Puerto Rico has emerged as a prime destination for international banking and financial services, thanks to its robust regulatory framework, favorable tax regime, and strategic position as a U.S. territory bridging the Americas. International Financial Entities (IFEs), licensed under Act 273 of 2012 (the International Financial Center Regulatory Act), allow operators to provide banking-like services such as deposits, lending, custody, and payments to non-residents of Puerto Rico. These entities benefit from integration with U.S. financial systems, including access to the Federal Reserve, while enjoying exemptions from certain federal regulations.

As of 2025, the appeal of IFEs has grown amid updates to Puerto Rico’s Incentives Code (Act 60), which extends tax benefits through 2055 but introduces changes for new applicants starting in 2026. Acquiring an existing IFE—rather than forming a new one—can expedite market entry, but it demands rigorous due diligence, regulatory compliance, and strategic negotiation. The process, overseen by the Office of the Commissioner of Financial Institutions (OCIF), typically spans 6 to 18 months and involves costs ranging from $100,000 to $500,000 in legal, due diligence, and application fees, depending on complexity. Recent examples, such as Beneficient’s 2024 acquisition of Mercantile Bank International Corp. for $1.5 million, highlight the growing interest from fintech and alternative asset firms.

This comprehensive guide breaks down the acquisition process into phases, drawing on OCIF guidelines and industry practices, while incorporating 2025 regulatory nuances like enhanced capital adequacy requirements and streamlined digital submissions.

Why Consider Acquiring an IFE in Puerto Rico?

Before diving into the steps, understanding the strategic advantages is crucial. Puerto Rico’s IFE regime combines U.S. regulatory credibility with offshore-like flexibility. Key benefits include:

– Tax Advantages Under Act 60: IFEs qualify for a 4% fixed corporate income tax rate on eligible income, 100% exemption on dividends distributed to non-residents, and up to 75% exemptions on property and municipal taxes. For applications approved before December 31, 2025, certain passive income (e.g., capital gains) may enjoy a 0% rate, but post-2025 applicants face a phased 4% on such earnings. These incentives, extended to 2055 per recent legislative updates, aim to attract high-net-worth individuals and firms, particularly in fintech and crypto custody.

– Regulatory Environment: OCIF enforces Basel-inspired standards, ensuring stability while allowing IFEs to serve global clients without FDIC insurance mandates. Unlike mainland U.S. banks, IFEs are exempt from certain Community Reinvestment Act requirements, focusing instead on international operations.

– Market Opportunities: With Puerto Rico’s economy rebounding—GDP growth projected at 2.5% in 2025—IFEs facilitate cross-border services for Latin America and the U.S. mainland. The island’s bilingual workforce and proximity to major hubs like Miami enhance operational efficiency.

However, risks abound: High compliance costs, geopolitical sensitivities (e.g., U.S. sanctions scrutiny), and potential IRS audits on Act 60 beneficiaries, as seen in 2025 enforcement actions emphasizing the 183-day residency rule. Buyers should budget for ongoing annual license fees of $5,000 to $10,000 and maintain at least $5 million in authorized capital.

Phase 1: Securing a Binding Letter of Intent (LOI)

The acquisition begins with identifying a target IFE—often listed on platforms like DealStream or through specialized brokers—and negotiating terms with the seller. In 2025, with increased M&A activity in Puerto Rico’s financial sector (e.g., listings for litigation finance-focused IFEs priced at $2-5 million), sellers prioritize buyers who can demonstrate regulatory viability over sheer bid size.

To strengthen your position:

– Buyer Profiling: Submit a detailed profile mirroring OCIF’s new entity application. This covers your proposed operations (e.g., digital asset custody or trade finance), funding sources (verified via bank statements or investor commitments), and key personnel backgrounds. Include citizenship and residency details, as non-U.S. nationals may trigger additional FinCEN reviews under the Bank Secrecy Act (BSA).

– Establishing Credibility: Highlight relevant experience, such as prior OCIF approvals or clean records from agencies like the SEC or FINRA. In competitive bids, sellers may favor buyers with pre-vetted teams to avoid approval delays.

– LOI Negotiation: The seller usually drafts the LOI, outlining the purchase price (typically 1-2x book value for established IFEs), due diligence timelines (30-90 days), and contingencies like regulatory approval. Include earn-out clauses for performance-based adjustments. Signing creates a binding commitment to negotiate exclusively, with break fees if the deal falls through due to buyer fault.

This phase lasts 1-3 months. Engage Puerto Rico-licensed attorneys early to align with OCIF’s 2025 digital LOI submission portals, reducing paperwork delays.

Phase 2: Submitting the Change of Control Application

With the LOI in place, shift to OCIF’s Change of Control process, which scrutinizes the buyer’s suitability to prevent risks like money laundering or insolvency. This step, updated in May 2025 via new draft regulations, emphasizes enhanced due diligence for international buyers.

Essential elements:

– Target Evaluation: Perform a comprehensive audit of the IFE’s financials, including asset verification, liability assessments, and compliance with AML/KYC protocols. Use firms like KPMG or Deloitte for this, costing $50,000-$150,000. Identify red flags, such as unresolved audits or client concentration risks.

– Background Investigations: Commission third-party reports from OCIF-approved providers (e.g., Kroll or JS Held). These cover criminal, financial, and reputational checks across jurisdictions, with fees of $2,000-$10,000 per person. For global teams, expect higher costs due to multi-country searches.

– Individual Submissions: All controlling persons (10%+ ownership or influence) complete the OCIF Personal History Form (revised July 2024). More on this below.

– Financial Proofs: Supply three years of audited financials in U.S. GAAP/USD, prepared by a certified CPA. For foreign entities, translations and equivalency certifications add $10,000-$20,000 in costs (but this varies wildly from case to case and your relationship with your CPA)..

– Application Filing: Submit via OCIF’s online portal, including a $5,000 non-refundable fee (plus investigation deposits if needed). OCIF reviews within 30-60 days, followed by Q&A rounds. Address concerns promptly, such as revising business plans to align with Act 273’s non-resident focus.

This phase, the most demanding, can take 3-9 months. Budget $100,000+ for professionals, and anticipate OCIF’s 2025 emphasis on cybersecurity and ESG factors.

Phase 3: Obtaining Approval and Completing the Transfer

OCIF approval signals the home stretch, but closing requires precise execution to avoid post-deal disputes.

– Deal Closure: Finalize the purchase agreement, transfer shares/assets, and settle payments. Update OCIF records and notify clients/vendors.

– Transition Management: Onboard new leadership, migrate systems, and ensure BSA/AML continuity. For digital-focused IFEs, integrate tech stacks like blockchain custody tools.

– Ongoing Obligations: Comply with approval conditions, such as annual reporting or capital maintenance. Notify the Federal Reserve if accessing their services.

Timelines here are 3 to 6 months, with total acquisition costs potentially reaching $300,000-$1 million, excluding the purchase price. Recent cases, like the 2024 failed Beneficient-Mercantile deal, underscore the value of pre-approval simulations.

In-Depth Look at the Personal History Form

The OCIF “Statement of Personal History” (Rev. 07/2024) is a cornerstone document for vetting integrity. This 10-page sworn form applies to directors, officers, managers, and owners with any capital interest in the IFE.

– Guidelines: Complete fully, using “N/A” where inapplicable; attach explanations. Non-U.S. notarizations need Apostilles under the Hague Convention.

-*Personal Details: Full identification, including SSN/ITIN, birth info, passports, addresses, and IFE role specifics (e.g., ownership percentage, time commitment).

– Educational Background: Degrees, institutions, and certifications (e.g., CFA, AML specialist). Provide evidence for active licenses.

– Professional History: Employment timeline, emphasizing finance-related roles.

– References: Three independent contacts with long-term knowledge.

– Disclosures: Yes/no queries on bankruptcies, crimes (e.g., fraud), regulatory sanctions, litigations, and terminations. Positive responses demand detailed narratives.

– Supporting Materials: Photos, audited financials (three years for controllers), criminal/reputational reports, credit reports, resumes, certifications (e.g., Puerto Rico Treasury debt clearance), and passport/visa copies.

– Affidavit: Notarized confirmation of accuracy, with ongoing update duties.

Failure to disclose can result in denial or penalties. In 2025, OCIF has digitized form submissions for faster processing.

Potential Challenges and Best Practices

Common hurdles include lengthy background checks for international parties and evolving regulations (e.g., 2025’s proposed IBE/IFE reforms strengthening oversight). Mitigate by:

– Partnering with experienced firms like Aviara Advisors (the only turnkey option) and law firmst such as Pirillo Law and DLA Piper.

– Conducting mock OCIF reviews.

– Ensuring Act 60 compliance for tax optimization.

In conclusion, acquiring an IFE in Puerto Rico positions investors for global financial success, but demands diligence and expertise. With 2025’s extended incentives and rising acquisitions, now is an opportune time—consult specialists, such as us at Aviara Advisors, to tailor your approach, write your business plan and financial model, and organize your 3rd party background checks and due diligence materials.