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Setting up an offshore bank in St. Lucia in 2022

Posted by: Christian Reeves
Category: St. Lucia

In this post, I’ll look at setting up an offshore bank in St. Lucia in 2022. The rules are the same as in previous years, but there are many more options for USD corresponding bank partners, making St. Lucia more attractive this year. So, here’s what you need to know about setting up an offshore bank in St. Lucia in 2022.

Note that this article is about setting up an offshore bank in St. Lucia. An offshore bank license allows you to do business with people and companies from any country except St. Lucia. That is to say, international bank licenses are prohibited from accepting clients who live in St. Lucia and may not compete with local banks for local business. The requirements to form a local bank are very different from those for setting up an offshore bank in St. Lucia.

There are basically three options for setting up an offshore bank in 2022. They are the US territory of Puerto Rico, St. Lucia, and Dominica. Previous contenders, such as Belize and St. Kitts, haven’t issued a new license in many years. And, top tier options, such as the Cayman Islands have fallen out of favor as the cost of operations has increased dramatically. For more on Cayman, see The Decline of the Cayman Islands Offshore Banking Empire.

The most popular offshore banking jurisdiction in 2022 is Puerto Rico. This island makes up about 90% of the activity in the industry and is dominating the game. It’s also become very competitive and only the best applicants will be approved for a new license. 

For those who want to avoid dealing with US regulators, or want to start a different type of bank, the best option is St. Lucia. Here’s what you will need to set up an offshore bank in St. Lucia in 2022.

Capital: The minimum capital required is $2.2 million. Of this, $300,000 must be held in a CD at a bank in St. Lucia. If your bank goes under, this CD will be used to pay creditors. You can hold the remaining $1.9 million at your correspondent bank or in another account in the name of your bank.

Note that the above refers to tier 1 bank capital, which is your paid-in corporate capital. When you start your bank, you’ll need to have a minimum of $2.2 million ready to be deposited into your operating account. 

The above does not include your tier 2 capital, which is generally 8.5% of deposits. There will also be cash reserves requiring you to hold about 20% of your client’s funds in cash. Regulators in St. Lucia follow US Federal Reserve and OECD capital requirements. 

Banks in St. Lucia may also choose to be regulated by the Eastern Caribbean Central Bank. In this case, your tier 2 capital will be governed by the ECCB’s rules. You can see more on the ECCB here, but note that most offshore banks do not choose to receive an ECCB license in addition to the standard offshore license issued by their country.

The next component of the application for an offshore banking license in St. Lucia is the business plan. This is a very detailed document that includes your financial model, describes your target market, explains why your group is qualified to operate a compliant international bank and includes your operating policy documents (such as KYC, AML, etc.). 

You’ll find that a business plan written to impress regulators is very different from one written for investors. These documents go into great detail on why you are qualified to operate the bank and how you will handle compliance and account openings. Your business focus must be specific to industry, demographics, and region of operation. For more on the business plan, see Business Plan for an Offshore Bank License.

Your marketing plan will be specifically approved by regulators, as will your website and all collateral materials. If you deviate from your plan, you’ll need to discuss this with regulators before making the change. For example, if you tell them that your target market is Mexico, and then you begin marketing into China, you will need to get approval.

Note: I’m often asked why the business model needs to be very specific. It’s because regulators want to know that you have the expertise to perform due diligence on clients in your target country. No small offshore bank has the resources to investigate persons from every country, so your startup plan must be limited.

The last component of your new bank license application in St. Lucia will be financial documents and a third-party background report. These items must be provided by each officer, director, shareholder, investor, and promoter of your bank project. 

The financial documents include three years of audited financial statements. These are meant to prove your source of wealth and where the money is coming from to set up this bank. These statements must show you have the capacity to support the bank in an economic downturn and have the required $2.2 million in cash ready to be deposited once your license is granted. 

If an offshore corporation is to be a shareholder, it should be a newly formed entity. If the shareholder is an existing business, then the company and the individuals behind the company must provide three years of audited financial statements. 

The reason for three years, rather than just one, is that regulators want to know that the money was earned over time. They don’t want you to take a loan or otherwise receive funds from someone else and claim it as your own… They’re looking for frontmen that are protecting the identity of the real investor.

The money to open the bank must belong to the investors and shareholders. You may not borrow money to start a bank. If that were to happen, the lender would need to complete the due diligence process. A loan also creates a risk to the bank that regulators do not generally accept.

As for the third-party background checks, these must be done by a company approved by regulators. The most common are Kroll and Berkeley Research. But, the provider will depend on the country of citizenship of the applicant.

Because of the costs of these reports, and the work required to prepare three years of audited financial statements, it’s advisable to minimize the number of investors and shareholders during the startup phase. These reports typically range from $6,000 to $12,000 per person and depend on the country of citizenship and complexity of the person’s history.

In most cases, you’ll start with two or three principals who have the minimum amount of capital.  After the license is issued, you can sell shares to additional investors. So long as each new shareholder receives less than 10%, they are not required to be approved by regulators.

Once you have your license, it’s time to build out your business. This includes an office in St. Lucia, your core systems, local employees, and opening correspondent bank accounts. Securing those correspondent accounts is the most difficult aspect of operating an offshore bank. For more information on these items, you might read through Sample Operating Expenses for an Offshore Bank in Puerto Rico. While this was written for Puerto Rico, it can be helpful for someone setting up in St. Lucia.

While your compliance team, including your Chief Compliance Officer, as well as operations, should be in St. Lucia, you can put employees in lower-cost countries as well. For example, your customer support, document organization, application preparation, etc. can be in your target market or your home country. For my thoughts on where to place lower-cost employees, see Where to set up a Bank Call Center

I’ll leave you with some good news on correspondent bank accounts. Because of the number of banks opening in Puerto Rico, several are providing US dollar correspondent accounts. They have this ability because many of the international banks in Puerto Rico have a Fedwire account where the US Federal Reserve holds the funds and send the wires. 

This industry change means that well-run and well-qualified banks in St. Lucia can open correspondent accounts at international banks in Puerto Rico. This has greatly improved the function and reliability of an offshore license from St. Lucia and has been a boon to the industry in general.

I hope you’ve found this article on setting up an offshore bank in St. Lucia in 2022 to be helpful. Please contact me at info@banklicense.pro for more information. I will personally write your business plan and negotiate your license.