Eternity Law International — News — Offshore bank license in Cayman islands

Offshore bank license in Cayman islands

Published:
January 15, 2024

The Caymans have acquired the status of an important financial center in their region. Despite their compact size, many banks and financial institutions, including international ones, are concentrated here. In recent years, the islands have become a popular location for digital asset businesses, attracting numerous cryptocurrency exchanges and other firms in the space. Despite its attractiveness, the jurisdiction still remains in the shadows for many corporate service providers. This is despite the fact that the region offers a lot of prospects. The local government actively supports foreign entrepreneurs, offering favorable conditions such as low taxes, fast company registration, etc.

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Regulation of the banking sector in the Cayman Islands

The principles of confidentiality and secrecy in this jurisdiction are enshrined in legislation, including the Law on Confidential Relations and the Law on Regulation of Banking and Trust Companies.

The first provides for criminal liability for unauthorized disclosure of confidential information subject to the protection of professional secrecy and provides access to the police during the investigation of serious criminals.

The activity of banks in the Cayman Islands is regulated by the Law on Banks and Trust Companies, which classifies bank licenses as follows.

  1. Class A. This is the highest banking license issued to only 16 banks on the islands. It allows the bank to provide services both on the local and international markets. Usually, this type of license is granted to branches or subsidiaries of international banks with a capital of at least 50 million US dollars.
  2. Class B is unlimited. The license of this class allows the company to work only offshore. Banks with this license are prohibited from conducting business with residents of these islands, but any banking operations outside the jurisdiction are permitted.
  3. Class B is limited. This limited license is granted exclusively to the foreign owner of the bank. It is usually owned by banking organizations from other countries or foreign corporate groups. It can also be provided to new banks in the Cayman Islands that perform treasury functions for group members and do not intend to accept deposits from third parties.

Benefits of the option to get an offshore banking license in the Cayman Islands

Cayman is a free trade zone. This status makes them an important hub to support deepwater oil and gas production in the region.

Not leaving aside the prospects of banking sector, the islands have adopted legislative measures allowing them to become an international financial center with their own legislation in the areas of finance and taxation. This is attracting the attention of global firms, especially those with close ties to global jurisdictions and seeking favorable tax treatment.

Businesses on the islands are given the flexibility to engage with global markets and supported by a comprehensive legal environment that encourages digital transformation and innovation in finance and banking. This country has an economically stable and politically stable system and is actively improving its physical infrastructure. Those who decide to register a banking business in this jurisdiction can take advantage of other advantages of the region.

  1. The Caymans create favorable laws, supporting the development of the blockchain and crypto spheres, as well as the banking sector. A regulatory framework for digital assets was introduced in 2019, providing clarity for businesses and investors in the market. The legal system, based on common law principles, provides a familiar environment for international companies.
  2. Permits of different class categorization with services division. First category is widely-common because it covers standard banking service ranges and needs less effort. 
  3. The jurisdiction provides a clear regulatory framework for the activities of enterprises, which significantly reduces the risk of regulatory uncertainty, which often becomes a serious obstacle for banking companies. A Cayman Islands license provides clear guidelines and requirements, ensuring compliance with business laws.
  4. It has a skilled workforce with experience in the financial sector and speaks English. This is also attracting companies in the blockchain and cryptocurrency industries.
  5. Financial benefits include low income tax, no taxes on interest, dividends, management, royalties, maintenance and stamp duty. Foreign companies are exempt from import, capital gains and inheritance duties.
  6. Licensing in this country reduces taxation for foreign employees and non-resident directors. The banking business avoids double taxation thanks to numerous agreements with other countries.
  7. The island’s strategic location makes it an ideal location for businesses and investors wishing to access global markets.
  8. The jurisdiction complies with international standards. Obtaining an offshore banking license in Cayman highlights the company’s compliance with these standards, which is important in the context of combating financial crime and cyber attacks.

The permit confirms the company’s readiness to work in accordance with the law, ensuring the safety and reliability of business in the banking sector.

Obtain an offshore banking license in the Cayman Islands

Licensing is only available to firms that are officially registered in the jurisdiction. Typically, registering a legal entity here takes no more than 14 days and includes choosing a legal form, determining the name of the company, developing a charter and other corporate documents. After receiving your registration process, the organization can proceed to the next stages of the process.

The document preparation stage includes the following steps.

  1. Business plan. A key document that describes in detail the company’s main processes, its strategy, projected financial profit and potential risks. The clarity and completeness of the business plan play an important role in the successful completion of licensing.
  2. AML/CFT Policies. The company must provide the regulator with a clear plan to prevent terrorist financing and money illegal circulation. Effective procedures must be developed and implemented to ensure the safety and protection of investors and clients.
  3. Choose a service type.
  4. Information about the owners. Detailed information about the company’s owners, key persons and shareholders, including passport details, qualifications, experience and place of residence.
  5. Proof of address. Confirmation of the company’s legal and physical address, including the rental of a local office that complies with CIMA requirements.

These documents, and possibly additional materials, must be prepared in accordance with applicable laws. Our specialists will help you in collecting documentation. We are also ready to offer you ready-made solutions, in particular, cryptocurrency licenses in the Bahamas, Estonia, Labuan and other countries.

After preparing the documents, the company submits an application for a permit to the FSA. It is possible to conduct interviews with company managers. The regulator conducts a thorough review of the application and the information provided, then assesses the suitability of the company to manage financial assets.

The wait for a decision and the evaluation process can take 3 to 4 months. If the decision is positive, CIMA will grant approval in principle along with a list of requirements. Once all requirements have been met, including posting the required statements on the company’s websites and payment of paid-up capital, the LFSA will issue a full bank authorization.

If you’re intending to purchase a ready-for-use permit, cost of it is calculated individually. You’ll be given an estimated price prior to starting cooperation. 

Requirements and restrictions in the option to obtain an offshore banking license in the Cayman Islands

To successfully complete the licensing procedure, the company must meet certain operational and regulatory requirements:

  • provision of a minimum authorized capital to one of the local banks;
  • opening a physical, legal office in the jurisdiction through which all company transactions are carried out;
  • implementation of a built-in security system with mandatory notification to CIMA in the event of hacks or system failures. The impact analysis report must be submitted within 14 days of the incident;
  • appointment of an approved external auditor to monitor business operations annually;
  • maintaining a separate client account with a clear reflection of each transaction performed;
  • compliance with AML/CFT rules and principles with the appointment of an AML specialist;
  • obtaining prior approval when changing the composition of shareholders, directors, office location, opening additional offices outside the jurisdiction and concluding outsourcing agreements;
  • presence of at least 1 shareholder (individual or legal entity, without restrictions on citizenship);
  • at least 2 directors (only individuals, without restrictions on citizenship);
  • minimum number of local employees.

Company name restrictions

  1. Names that imply illegal activity or are associated with the government are prohibited.
  2. The Registrar has the right to reject undesirable or contrary to public interest firm names.
  3. When using a company name in a foreign language, a translation that complies with the specified restrictions is required.

CIMA plays a key role in providing a conducive, reliable and secure banking market environment in the islands. This is achieved through the performance of a number of functions by this regulatory body.

  1. CIMA sets standards to normalize relationships between market participants. This includes obligations to maintain financial records, implement risk management systems, establish customer protection mechanisms, and prevent financial crimes and other aspects.
  2. Companies that meet the established standards in the opinion of the regulator receive a license. This document serves as confirmation of the legitimacy and reliability of the company, which helps to create trust on the part of clients and investors.
  3. CIMA actively monitors and audits companies’ activities for compliance with established requirements.

The activities of regulatory authorities on the island are aimed at minimizing financial crimes and protecting the interests of market participants, helping to create a stable and safe environment in the cryptocurrency industry of the region.

Our advantages

  1. A complex approach. The company’s specialists cover all aspects of opening companies abroad, including legal, financial and technical aspects.
  2. Experience and expertise. The company has significant experience in solving problems of registration and licensing of banking businesses, and has deep knowledge of international law and local legislation.
  3. Support at all stages. Experienced lawyers and managers provide service range from consultations and preparation of documents to interaction with the regulatory body and support of the licensing process.
  4. Cooperation with different jurisdictions. The company successfully supports clients opening companies in various jurisdictions.
  5. Individual approach. We provide solutions that take into account the unique needs and wishes of the client.
  6. The logical conclusion of the case. The company’s main priority is to complete the business it has started, ensuring clients successfully open and license their business.

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