then you want to set up in Puerto Rico.
If you want to do business that the US will not approve of, such as opening accounts for persons from Russia or Venezuela, then you need an offshore bank license from a country without close ties to Uncle Sam.
I note that this also means that you can’t hold USD and can’t have a US correspondent banking partner. When you’re tied to a US bank, you’re indirectly tied to US regulators. And, 9 times out of 10, you will find that your US bank correspondent provider will be a tougher regulator than the US government. They’re more motivated by protecting their business than helping you navigate a complex compliance environment.
So, my list below is based on each country’s reputation and the ease of setting up a successful international bank in that jurisdiction. But, not all business models are equal and thus not all jurisdictions are good fits for every use case.
Without any more ado, here are my best offshore bank license jurisdictions for 2023:
Since about 2015, Puerto Rico has dominated the offshore bank license industry. With 3 to 4 times more banks than its competitors, it’s not even close… the vast majority of offshore bank license applicants want to be in Puerto Rico.
The reasons for this dominance are simple enough: offshore investors want to get their cash into a US bank. The only jurisdiction that allows this is the US territory of Puerto Rico. It’s not possible for 99% of international persons and companies to open an account in the United States, so they settle for the next best thing with Puerto Rico. For more on this, see: US Banking License vs. Puerto Rico International Banking License.
Next, international banks in Puerto Rico do not need to pay US taxes. They pay 4% on their net profits to Puerto Rico, and nothing to the US Federal Government. If the owners of the bank are non-US persons, then after tax dividends can be paid out of the bank with no withholding tax. The only tax paid in most structures is 4%.
Plus, an offshore banking license from Puerto Rico solves one of the biggest issues faced by the international bank license industry – the difficulty of securing a correspondent banking partner. It’s much easier for a bank in the territory to secure a quality correspondent partner than for a bank in St. Lucia or Cayman, for example.
And, after operating for a year or two, an offshore bank in Puerto Rico can apply for a Fedwire account at the US Federal Reserve. If approved, the Fed becomes your correspondent bank and your cost for wires and ACH goes down dramatically. A Fedwire account is the key to profitability for a transactional bank. For more on this, see: International Banks in Puerto Rico with Fedwire.
But, it’s not all roses in Puerto Rico. An international bank on the island must follow US laws. So, that means no Russian or Venezuelan clients for example. If your business model doesn’t fit within the US regulatory framework, then you need to look elsewhere for an offshore banking license. For more on this topic, see: Navigating Regulatory and Country Risk: Setting Up a Bank in Puerto Rico.
Plus, those of us in the business are expecting many changes coming to the Puerto Rico offshore banking license industry in 2024. The bottom line is that from 2014 to about 2019, anyone with the cash and a clean record could get a banking license on the island. If you had the minimum of $550,000, and no criminal record, you would be approved, no banking experience required.
This has led to many banks not having the capital to compete for business and not being able to keep up with the Tier 2 capital requirements. As a result, banks just sat around unable to grow and unable to reach profitability.
Nowadays, regulators require more capital than is stated in the law, along with banking experience on your team. Also, they are cautious of financial statements from countries with less than a clean history of audits. It will be much easier for a US, EU or UK person to get a license than someone from China, for example.
The current minimum capital required is $5 million with a plan to reach $10 million in a few years. Regulators will also scrutinize the financial statements of applicants to be sure they have enough liquid assets to support the bank in an economic downturn and to add money as necessary for Tier 2 capital depending on your business model.
These higher capital requirements are forcing a few offshore banks in Puerto Rico to sell. A small operating bank is currently valued at $5 million. This value is primarily based on a 24 month time to market and the probability of receiving a license if you apply for a new charter. Very few new licenses are being issued these days.
Only clean banks are allowed to sell. Those with regulatory issues are being forced to close. For a post on this topic, see: Puerto Rico Cracks Down on International Banks: A Look at the Recent Closures.
And we expect the pressure to continue on smaller banks. It looks like the minimum paid in capital will become $10 million in 2024. This will apply immediately to all new applicants and existing banks will have 5 years to reach this level.
Another way regulators plan to keep smaller applicants away is by increasing the application fee in 2024. It is currently $5,500 and they’re talking about bumping it up to $1 million (yes, quite a bump… more like a shove).
We don’t know how many of these planned changes will pass, but it’s certain that a buyer in 2023 will be in a better position than a new applicant in 2024. For more on this, see: New International Banking Regulations for Puerto Rico in 2024.
Editor’s Note: This post was written in July of 2023. We will update it when we have more information on the changes coming in 2024.
Gibraltar is the Puerto Rico of Europe. While it’s an independent country, both local regulators and the European Union have a say in the banks operated from the island and the capital required from an international bank licensed there… just as the local regulator and the US Federal Reserve Bank have a say in how a bank in Puerto Rico is operated.
This connection to the EU means that regulation is tight and the reputation of the jurisdiction is strong. Banks from Gibraltar can join the EU and UK banking systems. Again, this is similar to Puerto Rico being a US territory and having the ability to join the US banking system.
The capital required for a license in Gibraltar is €5,000,000 plus that required by EU regulations, Per the government website, “a bank’s Minimum initial and ongoing capital requirement is the higher of €5,000,000 or the capital calculations set out in the Financial Services (Capital Requirements Directive IV) Regulations (CRD IV).”
In practice this means that some banks might be approved with €5,000,000 and then be required to increase this to €10,000,000 within a few years, much as Puerto Rico does now. For other business models, you might be required to start at €10,000,000. This would be part of the negotiations with regulators when the application is filed.
The following banks are currently licensed in Gibraltar: Bank J. Safra Sarasin (Gibraltar) Ltd, Gibraltar International Bank Limited, IDT Financial Services Limited, Moneycorp Bank Limited, SG Kleinwort Hambros Bank Limited – Gibraltar Branch, The Royal Bank of Scotland International Limited, Trusted Novus Bank Limited, Turicum Private Bank Limited, and Xapo Bank Limited.
Of these, Xapo Bank is a very interesting newly licensed offshore bank. Technically, they were licensed in 2014, but recently took in a lot of capital to focus on the crypto industry. So, a change in shareholders rather than a pure sale.
I would rate Puerto Rico as the top jurisdiction with over 60 international banks. For a bank that does not want to be close to the United States, or preferred European Union oversight, Gibraltar would be the highest quality jurisdiction available.
The up and coming offshore bank license jurisdiction in the Caribbean region is Bermuda. With the recent licensing of Jewel Bank, and with the world’s largest crypto exchange, Coinbase, setting up on the island, all eyes are on this jurisdiction.
For a client that did not want to be connected to the United States through Puerto Rico, or wanted a second banking license outside of Puerto Rico, my first choice would be Bermuda. Then I would look at BVI and St. Lucia.
If the primary international bank was to operate from Puerto Rico, then I’d look for a lower cost offshore license in St. Lucia to facilitate foreign business. There has been one bank in Puerto Rico that also had a license in St. Lucia, so it is possible to achieve.
My recommendation for an offshore banking license application in Bermuda is $10 million paid in capital plus $1 million startup budget. Therefore, the minimum proof of funds to be filed in Bermuda with a new license application is $11 million.
Note that this startup amount might be low depending on the core system you choose. It’s possible for your IT budget alone to be more than $1 million. I would say most have an IT budget of $500,000. For more on this, see: Banking Core System Review 2023.
One item of note with Bermuda is that the country does not have an offshore banking law or an international banking law. This country is issuing full banking charters and allowing them to do international business. I would assume there is a side agreement to not compete in the local market, but these are full domestic banking licenses operating as international banks.
There may be a reputational benefit to having a full banking charter when it comes to securing a big name correspondent banking partner. Rather than being considered under the rules for an international bank, you will be reviewed as a domestic bank.
This is also a benefit when applying for a branch license in another country. Most do not allow international banks to receive a deposit taking branch license, but do allow for domestic banks. It would be possible for a bank in Bermuda to apply for a branch license in Miami, FL, for example.
Of course, you might prefer a representative office or non-deposit taking license, but this is a topic for another post.
For an article focused on the crypto banking industry, see: The Future of Crypto Banking in 2023 and Beyond. See also Bermuda to Become the Top International Bank License in 2024 for post on banks in Bermuda.
For information on setting up a crypto exchange in Bermuda, see Bermuda is the Best Jurisdiction for a Crypto Exchange or Digital Asset Business.
British Virgin Islands
The third interesting option for an offshore banking license in 2023 is the British Virgin Islands. Like Bermuda, there is only one international bank licensed on the island, but the regulator has an excellent reputation.
VP Bank (BVI) Ltd. was established in 1995 and received its banking license from the British Virgin Islands Financial Services Commission (FSC) in the same year. This allows the bank to offer a full range of private banking services to private individuals, intermediaries, and asset managers.. VP is a very large wealth management group that also has banking licenses in Switzerland (1988) and Singapore (2008).
It’s also interesting to note that two of the largest domestic banks of Puerto Rico have licenses in BVI, Banco Popular and First Bank. They use this as a booking center and do not offer services to residents of BVI. See the BVI regulator’s website here: BVI FSC.
The last time the banking law of BVI was updated was 1990, so we don’t get much useful information from it for an international banking license application filed in 2023. We have to rely on conversations with regulators on the topic.
It’s unclear if BVI will follow Bermuda and require $10 million in paid in capital or will stick with the Puerto Rico amount of $5 million. The final amount is likely to depend on what happens in Puerto Rico in 2024.
Therefore, the best guidance I can give is that a banking license application in BVI will require $5 million to $10 million paid in capital plus at least $1 million in startup capital. I also note that the international banking industry in BVI is more advanced than Bermuda, even though it is older. These regulators and processes have been in place for decades and are very solid.
The lowest capital requirement for an offshore bank license is St. Lucia. This jurisdiction has maintained its reputation and has a quality regulator, even while allowing relatively low capitalized banks. The bottom line is that St. Lucia is the lowest cost and lowest level jurisdiction that I can recommend on this list of the best offshore bank license jurisdictions for 2023.
I also note that it has been several years since St. Lucia issued a new license. The government has not signaled willingness to issue a new international banking license, but it might be possible for a well qualified applicant.
The other path forward is to apply for a new license and receive a good review from regulators. Then we can take that to some of the existing banks on the island and negotiate the purchase of an existing license. This option is guaranteed to succeed if you get a good review from regulators. While a new license is both a political and a compliance matter, selling a bank removes the politics and is left to the regulators.
The following information outlines the capital requirements, along with my advice, for establishing a bank in St. Lucia. Drawing from my personal experience, I propose an initial investment of $2.5 million in paid-in capital and a $500,000 startup budget. This recommendation, however, exceeds the minimum legal prerequisites, as stated below. For more detailed information, please refer to the government’s official website.
To start a banking institution in St. Lucia, it is mandatory to acquire a license from the Financial Services Regulatory Authority (FSRA), the financial regulatory body of St. Lucia. The FSRA ensures all banks operating within the country’s borders maintain financial stability and solvency.
The following is a list of criteria required to secure a banking license in St. Lucia:
Apart from license prerequisites, banks in St. Lucia must also meet certain ongoing capital requirements. These conditions are meant to ensure banks have enough resources to weather financial crises and continue operations during challenging periods.
The capital requirements for St. Lucian banks include:
The FSRA reserves the right to impose further capital requirements on banks that present a higher risk of financial instability. I also note that even $2.5m is a very low amount of startup capital for a new bank. You might use this amount to get the license and then raise additional capital before approaching quality correspondent banking partners.
Belize is a historical offshore bank license center that might be making a comeback. While regulators have not issued a license in many years, word on the street is that they will consider an application from a well capitalized and reputable operator.
There are currently three offshore banks in Belize, led by Caye International Bank. Caye has been one of the best rated and most respected of the international banks for many years. This bank has been operating from Belize since 1996.
As a small yet stable jurisdiction with a strong regulator, Belize is a quality option for a new international bank. Plus, it’s relatively close to both Mexico and the United States (on the southeastern tip of Mexico) and the native language is English.
Most agree that a quality applicant with $5m in capital might be approved and one with $10m paid in capital has a very high probability of approval. It would come down to convincing regulators to expand the industry and would be based on the reputation of the founder of the bank.
If you want to go after a license in Belize, I would be able to assist with all aspects: business planning, application, negotiations, and politicking. I’ve been working in Belize for decades and would love the opportunity to grow the industry.
Switzerland is well known as a leader in the big bank international banking industry. If you have $100m plus in capital, and a pedigree in banking, then you might apply for a full banking charter from this country.
For those of us that don’t have an extra $100m lying around, Switzerland also offers a “mini bank license” or the fintech financial license. This offshore banking license is a hybrid between an MBS or EMI license and a bank.
The primary limitation of this license is that you can not pay interest on deposits. Only a full bank charter can pay interest on deposits. The other limit is that the maximum you can hold in client funds is CHF 100 million.
Required capital begins at CHF 300,000 and then 3% of your total deposits. So, total capital required is a fraction of that required for a full banking charter.
The mini bank license or fintech financial license might be a good option to get started and then move into a banking license in Puerto Rico or Bermuda. Also, you might add this license to a global group to increase the services, currencies, or payment rails available to your clients.
One other possibility beyond the scope of this article is starting out in a Swiss Trust Company. You might be able to use an aged Swiss Trust to build a financial services business in Switzerland. For more on this, see: Aged Swiss Trust for Global Financial Services Company. Again, this is not a banking license, but a good start in a top tier jurisdiction.
The bottom line is that Dominica does not belong on a list of the best offshore bank license jurisdictions for 2023. The reason it’s here is that this country has appeared on lists for decades. Most recently, Dominica was on my best international bank list of 2020. So, I need to deal with it here and explain why it’s been removed.
Two things have happened in Dominica. First, the government decided it wanted to eliminate the international bank license industry. At the same time, as of June 28, 2021, Dominica eliminated offshore corporations and International Business Companies. Second, government officials remembered that they still wanted to earn the money that bank licenses brought in.
So, government officials hatched a plan to achieve both goals. Allow applicants to apply for a banking license and ask for a personal payment to facilitate that license. Then, as the license application moves along, each person along the line asks for a bribe… and so on and so forth.
In this way, they created a never ending chain of people with their hands out. Eventually, the applicant will give up and go away… and the government reps have achieved both goals. They got paid and didn’t have to issue a license. Also, they did not have to deny the application because the applicant simply gave up.
This is what they call a win-win-win in Dominica. And it’s why Dominica no longer belongs on any offshore bank license list. You’ill never get to the end of the money line and this island has become a scam jurisdiction.
From this information, you, the bank license applicant, can learn two things: 1) avoid Dominica in 2023 as it’s a waste of time, and 2) anyone promoting Dominica either doesn’t know what they’re doing, or just wants to make a quick buck off of you.
When you search the web for offshore bank licenses or international bank licenses, if the website is promoting Dominica, they are probably as useless as a license from that country. This is especially true if they’re paying for a google advertisement promoting Dominica under those keywords. I just checked and there are a few sites actively marketing bank licenses from Dominica using PPC.
Note: I have posts talking about how great Dominica is (was) that were written in 2019 and 2020. Be sure to check the date on the article or ask the provider if they still offer Dominica before sending them to the trash bin.
The same goes for anyone promoting bank licenses from Vanuatu, Comoros, or Gambia. These licenses are useless because you will never be able to get a quality correspondent partner. You will not be able to turn one of these bank licenses into an operating business and promoters know this. Avoid any “expert” and any website trying to sell these licenses.
I hope you’ve found this post on the best offshore bank license jurisdictions for 2023 to be helpful. For more information on setting up an international bank in one of these jurisdictions, please contact me at firstname.lastname@example.org. I’ll be happy to assist you throughout the process from business plan to the application, negotiations with regulator, licensing, and setting up the business.
For more information on the business plan, see: Business Plan for an Offshore Bank License
For more information on the core system, see this 32 page post: Banking Core System Review 2023