Puerto Rican Banks Must Comply with US Know Your Customer Rules, Despite Misleading Claims
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A recent article on Bloomberg has sparked confusion among non-US persons looking to open accounts at International Financial Entities (IFE) in Puerto Rico. The claim that these entities allow anonymous account openings through the use of an offshore corporation is completely false.
Reality Check: Compliance Requirements in Puerto Rican Banks
In reality, all international banks licensed in Puerto Rico must comply with strict US compliance requirements, including Know Your Customer (KYC) and Anti-Money Laundering (AML) rules. The Office of the Commissioner of Financial Institutions (OCIF) closely monitors IFEs to ensure they follow these standards during the licensing and launch process.
- There is no way an IFE will be issued a license if it doesn’t collect information on its account holders.
- OCIF audits these entities regularly to guarantee full compliance with US regulations.
Asset Protection and Privacy through Efficient Vetting
While opening an account at an IFE in Puerto Rico may offer non-US persons significant asset protection and privacy compared to larger banks in the US, this is not due to lax KYC and AML procedures. Instead, IFEs have invested heavily in IT infrastructure to efficiently vet international customers, a process that most US banks lack.
Key Factors Contributing to Popularity
One key factor contributing to the popularity of Puerto Rican IFEs is the United States’ decision not to participate in the Common Reporting Standard (CRS) global tax compliance program. This means that accounts in Puerto Rico will not be automatically reported, providing non-US persons with increased privacy and protection compared to other offshore jurisdictions.
Compliance Requirements: No Room for Error
However, it’s essential to note that no international bank in Puerto Rico will permit anyone to open an account using an offshore corporation without disclosing the ultimate beneficial owner and thoroughly vetting their source of funds. This is a critical aspect of compliance with US AML and KYC requirements.
Conclusion: Compliance while Maintaining Privacy
For non-US persons looking to open an IFE account, it’s recommended to do so under an offshore corporation to take advantage of asset protection and privacy benefits while still complying with US regulations. By understanding the true nature of IFEs in Puerto Rico, individuals can make informed decisions about their financial security and privacy.