The Reality of Starting an Offshore Bank in 2024
The offshore world can be intoxicating with stories of hidden and private wealth being squirreled away in exotic locales. One of the more engaging fantasies is that of the solo-entrepreneur starting an offshore bank to, either handle their own wealth, or those of others. Let’s dig in to the reality of this in 2024 and why you might want to place that idea firmly in the “fantasy” pile.

The History of Offshore Bank Formations
In the period before the introduction of the U.S Patriot Act, offshore banks often operated as effectively shells. Their operations were largely confined to tax-havens and their businesses were built around select high-net-worth clients and secrecy. Tax havens, such as Vanuatu, Panama, Nauru, and the Cayman Islands spawned hundred of these brass plate banking entities which, in many cases, led to significant levels of fraud.
Throughout the 80’s and early 90’s fraud and money laundering was commonplace with these small offshore banks, based in secrecy laden jurisdictions, becoming a key part of the puzzle. Major crimes such as the collapse of the Bank of Credit and Commerce International (BCCI), First International Bank of Grenada, to name a few, spurred regulators globally to start looking at these shell entities.
Unfortunately for the banking regulators, whenever they took action to close one fraudulent bank, another would pop up in its place in a different jurisdiction. Subsequently, this had all the hallmarks of the wild west, and the offshore banking sector was seen as hugely risky.
Despite these risks, marketing promoters continued to sell banking charters to unsuspecting individuals with little in the way of appropriate background checking. In fact, the sale and trade of bank license became a booking industry in the 90’s with small island nations, like Nauru, profiting handsomely from licensing non-existent banks.
Enter the Patriot Act

However, in 2001 a watershed moment occurred with the terrorist attack at the World Trade Center in New York. The U.S administration responded with decisive military action as well as significant law and regulatory changes under the guise of strengthening national security. Subsequently, the Patriot Act was enacted which completely changed the financial system.
In its essence, the Patriot Act allowed the government to step around all manner of privacy laws which, would normally have been restricted under the constitution, under the guise of national security. This had the effect of basically requiring all financial institutions to adhere to rules restricting all forms of terrorist financing lest they be subject to major financial and criminal penalties.
However, as is often the case with new laws, this one was heavily abused by the administration to target everyone from tax evaders to political opponents. The ultimate effect was that banks became very concerned about who their counterparties were, and this effectively ruled out dealing with the offshore shell banks that were numerous.
The Impact on Offshore Bank Charters
As you can imagine, financial institutions can only survive to the extent that they are able to transact with other banks within the global system. Without access to correspondent banking facilities, these offshore shell companies effectively became irrelevant, and their clients struggled to then move and fund their accounts.
Ultimately, all of the major banks closed ranks and started to restrict the offering of facilities to any institutions that did not maintain a major presence in their country of registration. This saw a collapse in both the overall number of offshore banks as well as the number of new registrations annually. In fact, countries like Nauru effectively exited the offshore banking sector and closed their industries all together.
Current Status in 2024
You would be forgiven for thinking that there are no opportunities to provide any type of banking services in 2024. However, there has been some interesting developments in the sector over the past few years.
In particular, we have seen an explosion of quasi banking entities called neo-banks. Over the past few years, many jurisdictions have passed legal regimes allowing for the creation of e-money institutions (EMI) or Neo-banks. These types of operations still require a license, but the conditions are often significantly less onerous than actually applying for a full banking charter.
What Exactly is an Electronic Money Institution?
In short, an EMI is a company authorized to issue electronic or digital money. Think of a digital wallet provider who issues you electronic credits in exchange for your fiat money. Some of the quasi-banking services they can provide are:
- Issuance and distribution of electronic money
- Payment services and e-money transactions
- Issuance and distribution of payment cards
EMIs possess many of the same functionality as small banks or credit unions do and, depending on their jurisdiction, their service scopes are quite wide.

What Sort of Regulation Does an EMI Face
You can expect to be the subject of significant regulatory oversight whilst operating an EMI. The days of cash deposits in a gym bag are long gone. Subsequently, expect your local regulator to require significant reporting around exposure and client lists. Additionally, you will need a very robust anti-money laundering (AML) program as well as key experienced staff.
Potential Challenges and Hurdles for Offshore Banking
Regardless of the ease in obtaining an EMI or PSP license, you will still need to secure your own banking and financial facilities. This is often one of the significant hurdles that financial service entrepreneurs face in the startup phase.
Banks are particularly onerous when it comes to being a financial intermediary for an EMI. They, rightly, assess the AML risk as high given the untested nature of your proposed business. Subsequently, obtaining correspondent facilities with a few appropriate banks can be very difficult indeed.
Typically, you will need to demonstrate to the bank that you are simply not a brass plat, or shell, operation. This means a real office location (in the jurisdiction of registration), a detailed and realistic business plan, and experienced key staff that demonstrate competency in their area.
Subsequently, the costs are, in some cases, exorbitant and are not in the realm of someone simply wanting to start a small operation.
Options for Smaller Operators
Despite the potential costs of setting up an EMI, there are other options for entrepreneurs in the fintech space. In particular, there are many opportunities to “lease” or “rent” a payment service license.
These sorts of services have many names such as, Banking in a Box, BIN rental, Bin Sponsoring, and License as a Service. They have become a common avenue for those looking to start a smaller financial service without the huge overheads that obtaining a license entails.
Final Words on Starting an Offshore Bank in 2024
In conclusion, the options for obtaining a full banking charter in 2024 is relatively limited and likely to be only the preserve of the super wealthy. You are unlikely to be able to undertake such an application without something in the realms of US$5 – $10 million and a solid banking reputation.
However, the explosion in FINTECH and Neo-Banks means that there are now plenty of options for those who choose to either partner with licensed companies, or to seek their own EMI/PSP/Neo-Bank license.
Regardless, if you are seeking to setup a small financial services operation you should prepare detailed business plans and have the right people on-board to support your growth. This is not an industry for the faint of heart given the complexities, costs, and competition involved.
Best of Luck with Your Future Entrepreneurial Endeavors.
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