Financial Crime World

Puerto Rico Proposes Amendments to International Financial Center Regulatory Act and International Banking Center Regulatory Act

Governor Pedro Pierluisi and Financial Institutions Commissioner Natalia Zequeira have announced plans to update two key laws governing the international banking industry in Puerto Rico. The proposed amendments aim to strengthen oversight and ensure compliance with anti-money laundering laws.

Key Changes

  • Minimum capital requirements for international financial institutions will increase from $250,000 to $10 million over a five-year period.
  • Application fees for organizing or operating an international financial institution will rise from $5,000 to $25,000.
  • Investigation charges will jump from $5,000 to $25,000.
  • Hiring independent directors and increasing line of credit requirements are also mandatory.

Licensing Fees

  • Licensing charges for international financial entities (IFEs) will consist of a one-time fee of $1 million and an annual renewal fee of $100,000.
  • The banking guarantee will increase from $300,000 to $2.5 million over a five-year period.

Goals of the Amendments

  • Enhance the oversight capacity of the Office of the Commissioner of Financial Institutions (OCIF) by facilitating more robust investigations into institutions’ proponents and their financial capacity.
  • Deter institutions that operate as shell banks, which have licenses but never operate.
  • Ensure entities entering the market are financially and economically robust, solvent, and competitive.

International Financial Center Regulatory Act

The International Financial Center Regulatory Act provides tax exemptions to businesses engaged in eligible activities in Puerto Rico. To benefit from these exemptions, a business must become an IFE by applying for a permit and license and obtaining a tax decree.

Impact of the Amendments

  • The proposed changes will enhance the OCIF’s oversight capacity, ensuring that entities entering the market are financially and economically robust, solvent, and competitive.
  • The amendments will facilitate more effective investigations of institutions’ proponents and their financial capacity, as well as determine the source of funds for the bank’s capital.

Government Response

A spokesperson for the Puerto Rican government emphasized the importance of these changes in attracting foreign investment and promoting economic growth on the island. “These updates are designed to ensure that international banking and financial entities operate in a solvent, competitive, and responsible manner, contributing to the island’s economic growth,” said the spokesperson.

Next Steps

The proposed amendments are currently undergoing public review and comment period before being submitted to the Puerto Rican legislature for approval.