# Puerto Rico Banks: How the IFE Jurisdiction Works

> Puerto Rico as a banking jurisdiction: IFE licenses under Act 273, 4% tax, Fedwire without FDIC, Act 44-2024 reform and sector cleanup. Profiles of Zenus, FV Bank, Arival.

Author: Гордей Болотько — партнёр, Corporate & Commercial (https://wiki.private.law/authors/bolotko)
Last modified: 2026-07-17T08:52:00.000Z
Canonical: https://wiki.private.law/en/puerto-rico-banks
Topics: banking
Jurisdictions: puerto-rico, usa
Functional tags: bank, license, crypto-friendly, stablecoin, custody
Product tags: banking, bank, stablecoin, custody
Semantic tags: bank, license, crypto-friendly, stablecoin, custody, banking
Article type: hub

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Puerto Rico is a rare hybrid: a U.S. territory with its own banking legislation. Dollar zone, federal Fedwire and SWIFT—yet a separate local regulator and tax rates that mainland banks can only dream of. On this foundation, an entire class of "international" banks has grown over the past decade: from infrastructure-focused Zenus and stablecoin-oriented FV Bank to Peter Schiff's collapsed Euro Pacific.

This is a hub overview of the jurisdiction: how it is structured legally, what happened to it during the turbulent 2022–2026 period, and who remains in the market. All figures and statuses are as of July 2026.

# From IBE to IFE: How the Island Became an "Onshore Offshore"

The story begins in 1989. Act 52-1989 (International Banking Center Regulatory Act) created International Banking Entities (IBE)—banks for non-residents, exempt from local taxes by force of law itself, without any decrees. The vision was ambitious: to turn San Juan into a Caribbean banking center. By June 2011, 31 IBEs were operating on the island with assets of $43.6 billion.

In 2012, the model was relaunched. Act 273-2012 (International Financial Center Regulatory Act) introduced a new type of license—International Financial Entity, IFE (after 2024 amendments, the law calls them International Financial Institutions). The key difference from IBE: benefits are no longer automatic; they are granted through an individual tax decree—a contract with the government.

The old IBEs did not disappear, but today they are mainly treasury units of large groups like UBS, Citi, and Banco Popular with ~$68 billion in balance sheet assets. New licenses are issued only under Act 273, and it is IFEs that have become the face of the jurisdiction.

# What IFE Status Provides

The entire structure rests on the definition of a client. IFEs are prohibited from serving "domestic persons"—residents of Puerto Rico itself. But a "foreign person" under Act 273 is the rest of the world, including citizens and companies of mainland USA: for purposes of the law, the term "United States" is defined such that Puerto Rico is not included. The result is a bank with an American address that has access to the entire world, except its own island.

Next—American infrastructure. An IFE can apply for a master account at the Federal Reserve Bank of New York and obtain direct access to Fedwire: dollar clearing without correspondent banks. Plus SWIFT, plus a jurisdiction that does not appear on any offshore blacklist—it is U.S. territory.

Privacy is a separate argument. The U.S. does not participate in CRS, so IFEs do not make automatic reports to other countries' tax authorities. At the same time, the full American enforcement stack applies: BSA, PATRIOT Act, OFAC, and since March 2021—the FinCEN Gap Rule, which obligated banks without federal prudential regulation to maintain full-fledged AML programs.

What the status does not provide—FDIC insurance. Formally, an IFE can operate without it, and in practice no IFE is insured: deposits are protected only by the bank's own balance sheet. And a master account is not a right, but a privilege. In 2022, the Fed introduced a three-tier application review system, where uninsured institutions without federal supervision fall into the strictest Tier 3, and in May 2026 the Second Circuit in Banco San Juan Internacional definitively confirmed: the law guarantees no one an account at the Fed.

> 🍓 IFE—an American bank for non-residents of the island: dollar and Fedwire without correspondents, outside CRS, but without FDIC and with the full set of BSA/OFAC obligations. Access to the Fed's payment system is discretionary, as confirmed by the court in 2026.

# License and Taxes: Mechanics

> 🔗 **Related**
> [Act 60 for New Residents](https://wiki.private.law/en/puerto-rico-act-60)

The regulator is OCIF (Oficina del Comisionado de Instituciones Financieras). The process is two-stage: first a permit to organize with verification of all capital owners, business plan and directors, then—after registration, capital contribution and office lease—the license itself.

Until 2024, the entry threshold was almost symbolic: $5 million authorized capital, of which only $250 thousand had to be paid in, four employees on the island, and $5,000 for the application. The Act 44-2024 reform (effective May 16, 2024) raised the bar radically: $10 million in fully paid-in capital for new licenses, a minimum of 8 employees in Puerto Rico (two of them in compliance), an independent director, annual BSA/OFAC audit. Existing banks were given up to six years to recapitalize.

| Parameter | Before 05.16.2024 | After Act 44-2024 |
| --- | --- | --- |
| Paid-in capital | $250K (with $5M authorized) | $10M fully paid at time of license |
| Employees in Puerto Rico | 4 | 8, including 2 in compliance functions |
| Application / license / renewal | $5K / $5K / $5K | $50K / $50K / $25K per year |
| Income tax | 4% by decree | 4% (unchanged) |
| Digital assets | gray zone | custody permitted (no-objection), exchange prohibited |

The tax block is formalized by a separate decree—today through the Incentives Code (Act 60): 4% on income from licensed activities, 0% on dividends to non-residents (Puerto Rico residents pay 6%), exemptions from property and municipal taxes. The decree is issued for 15 years with extensions totaling up to 45; upon extension, the rate is renegotiated in the 4–10% corridor. The nature of the instrument is important: the decree is a contract with the government, "law between the parties," and therein lies its resilience to changes in political course. We have a separate analysis of the island's personal tax regime—Act 60 for new residents.

The permitted scope of activity is broad: deposits and lending to non-residents, letters of credit, FX, custody (since 2024—explicitly including digital assets via no-objection procedure), asset management, fund management. Explicitly prohibited: accepting money from island residents and operationally running a crypto exchange.

# The 2022–2026 Cleanup: From "Loophole" to Mature Sector

By the early 2020s, the jurisdiction had accumulated reputational baggage: Pandora Papers, crypto scandals, Venezuelan money. Treasury in the National Money Laundering Risk Assessment 2022 explicitly named Puerto Rican IBE/IFEs as a high-risk zone. Then events cascaded.

On June 30, 2022, OCIF shut down Peter Schiff's Euro Pacific Bank—formally for undercapitalization, against the backdrop of the global J5 investigation "Operation Atlantis." No criminal charges were ever brought against the bank or Schiff, but the liquidation turned into a multi-year saga: asset buyer Qenta terminated the deal in 2025, and the May 2026 settlement returned gold to clients at a discount of about 27% to market price. Four years later, depositors still have not received everything.

September 2023—the first FinCEN case in history against a Puerto Rican IBE: Bancrédito International accepted a $15 million fine for lack of an AML program and unfiled SARs (first application of the Gap Rule). The FinCEN director drew a line: "the era of easy money laundering through Puerto Rican IBEs is over." The case also had a political dimension: the bank's owner Julio Herrera Velutini was accused of financing the governor's campaign to replace the head of OCIF. In August 2025, the parties settled for a misdemeanor, and in January 2026 Trump pardoned all defendants before sentencing—the case is fully closed.

Scale of the cleanup: in 2021–2024, OCIF issued 26 orders, 17 of them against IBE/IFEs; by October 2024, 23 IFEs had gone into liquidation—Nodus (its chairman and ex-CEO pleaded guilty to fraud in 2025–2026), Standard International, First Finance, Next Bank, International Union Bank, and others. IFE sector assets shrank from a peak of $2.2 billion (2021) to ~$1.3 billion (2025), and since 2022 the sector has collectively been operating around break-even.

The denouement was unexpectedly positive: in February 2024, Treasury removed Puerto Rican banks from the list of national ML risks, FinCEN held the first FinCEN Exchange on the island, and the Act 44/45-2024 reform established a new entry bar. The jurisdiction did not die—it became more expensive and matured.

> 🍓 The 2022–2026 outcome: mass cleanup of weak licenses plus a 40-fold increase in capital requirements. There are fewer banks, but each survivor is more resilient. The regulatory attractiveness of the jurisdiction has been preserved—the "cheap entry" has disappeared.

# Who Remains: Key Players

According to OCIF data for 2024, 46 IFEs and 27 IBEs are active. The three most notable fintech-wave stories—Zenus, FV Bank, and Arival—received identical licenses with adjacent numbers and diverged along three different trajectories.

## Zenus Bank: From Retail to Infrastructure

IFE-061 license (permit 2019), founder—Mushegh Tovmasyan, FX industry veteran (founded broker Divisa Capital, restructured Alpari, co-founder of Equiti Group), CEO—Puerto Rican banker José Díaz-Ortiz. Started as a "global retail bank": remote accounts for non-residents from 180+ countries, Visa Infinite cards, principal membership in Visa since 2020.

In October 2024, Zenus launched a BaaS platform on Estonian core banking Tuum, and on July 22, 2025, announced a complete exit from retail—personal accounts closed by October 22, 2025. Today it is a pure B2B bank: embedded accounts, BIN card sponsorship in 100+ countries, payment rails from Fedwire and SWIFT to stablecoins. The bank claims 650+ financial institutions on the platform and $40 billion in annual turnover—self-reported figures, no audited statements in public. No enforcement history with the regulator found; in customer reviews from the retail era—complaints about blockages and fees when closing accounts.

## FV Bank: Betting on Stablecoins

> 🔗 **Related**
> [separate article](https://wiki.private.law/en/fv-bank-digital-asset-custody)

IFE-063 license, founded in 2018 by Miles Paschini and Nitin Agarwal. Paschini is a card industry veteran: his Gibraltar-based WaveCrest issued the world's first crypto cards until Visa shut down the program in January 2018 for violating operational rules. FV Bank was built precisely on the lessons from that story: own the license, compliance, and technology stack yourself.

First among IFEs to receive OCIF permission for digital asset custody (December 2020, launch November 2022), accepts direct deposits in USDC and PYUSD with auto-conversion to dollars, in October 2024 issued Visa cards linked to both fiat and custody balances, and in June 2026 became the first among American depository banks to launch Stablecoin Invoicing—invoicing payable in stablecoins with settlement in USD. After the adoption of the GENIUS Act (July 2025), this is the main beneficiary of stablecoin regulation in the jurisdiction. Disclosed investments ~$13 million (Series A $8 million from BnkToTheFuture, 2021). No enforcement history. Detailed bank profile—in a separate article.

## Arival Bank: A Cautionary Tale

IFE-065 license (October 2021). Project of the Life.SREDA team—Vladislav Solodkiy, Igor Pesin, Jeremy Berger—positioned as "the first fintech bank for abnormal clients": startups and crypto businesses that are rejected by regular banks. Raised $2.3 million through crowdfunding on SeedInvest and Crowdcube at a valuation of ~$15 million.

In 2022, majority investors exercised options and consolidated ~61% control; Solodkiy was ousted from management, is suing in Singapore, and in 2025 published a book about it. The bank continues to operate under CEO Bill Pappa (approved by OCIF in 2023): USD accounts with ACH and wires, EUR via SEPA, no cards yet. Important caveat: a significant portion of the high-profile accusations around Arival—"failed OCIF verification," "opaque UBOs"—comes from a lawsuit against a third company that was dismissed by the court and from publications by the ousted founder. These are documented claims by parties to the conflict, not established facts.

## Old Guard and Special Cases

Italbank (IBE, 2008, Dorado family from Italcambio group) and Facebank (IBE, 2006, ~75% of clients—Venezuelan diaspora, has DBRS rating—rare for the sector)—quiet veterans. Banco San Juan Internacional is alive but lost its master account at the Fed and lost the final appeal in May 2026—now works through correspondents. Stern International (IFE-044)—niche trade finance. Medici Bank of Prince Lorenzo de' Medici appears on OCIF's 2024 enforcement list. And San Juan Mercantile—the island's first "crypto settlement" bank—after renaming to Mercantile Bank International was sold to Beneficient for $1.5 million: an indicative price for a shell license.

For contrast: Nave Bank ("the first new Puerto Rico bank in 20+ years," >$400 million in assets by end of 2025)—not an IFE, but a regular local bank with FDIC insurance, serving the domestic market. It is also telling that new players are almost not coming for IFE licenses: crypto majors—Coinbase, Circle, Kraken, Ripple, PayPal, Block—take money transmitter licenses with digital asset rights in Puerto Rico: faster and cheaper than a banking license.

# Public Check on X: Who's Alive

The pulse of public accounts honestly reflects the state of businesses (verified July 3, 2026):

| Account | Status | Followers | Last Activity |
| --- | --- | --- | --- |
| @ZenusBank | active | ~950 | June 2026—Celent award |
| @fvbankus | active | ~1,840 | June 2026—Stablecoin Invoicing |
| @yolobro—Miles Paschini, CEO FV Bank | active | ~730 | June 2026 |
| @ArivalBank | abandoned | ~330 | January 2021 |
| @SlavaSolodkiy | active | ~130 | June 2026, bio—"ex-CEO ArivalBank" |

Zenus and FV Bank's marketing is alive; Arival's account has been silent precisely since the corporate conflict. Tovmasyan has no public personal X—look for his traces on LinkedIn. A separate universe—@PeterSchiff, who has been waging a public war for Euro Pacific depositors' assets for the fourth year.

# What This Means for the Client

An IFE bank is a working tool for a non-U.S. resident who needs a dollar account with direct access to Fedwire: fintech, crypto business, trading, international trade—anyone who is rejected by classic banks. Bonus—privacy outside CRS and an American account "address" without American tax residency.

Risks mirror the advantages: deposits are not insured, the license can be revoked (23 liquidations in three years is not theory), the bank's master account is Fed discretion. Therefore, choosing a specific bank is more important than choosing a jurisdiction: you need to look at capital, audit, history of relations with OCIF, and concentration of the client base.

For those thinking about their own license: the era of "$250K and four employees" ended in May 2024. Now it's $10 million in paid-in capital, eight people in the office, and strict compliance—or buying an existing license with OCIF approval (shell price benchmark—Beneficient/Mercantile deal, $1.5 million).

> 🍓 Puerto Rico is the only jurisdiction where a non-resident bank lives inside the American financial system. After the 2022–2026 cleanup, this is a market for serious players: entry ticket $10M, survivors have coherent business models. For the client, the main rule remains unchanged: this is banking without insurance—choose the bank, not the jurisdiction's brand.

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## Factual claims

- This is a hub overview of the jurisdiction: how it is structured legally, what happened to it during the turbulent 2022–2026 period, and who remains in the market.
- The story begins in 1989.
- In 2012, the model was relaunched.
- The old IBEs did not disappear, but today they are mainly treasury units of large groups like UBS, Citi, and Banco Popular with ~$68 billion in balance sheet assets.
- Until 2024, the entry threshold was almost symbolic: $5 million authorized capital, of which only $250 thousand had to be paid in, four employees on the island, and $5,000 for the application.
- The permitted scope of activity is broad: deposits and lending to non-residents, letters of credit, FX, custody (since 2024—explicitly including digital assets via no-objection procedure), asset management, fund management.
- By the early 2020s, the jurisdiction had accumulated reputational baggage: Pandora Papers, crypto scandals, Venezuelan money.
- September 2023—the first FinCEN case in history against a Puerto Rican IBE: Bancrédito International accepted a $15 million fine for lack of an AML program and unfiled SARs (first application of the Gap Rule).