Puerto Rico offers a unique regulatory and tax environment for financial services companies, including Money Services Businesses (MSBs). However, it’s critical to understand that there are two very different paths for building a financial services business on the island, depending on your target market.

The Puerto Rico MSB License — Act 136 of 2010

Under Act 136 of 2010, Puerto Rico regulates Money Services Businesses much like U.S. states regulate money transmitters.

An MSB license in Puerto Rico is:
– Intended for local business: The license is designed to serve residents and companies in Puerto Rico.
– Scope of Activities: Licensed MSBs may engage in money transmission, currency exchange, check cashing, prepaid cards, and similar services.
– Application Requirements: Applicants must provide detailed ownership disclosures, compliance programs, AML policies, financial projections, and audited financials.
– Capital and Bonding: Net worth and surety bond requirements apply, scaled to the size and risk of the business.
– Supervision: Licensed MSBs fall under the jurisdiction of the Office of the Commissioner of Financial Institutions (OCIF), which performs ongoing examinations and compliance checks.

For companies wishing to operate in Puerto Rico’s local economy, an MSB license under Act 136 is the correct route.

The Tax-Advantaged Option — Act 60 and IFE Licenses

Some entrepreneurs look to Puerto Rico not only for regulatory purposes but also for its unique tax incentives. Puerto Rico offers two special regimes that allow businesses to pay a fixed 4% corporate tax rate:

1. Act 60 Export Services Companies
– Companies that provide financial or other export services to clients outside Puerto Rico may qualify.
– Key restriction: No business can be conducted with Puerto Rico residents or entities.

2. International Financial Entities (IFEs)
– A full banking license regime under Puerto Rico law.
– IFEs can offer services such as custody, payments, and lending, but only to non-Puerto Rican clients.
– IFEs benefit from the same 4% fixed tax rate as Act 60 companies.

Important Distinction

– MSB License (Act 136): Serves Puerto Rico residents and businesses; does not qualify for tax incentives like the 4% regime.
– Act 60 / IFE: Cannot do business with Puerto Ricans, but qualifies for tax benefits and can serve clients in the U.S. mainland or abroad.

If you want the 4% tax rate, you cannot operate as a local MSB. The two structures are mutually exclusive in terms of market scope.

Comparison: MSB License vs. Act 60 / IFE

Feature	MSB License (Act 136)	Act 60 / IFE Structure
Target Market	Puerto Rico residents and businesses	U.S. mainland and international clients only
Tax Rate	Standard U.S. federal/state rules; no special incentives	4% fixed corporate tax rate
Permitted Activities	Money transmission, check cashing, prepaid, exchange	Banking, custody, payments, lending (IFE); export services (Act 60)
Regulator	Office of the Commissioner of Financial Institutions (OCIF)	OCIF (IFE) and Puerto Rico Department of Economic Development (Act 60)
Local Business Allowed?	Yes	No
Substance Requirements	Basic licensing compliance	Local office, staff, and operational presence required

Compliance and Operational Considerations

Whichever route you take, Puerto Rico imposes strict compliance obligations:

– AML/BSA Requirements: MSBs, Act 60 companies, and IFEs all must maintain robust anti-money laundering programs.
– Reporting: Regular filings with OCIF, IRS/FinCEN, and other U.S. regulatory bodies.
– Substance Requirements: For Act 60 or IFE eligibility, companies must maintain genuine operations in Puerto Rico—local staff, offices, and governance.

Conclusion

Puerto Rico offers two distinct opportunities for financial services companies:

– An MSB license under Act 136, designed for businesses serving local residents.
– A tax-advantaged Act 60 or IFE structure, taxed at just 4%, designed for businesses serving clients outside Puerto Rico.

Choosing between the two depends on your strategic goals. If your focus is on Puerto Rico’s domestic market, the MSB license is appropriate. If your goal is international or U.S.-based business with tax efficiency, then an Act 60 or IFE structure is the better path.