Checklist for Starting an IFE Bank in Puerto Rico or Buying an Existing Bank

As of August 18, 2025, Puerto Rico’s International Financial Entities (IFEs) operate under Act 273-2012 (the International Financial Center Regulatory Act), with significant amendments from Act No. 44-2024 effective May 16, 2024. These reforms increased capital requirements, licensing fees, and compliance standards to enhance credibility and align with U.S. norms. IFEs are regulated by the Office of the Commissioner of Financial Institutions (OCIF) and focus on serving non-residents, offering services like deposits, lending, and digital asset custody. Note that IFEs cannot serve Puerto Rican residents or use “bank” in their name unless authorized for deposits.

This checklist covers two scenarios: starting a new (de novo) IFE and buying an existing one. Both require OCIF approval, with processes emphasizing applicant quality, financial stability, and compliance. Consult legal experts, as requirements may evolve; timelines are estimates based on 2025 data.

Checklist for Starting a New (De Novo) IFE Bank

The process is divided into two phases: Permit to Organize and Permit to Operate. Total timeline: 6-12 months; minimum startup cost: ~$12 million (capital + budget).

Phase 1: Pre-Application Preparation (1-3 Months)

• Assess Eligibility and Business Plan: Ensure the entity is organized under Puerto Rico, U.S., or territorial laws (no individuals; corporations/LLCs preferred). Develop a detailed business plan focusing on international services (90%+ revenue from non-residents), including risk management, AML/KYC policies, and projected jobs (minimum 8 full-time employees in Puerto Rico, including 2 in compliance and a full-time Chief Compliance Officer).
• Gather Ownership and Background Info: Collect personal, business, and credit histories for all owners (10%+ interest), directors, and key personnel. Include audited financials, criminal background checks, and evidence of no insolvency or felonies (e.g., fraud, tax evasion).
• Secure Capital and Assets: Prepare proof of $10 million paid-in capital (fully paid at licensing) and $1 million in unencumbered assets (e.g., CD in a local Puerto Rican bank). Total startup budget: At least $1 million additional for operations.
• Appoint Key Personnel: Select at least one independent director (unaffiliated with owners); plan for 10 employees minimum, with compliance team on-island.
• Engage Professionals: Hire legal counsel, auditors, and consultants familiar with OCIF. Budget $100,000-$500,000 for setup fees.

Phase 2: Submit Application for Permit to Organize (Submission + 30-90 Days Review)

• Prepare and File Documents: Submit to OCIF:
  • Articles of Incorporation/Corporate documents.
  • Business plan, including services (e.g., deposits, loans, digital custody).
  • Proof of capital/source of funds.
  • Background checks, financial statements, and affidavits for owners/directors.
  • AML/BSA/OFAC compliance program.
  • Evidence of unencumbered assets.
  • CEO affidavit on compliance.
• Pay Fees: $50,000 non-refundable application fee + $25,000 regulatory investigation fee (for due diligence; additional if costs exceed).
• OCIF Review: OCIF reviews within 30 days; expect 30-60 days of Q&A. Commissioner may deny based on character, experience, or incomplete apps (deemed withdrawn after 30 days if not addressed).
• Approval Milestone: Receive Permit to Organize if approved; proceed to build-out.

Phase 3: Build-Out and Permit to Operate (3-6 Months Post-Approval)

• Operational Setup: Establish physical office in Puerto Rico; implement IT systems, compliance training (annual on laws), and hire staff (minimum 8, with compliance focus).
• Compliance and Audits: Conduct initial BSA/OFAC audit; maintain records in Puerto Rico.
• Final Submission: Apply for Permit to Operate with evidence of readiness (e.g., capital deposited, staff hired).
• OCIF Final Approval: Additional review; pay $50,000 initial license fee.
• Launch Operations: Begin services; ensure capital remains ≥10% of deposits (unless insured) and “well-capitalized” per federal standards.

Ongoing Requirements

• Annual Renewal: Submit 30 days before expiration: $25,000 fee (+$5,000 per branch), material changes report, capital/unencumbered assets proof ($1M min), auditor’s BSA/OFAC report, CEO affidavit.
• Reporting: Quarterly financials, annual audits; maintain 8+ employees.
• Changes: Notify OCIF for share transfers (void without approval; $50k+$25k fee for 10%+ changes).

Checklist for Buying an Existing Bank (IFE or IBE) in Puerto Rico

Acquiring an existing IFE involves change-of-control approval from OCIF, with due diligence on the target. Timeline: 6-9 months; costs: $5M+ for license alone, plus capital ($5-10M) and fees. Market prices: $5-15M for basic banks, $55M+ with Fedwire.

Phase 1: Pre-Acquisition Due Diligence (1-3 Months)

• Identify Target: Research licensed IFEs (e.g., via OCIF registry); evaluate assets, liabilities, compliance history, and services (e.g., Fedwire access adds value).
• Financial Review: Audit target’s balance sheet, capital ($10M min for post-2024), unencumbered assets (staggered increase to $1.5M by 2028 for existing). Assess deposits, loans, digital custody.
• Legal/Compliance Check: Review OCIF filings, BSA/OFAC audits, litigation; ensure no violations or pending issues.
• Ownership/Control Analysis: Identify current owners; plan for 10%+ transfers requiring approval.
• Valuation and Negotiation: Factor in license value ($5M+), capital, and operations; sign LOI/NDA.
• Engage Advisors: Hire lawyers, accountants for due diligence; budget $100,000+.

Phase 2: Submit Change-of-Control Application to OCIF (Submission + 30-90 Days Review)

• Prepare Documents: Similar to new IFE:
  • Buyer’s background/financials (owners 10%+).
  • Transaction details (shares transferred).
  • Post-acquisition business plan, compliance program.
  • Proof buyer meets capital/asset requirements.
  • Affidavits on no felonies/insolvency.
• Pay Fees: $50,000 non-refundable + $25,000 investigation fee (for due diligence on buyer).
• OCIF Review: 30 days initial; 30-60 days Q&A. Approval needed for transfers (void otherwise). Denial possible if buyer lacks aptitude/character.
• Additional Approvals: If Fedwire involved, potential Federal Reserve review.

Phase 3: Close Transaction and Integrate (1-3 Months Post-Approval)

• Finalize Purchase: Transfer shares/funds; update corporate docs.
• Operational Integration: Align compliance, staff (ensure 8+ employees), systems; conduct post-acquisition audit.
• Notify Stakeholders: Update clients, regulators; pay any branch fees ($5,000 each).
• Renew License: If near expiration, submit renewal ($25,000) with updates.

Ongoing Requirements

• Same as new IFE: Annual renewals, reporting, capital maintenance (increase to $10M if not met). Monitor for further changes (e.g., unencumbered assets ramp-up).