How to Negotiate an Offshore Bank License

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Offshore banking is diverse, complex; huge compliance needs to say the least. The landscape of licensing correspondence and regulation is just impenetrable. In simpler terms, the barriers to entry keep on changing and have significantly done so over a couple few years. To get started, for instance, the corporate capital is close to 5 million dollars. When you put in to account capital ratios and reserves the amount you will need to start an offshore bank account is significantly high. So if you want to open an offshore bank here is how to go about it.

Jurisdiction selection

You will need to select the jurisdiction that is best for you, and then you search for an existing license. If there is none available, you will initiate the application process which will take up to six months. When selecting a jurisdiction, here are some of the most common: Comoros, Luxembourg, Bermuda, Bahamas, Barbados, and Seychelles among others. The capital required differs depending on the jurisdiction you select. Capital, in this case, means the amount of money required before you can be granted a license. You will also need to familiarize yourself with each countries laws, and requirements for new entrants in the market. Some countries are a bit flexible while others have tight laws on international banks entrants. Some countries also have separate rules for private banks and investment banks.

Understand the types of license classes available

Depending on the country you are applying for a license in, you need to understand the types of licenses you need to apply for or available for application. For example, Dominica has only one class of license while other countries offer up to three classes. These classes of licenses are:

• General bank license – this license opens your business to both international and domestic services. However, the requirements for obtaining this license are high. As you can understand, this license allows your bank to operate as a local bank.

• Captive bank license – This license is somewhat restrictive and costs less than a general or international license. It is mostly applied by multinational banks for internal lending. Once you apply for this license, you will have to understand your limitations such as you can only do business with individuals or other companies that have been approved by the country’s central bank and have been listed on your license.

• International or offshore license– This licenses is a bit more open and elaborate than the captive. It permits you to do all banking business including investment. However, there is a downside in that you can do business with anyone else other than clients from the issuing country. Let us, for instance, you have a license in Dominica; you cannot do business with Dominican nationals; however, you can do business with Dominican companies and corporations that are foreigner owned.

Regulatory bodies

Since you are entering into a new market, you will have to understand the regulating bodies. Not all licenses will be regulated by the issuing country’s authority. For example, banks in Dominica are regulated by both Eastern Caribbean Central Bank and the Dominica banking regulatory authority. This is important because you will have to understand once a license has been granted who you will be dealing with regarding regulation and oversight. Regulation is also important since noncompliance can lead to your license being revoked. Given the corporate capital invested, and your customer base you have acquired and then have the license revoked over technicalities the damage that can do is huge.

Duration

An important part of negotiating a license although often overlooked by most people is the duration it takes for the license to be approved. Some countries can take just six months to process while others can take up to 26 months. You need to negotiate a license in a country that issues the license in the shortest time possible given the time it takes to market the new bank. Some of the best countries to apply an offshore bank license include; Cayman, Montserrat, Republic of Vanuatu, Andorra, Anguilla, Lebanon, Luxembourg among others. Depending on the time it takes to process a license as opposed to others. Depending on your specific international banking license needs you can choose from the list or even explore for more flexible countries.

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Kevin Schultz is a professional journalist with over 15 years of writing and media experience. He is a full-time contributor to the Themocracy Online News Blog and his insightful writing has been enjoyed by thousands.