What Country Should You Choose to Open an Offshore Bank?

A great number of our clients wonder how they could open a bank in a foreign country. We must say that many of them do not realize how demanding the process of setting up an offshore bank can be.

Before you can open your own bank, you have to develop a clear understanding of how it is going to work and what tasks it can help you solve. Would you like to protect your family assets? Would you like to attract capital to develop your business? Would you like your prospective bank to grow? These are important questions to ask yourself before opening an offshore bank.

Offshore-Pro Group is an international company providing complex services in asset protection, immigration, business planning, foreign company registration, and bank account opening. We will also be happy to assist you in creating an offshore bank if this is your goal.

Why should you open an offshore bank?

Some people believe that opening an offshore bank will help protect their wealth. Well, they are right if we are talking about some considerable wealth. 

The type of the foreign bank that you should choose will depend on your main goal in establishing a bank. You may have one of the following prevailing goals:

• Asset protection. If you would like to protect your assets by creating a bank, then you should opt for a small private bank with a Category B license that will provide banking services only to a fixed group of people. These may be the members of your family.
• Business extension. If you have a business corporation and you would like to expand the geography of your business operations, a foreign bank can come in handy. You can use it for international business transactions.
• Fundraising. If you set up a medium-size or a large offshore bank, you will be able to attract foreign capital by offering attractive banking products to people and companies from all over the world. The bank will certainly facilitate business extension too.

We must note that even a small family bank can attract capitals from third parties. So you can start with a small offshore bank and make it grow with time.

We must also note that establishing a foreign bank is not the only method of asset protection. You can consider creating an offshore trust or foundation that is going to serve asset protection purposes very well. Besides, you can register a foreign business company in the form of an LLC or an IBC. We will gladly help you solve any of these tasks.

Best offshore jurisdictions to open banks in 2023

Financial Intelligence Units of most offshore countries do not have the statistics on the number of banking licenses issued to foreigners. However, the countries and territories listed below are probably the most attractive for a person wishing to register his/ her own foreign bank.

• Caymans
• Switzerland
• Vanuatu
• Bahamas
• Puerto Rico
• Panama

There are other countries that also might be of interest to you. In Dominica, for example, you can open a bank within 6 months (and this is fast). The following countries and territories also issue banking licenses for foreign nationals: Anguilla, Malta, Antigua and Barbuda, the Cook Islands, Samoa, the Camorras, and Nauru.

Facts you should know about banking licenses

If you would like to open an offshore bank, the first thing you should do is acquaint yourself with the banking-related legislation of your home country and the country where you are planning to set up a bank. In addition to that, you should pay attention to the following aspects related to obtaining a banking license:

• Capitalization. Every country will have its own requirements as far as the capitalization of the prospective bank is concerned. There were times when the level of offshore banks’ capitalization could be as low as 30 or 50 thousand US dollars. You cannot open a bank by investing as little as that today but this sum of money will certainly cover the costs of setting up an offshore company.

If your bank is going to provide the types of financial services that involve no or minimal risks for the public, the capitalization requirements are going to be modest. If you are planning to accept deposits from third parties, the level of capitalization will have to be much higher.

Some countries will grant you a banking license if the level of your prospective bank’s capitalization is US$ 1,000,000. You must realize, however, that a bank as small as this is going to have troubles acquiring SWIFT and finding correspondent banks.  

• Bank office in the country of domiciliation. This is another important issue to take into account when opening an offshore bank. Some banking licenses allow dealing with foreign clients and disallow the use of the bank by local people. Even if this is the kind of license that you hold, you need an office in the country where your bank is registered anyway. And it cannot be a tiny room with only one person in it. You should have a nice bank office and two or three bank officers.
• Business plan. You have to submit a business plan when applying for a banking license in all cases. This is a crucially important document because the Central Bank administration is going to use it to decide whether you deserve to be given a banking license or not. You should bear in mind that having a banking license from another country is going to be of great help. If the local Central Bank officers see that you already have a bank in a foreign country, they are going to be milder on you. At the same time, they are going to make sure that your prospective bank complies with all the technical requirements anyway. In addition, they will want to ascertain that no sanctioned personas are among your bank officers.
• Opening an offshore bank is a costly enterprise. Not only do you have to pay the license fee and meet the capitalization requirements but you are also going to have a number of additional bills to pay. The registration agent’s services, the banking software, the office equipment, the administrative costs, etc. will add to the total amount of expenditures. You have to be prepared for that. 
• An offshore bank cannot be opened in an instant. It may take up to two or even three years to set up a foreign bank. The shortest timeframe is six months but it can only be found in such offshore jurisdictions as Dominica or Samoa. Not in Europe.  

Factors you should consider to make your offshore bank fully functional – expert advice

So, you’ve got the banking license. Congratulations! Now you have to figure out how to manage your bank to make profits rather than losses. Below please find some factors that you have to take into account to make your offshore bank successful.

1. Even if you are planning to make most of your banking operations via online applications, you have to be able to use the state-of-the-art payment instruments. 

Your banking license is not enough to engage in banking operations. SWIFT membership, BIC acquisition, correspondent accounts in other banks – all these things require deep knowledge and experience. In all likelihood, you will have to involve specialists in these processes. You have to comply with all the requirements that the prospective correspondent banks have to new players in the banking market and to small banks established recently.

2. Many countries require that you have AML/CTF/ABC (Anti-Money-Laundering/ Counter-Terrorism-Financing/ Anti-Bribery-and-Corruption) policies in place when applying for a banking license. Other popular acronyms that will have a bearing on establishing an offshore bank are KYC (Know Your Customer), DD (Due Diligence), and EDD (Enhanced Due Diligence). You are going to be a banker and all bankers today are required to know their customers and conduct due diligence checks. Enhanced due diligence checks are applied to high-risk clients.
3. If you have ever opened a foreign bank account, you have passed through these procedures (supplied copies of various documents and answered numerous questions). Now you – as a banker – have to ask your prospective clients to submit their passport copies, proofs of address, and dozens of corporate documents if they are opening a corporate bank account. You have to protect yourself from any unreliable clients because you do not want to have any troubles with the financial regulators.
4. This means that your offshore bank is going to need Compliance Officers. In some countries, this is a necessary condition for obtaining a banking license. If you service suspicious clients, you will lose your correspondent accounts and your banking license. For this reason, you are going to have one more item of expenditure, namely, the Compliance Department, and access to World Check and World Compliance databases.
5. You will have to decide if you are going to provide services to clients from the USA because if you do, your paperwork is going to be more tiresome. You also have to be able to understand if a prospective client is a PEP (Politically Exposed Person). This is how FATF defines PEPs:
   • Domestic PEPs: People holding public offices in their home countries: heads of government or state, politicians and government representatives, judges, prosecutors, military commanders, state-owned corporation CEOs, party leaders, and so on.
   • Foreign PEPs: People with the same functions in foreign countries.
   • International PEPs: directors, presidents, vice-residents, etc. of international organizations.
   • Family member: Genetic relatives and spouses (including civil spouses) of PEPs are also considered PEPs.
   • Close persons: People that are in close social or professional relationships with a PEP are also considered PEPs.
6. If and when your offshore bank complies with all these requirements, you can open correspondent accounts in main currencies. Small offshore banks usually start with two or three national currencies and then gradually increase their number. This is the right thing to do because people like to diversify risks with the help of multicurrency bank accounts.  
7. You will also need an Internet banking platform. You can order a new platform developed to your specific requirements or you can purchase an existing one. Your Internet banking platform has to have advanced client-identification functions. Less than 10 years ago, the client only needed to enter the login and the password to access the banking application but now it is not enough. Minimum two-level authentication systems are applied. 

Different offshore banks provide different kinds of banking services

As soon as everything is in order and you are ready to start providing banking services, you have to revisit your business plan. Your marketing strategies will depend on the scope of services that you are going to provide. You have to ask yourself several questions:

• What banking services are you licensed to provide?
• Which of them are you planning to provide?
• Are you going to issue Visa and/ or MasterCard?

You can decide whether you want to offer a standard set of banking services to your clients or you are going to sell products that can make your offshore bank stand out.

Most small offshore banks allow opening current and savings accounts with them but a large portion of the profits goes towards covering the costs of the correspondent accounts. Some banks have fixed-term deposits, which allows them to make some extra money. 

Trading and investment services

If your offshore bank offers trading and investment opportunities to clients, it may look more attractive to them. You will probably have to acquire new licenses to be able to provide this sort of banking services, but the investment is going to pay back in all likelihood.

Offshore bank cards

Anonymous and prepaid bank cards are very popular with people from different parts of the world. You have to acquire a license and your own BIN (or IIN) to be able to issue Visa or MasterCard to your clients. You may also want to issue both personal and corporate cards. Your VIP clients may be interested in some exclusive offers so you can issue Gold, Platinum, Infinite, World, or Blue cards. 

You should realize, however, that card issuance entails certain administrative costs:

• To be able to issue bank cards, you will have to obtain a license that permits making loans. 
• If your bank issues bank cards, you will have to hire a couple of people to oversee the card-related issues such as chargebacks, pin code changes, card losses, and so on. It could probably be a good idea to cooperate with another small offshore bank for bank card issuance.
• If your bank issues bank cards, you can also cooperate with the services and companies that your clients often use. However, the bank has to have a high level of capitalization and a legal opportunity to do that.  

Your own offshore bank – an exciting business opportunity!

We must admit that registering an offshore bank is a rather challenging and time-consuming task. The opportunity is quite realistic and it looks exciting indeed but we suggest that you should weigh all pros and cons. Read the laws regulating banking services in your country and in the country where you’d like to open a bank. Think of the costs involved in the process of setting up an offshore bank. Talk to experienced bankers. Analyze relevant statistics. You have to decide if you are prepared to spend a lot of effort, time, and money on establishing your own bank.   

If you have assessed all the risks and you are sure that you want an offshore bank of your own, Offshore-Pro Group experts can certainly be of assistance to you. We can help you at all the stages of the offshore bank establishment process.

We will give you comprehensive consultations, link you to the right people, introduce you to several offshore bank owners, assist you with launching card issuance programs and finding correspondent banks, and with all other technical and administrative issues. Starting your own bank is a demanding enterprise but this may well be your most exciting business experience and your most profitable business company!

Please apply for a consultation on opening an offshore bank by writing to info@offshore-pro.info.