Financial Crime World

Title: Puerto Rico Strengthens Financial Regulation Compliance: New Laws Affecting IFEs and IBEs

Amendments to the International Financial Center Regulatory Act

On February 16, 2024, Puerto Rico’s Governor signed House Bills No. 1699 and No. 1700 into law, enacting Acts No. 44-2024 and No. 45-2024. These acts brought amendments to the International Financial Center Regulatory Act (Act 273-2012), aiming to modernize and strengthen International Financial Entities (IFEs) and International Business Entities (IBEs).

Act No. 44-2024: Enhancing Regulation and Oversight of IFEs and IBEs

Act No. 44-2024 significantly reforms the International Financial Center Regulatory Act to boost the regulation and oversight of IFEs and IBEs. The amendment is expected to provide international banking and financial entities with the necessary tools to cope with market changes, ensuring their solvency and solidity while contributing to Puerto Rico’s economic growth.

Fundamental Amendments for IFEs and IBEs

The following are some of the key amendments affecting both IFEs and IBEs:

Capital Requirements

  • Existing IFEs and IBEs must increase their paid-in capital in a staggered manner, reaching a minimum of $10 million.
  • New IFEs must meet the $10 million paid-in capital requirement in full before being granted a license.
  • The amount of paid-in capital must always be at least 10% of deposits accepted by the entity unless they are insured.
  • Unencumbered assets with local banks in Puerto Rico are required, increasing for existing entities in a staggered manner over their renewal periods and reaching $1.5 million by 2027-2028.
  • New IFEs must have at least $1 million in unencumbered assets.

Employees

  • Both IFEs and IBEs must have a minimum of 8 full-time employees in Puerto Rico.
  • Annual training in compliance with Puerto Rican and U.S. laws related to money laundering, financing of terrorism, etc., is mandatory for all employees.
  • IFEs must have at least 2 employees in their compliance department and employ a full-time compliance officer.

Independent Directors

An independent director without any economic or personal relationships with the entity or its owners is mandatory for the Board of Directors.

License Renewals and Fees

  • The annual license fee for IFEs and IBEs is now $25,000, with an additional $5,000 fee for each office or branch.
  • Late renewals face penalties and sanctions.

Other Regulations

  • New regulations include restrictions on transfer of capital or control and specific requirements for depository IBEs.
  • Each entity must keep books, records, and annual financial reports in Puerto Rico.
  • IBEs and IFEs may act as custodians for virtual assets and currencies but cannot operate as exchange platforms.

Effective Date

The new regulations will take effect 90 days after approval (May 16, 2024).

Disclaimer

McConnell Valdés LLC’s McV Alert is intended for informational purposes only and does not constitute legal advice or a solicitation of any kind. To establish a client relationship, please contact our office directly.