The best “pure offshore” offshore bank license jurisdiction in nowdays is St. Lucia. Here’s what you need to know about opening an offshore bank in St. Lucia, including the capital, operations, correspondent accounts, etc. If you’re thinking about opening a bank in St. Lucia, this is a must-read.
I say that St. Lucia is the best “pure offshore” bank license jurisdiction because the most popular jurisdiction for the last few years has been Puerto Rico. However, opening a bank in Puerto Rico means dealing with the US Federal Reserve and US regulators. If you want to be offshore and provide products that are not permitted by US banks, then St. Lucia is where you want to be.
For example, banks in Puerto Rico are prohibited from providing brokerage and investment services, as are all US banks. Like many European jurisdictions, banks in St. Lucia are not limited to providing custody services only.
Also, the US limits the countries from which you can accept accounts. In general, clients from Russia, Bulgaria, Cuba, Venezuela, etc. are persona non grata in Puerto Rico. If your business is focused on restricted nations or nationals, you’ll need to look at St. Lucia.
For example, let’s say you wanted to open a trade finance bank that supports trade within Eastern Europe, including Russia. Such a bank should be based in St. Lucia and modeled after Euro Exim Bank (for example), which is in St. Lucia.
Here’s what you’ll need to open a bank in St. Lucia:
The capital required is $2.2 million. Of this, $300,000 is held in a CD in St. Lucia and the balance can be in your operating account or your correspondent bank. The fact that $1.9 million can be placed at your correspondent is a major advantage, as correspondent accounts always require owner capital.
A detailed business plan covering operations, marketing, where your clients will come from, and your compliance manuals (such as Human Resources, AML, and KYC)
The business plan is a document written specifically for regulators and is the heart of the application. Unlike a standard business plan that is used to raise money, this one is written for the regulators. Its purpose is to convince the Financial Authority that you will be a good steward of the bank and that you won’t bring risk to the island (reputational or otherwise).
It’s also important that your business plan be specific when discussing your business model, target market, and marketing plan. Regulators want to know where your clients will come from and that your group has the expertise necessary to perform due diligence on these clients.
For example, if your team is from Mexico, and your target market is Russia and China, they will want to know what makes you qualified to research and approve account applications coming from these countries?
The business plan should also detail your plans in St. Lucia. Where will you set up your office, what core system will you use, and how many people will you employ on the island? Regulators want to know that you will be bringing some jobs to their country.
While it’s not necessary for all of your employees to be in St. Lucia, I suggest that you should base compliance and operations here. Sales, marketing, and support might be in a lower-cost country. For my thoughts on this see Where to set up a Bank Call Center.
Third-party background reports and audited personal and corporate financial statements are required from all officers, directors, shareholders, and investors in the bank.
Everyone listed in the business plan, and everyone putting money into the project, must be approved by regulators. This means that they all must provide three years of audited financial statements and a background report from a third-party investigator such as Kroll. Only reports from companies pre-approved by regulators will be accepted.
The purpose of the three years audited statements is to prove to regulators where the money came from to start the bank. You may not use borrowed funds and must disclose the source of all investments/funding during the startup phase of the bank.
Note that, after the license is granted, you need only disclose and have approved investments where the shareholder will have more than 10% ownership or control of the bank. If you sell less than 10%, you generally do not need regulator approval, but this only applies after the license is issued.
Another workaround is that you can sell conditioned options after the license is issued. You can sell an option that entitles the investor to more than 10% of the voting shares of the bank, so long as it includes a clause where the transfer of the shares is conditioned on the approval of regulators. These inventors will need to go through due diligence when they wish to convert their options into voting shares.
Once the application package is approved, the processing time in St. Lucia is typically 6 to 12 months depending on their workload and how much you want to push them to work quickly. Also, the quality of the application and the nationality of the shareholders will impact the approval time.
I hope you’ve found this article on opening a bank in St. Lucia to be helpful. For more information on opening a bank in St. Lucia or Puerto Rico, please contact us. I will personally write your business plan and handle your license application.
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