Setting Up an Offshore Bank
Historical background:
Establishing banks, especially offshore, was a straightforward task as recently as 5 years ago. For instance, in the jurisdiction of Saint Kitts and Nevis, prior to the 2008 crisis, it was possible to set up a bank for as little as $50,000. However, when the market was flooded with liquidity from the US Federal Reserve, such schemes became risky as they allowed for the creation of “bank laundry cycles” to siphon off large volumes of funds rapidly entering the market. For this reason, a number of measures were taken to close off the possibility of quickly establishing cheap banks.
Of course, the version given is only one of the existing ones, but it illustrates the quality of the changes that have taken place in the situation with the creation of new banking institutions. In practice, the reasons for the changes are not so important, the current situation and the possibilities for opening offshore banks are much more interesting.
Opening a Bank Today
Currently, the situation is such that obtaining a banking licence on pre-crisis terms is possible only in one or two jurisdictions. At the time of writing this article, these are Belize and the Seychelles. The general conditions there are approximately the same:
- $1-1.5 million deposit with the central bank
- $300-700 thousand certified equipment and software.
- The duration of the procedure is about a year
- “Total” verification of the origin of funds
In a few more jurisdictions, under the same conditions, it is possible to create a bank, provided that you already own another operating bank in the same state, and the old bank must become the insurer of the one being created.
Bank Establishment Procedure
The procedures for opening banks differ in each jurisdiction. In this article, we will give only a general scheme of a typical commercial bank engaged in payment card acquiring:
How to Open Your Own Bank
The first step is to make a fundamental decision: is it right to use such a tool as a bank, especially an offshore one, to solve existing problems? This requires researching the issue with specialists who have experience in solving such problems, as well as sufficient knowledge and connections to obtain a high-quality answer. Our company’s employees are ready to carry out such work.
Upon completion of the research, it may turn out that, for example, an entire department in a bank of a former Soviet republic specialises in conducting “special” payments, and to conceal the excessive number of chargebacks and complaints from card payment customers, it is sufficient to establish an external processing centre, while the bank can be completely uninvolved.
The second stage, in case we confirm the need to establish a banking institution, will be a high-level review of existing opportunities and specifics of different jurisdictions. As well as the selection of a particular state to initiate the procedure, or a detailed “deep dive” study of its legislation.
The third stage is either the launch of the procedure, if we have already opened a bank in the selected state, or a business trip of our company’s employees to establish business contacts and issue powers of attorney, which will subsequently allow for remote management of the process.
Banking schemes today
Unfortunately, setting up your own bank is no longer as cheap and easy as it was 5 years ago. Modern business schemes are becoming increasingly complex, but we are always ready to work through the most unusual issues for you. Contact us.
Alexey Zarin
Moscow, 2013
