This article looks at the process and procedure of obtaining an Electronic Money Institution (EMI) or e-money licence in the United Kingdom.
If you intend to offer your customers the ability to store money electronically or magnetically, like an e-wallet, and enable them to use this e-wallet to pay for goods or services, your firm will then be required to obtain a licence from the financial regulator.
Examples of e-money include prepaid cards that can be used to pay for goods at a range of retailers, or virtual (digital) purses that can be used to pay for goods or services online.
As a company, if you are planning to offer stored value, e.g. storing or issuing electronic money in a digital wallet, then you will require an e-money or more formally referred to as an electronic money institution licence.
1. Licence options
Option 1 - Small Electronic Money Institution (EMI) licence
Key features of a Small Electronic Money Institution:
+ no initial capital requirement - you do not need to show a minimum level of capital in your bank account
+ quicker to obtain the licence (3-4 months)
- can only serve the UK market and not the whole of Europe
- cannot issue more than EUR 5m e-money i.e. the total balance of all your users cannot exceed this amount. If, however, you are close to reaching this amount you can upgrade to the European-level licence “authorised e-money licence”
Option 2- Authorised Electronic Money Institution (EMI) licence
Key features of an Authorised Electronic Money Institution:
+ can serve customers across Europe through 'passporting' (EEA) with the single licence
+ no restrictions with regards to how much e-money you can offer
- an initial capital requirement of EUR 350k – you need to show this amount of capital in your bank account
- more staff is required locally to start the company i.e. a CEO, COO and a compliance officer/MLRO (money laundering reporting officer)
- takes longer to obtain the licence (4-6 months)
2. Countries in which you can provide E-money services
Through passporting, you can provide your payment and/or e-money services to countries within the European Economic Area. This means that you can establish a branch or provide services in these countries with a single licence.
Countries within the European Economic Area are:
Austria, Belgium, Bulgaria, Croatia, Cyprus (Republic of), Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.
3. Benefits of an Electronic Money Institution (EMI) or E-money licence
The major advantage of an e-money licence is that you can add payment services under the same licence without also having to apply for an additional licence for the payment services. For example with an e-money licence, you could issue e-money such as e-wallets but also the below payment services, such as providing debit cards and payment processing.
Additional services you can offer with an E-money (EMI) licence:
Providing debit cards to users with the ability to withdraw and deposit cash on the account.
Providing a money transfer service, such as TransferWise and Western Union
Providing payment processing services, for example, enabling retailers to accept card payments from their customers
Account initiation service – providing a service where a user can view all their banking accounts in one place
Payment initiation service – providing a service where users can make account-to-account payments (outside the scope of card schemes, such as Visa/Mastercard)
4. Countries in which we can help you obtain the Electronic Money Institution (EMI) or E-money licence
Our e-money licencing service covers Europe. Accordingly, we can help you obtain an e-money licence in countries including, Austria, Belgium, Bulgaria, Croatia, Cyprus (Republic of), Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. As part of our service, we can advise you on the best jurisdiction in which to establish and obtain your e-money licence.
5. Time frame to obtain the Electronic Money Institution (EMI) or E-money licence
Following the submission of an application, it takes 3-5 months on average to obtain the e-money licence. Given our experience of dealing with the FCA as well as understanding their expectations from a licence application, we minimise the number of questions asked by the regulator thus reducing the overall time taken to obtain the licence authorisation.
6. Key requirements to obtain the Electronic Money Institution (EMI) or E-money licence
i. Mind & Management
A firm must have more Directors resident in the UK than overseas (although their nationality is not an issue.)
The FCA expect the UK personnel to have powers over the group or overseas board, so the UK board can make decisions on policies, strategies and decisions.
Board meetings must be held in the UK.
Operational day-to-day decisions must be made in the UK.
A firm may have an overseas Director on the board of the UK company, as long as everything else concerning the company is based in the UK.
The CEO, Compliance Officer and the MLRO (Money Laundering Reporting Officer) must reside in the UK. The CEO could also double up as the MLRO if appropriately skilled and experienced.
Services provided by any third parties, such as IT, must be provided on executed agreements.
ii. Management Competence
The FCA will want to ensure that the management of the firm, including those responsible for the management of the firm, are fit, proper and competent. We can help you assess the suitability of your personnel.
7. Key information and documents required to prepare and obtain the Electronic Money Institution (EMI) or E-money licence
As part of your E-money application, we will help you prepare the following key aspects of the application.
A programme of operations.
A business plan including a forecast budget calculation for the first three financial years.
Evidence that you hold initial capital.
A description of the measures taken for safeguarding electronic money service users’ funds.
A description of the governance arrangements and internal control mechanisms, including risk management and accounting procedures.
A description of the procedure for monitoring, handling and following up on security incidents and security-related customer complaints, including an incidents reporting mechanism which takes account of the notification obligations.
A description of the process for filing, monitoring, tracking and restricting access to sensitive payment data.
A description of the business continuity arrangements, including clear identification of the critical operations, effective contingency plans, and a procedure for regular testing and reviewing of the adequacy and efficiency of such plans.
A description of the principles and definitions used in collecting statistical data on performance, transactions and fraud.
A security policy.
A money laundering and countering terrorism financing policy.
A description of the structural organisation, including, agents, branches, and outsourcing.
8. Services you can offer under an Electronic Money Institution (EMI) or E-money licence
Issuance of e-money i.e. prepaid cards, e-wallets; plus,
Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account.
Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account.
Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider:
a. execution of direct debits, including one-off direct debits;
b. execution of payment transactions through a payment card or a similar device;
c. execution of credit transfers, including standing orders.
Execution of payment transactions where the funds are covered by a credit line for a payment service user:
a. execution of direct debits, including one-off direct debits;
b. execution of payment transactions through a payment card or a similar device;
c. execution of credit transfers, including standing orders.
Issuing of payment instruments and/or acquiring of payment transactions.
Money remittance.
Payment initiation services.
Account information services.
9. Initial Capital required for the Electronic Money Institution (EMI) licence
The initial capital required for the authorised or European-wide e-money licence is EUR 350,000
The Small EMI is not subject to any initial capital requirement.
10. How we can help you obtain the Electronic Money Institution (EMI) or E-money licence
We specialise and focus on payments and e-money. We can help you to obtain your e-money licence, be compliant by helping you with your compliance obligations, and provide support and advice where required. As part of our licencing (authorisation) service, we spend time understanding your plans and ambitions and advise you on the best possible route and strategy.
In addition to the licence authorisation service, we can assist you with additional services, such as company formation, ongoing advisory and consulting, accounting, legal, Visa/Mastercard principal membership and operational setup. We offer an end-to-end service, taking responsibility for the entire project, including project planning and preparing all the required documents, such as your regulatory business plan, AML policy and financial statements.
Our licencing service includes the following:
Guiding you throughout the application preparation stage
Managing the entire application from planning to obtaining the licence
Preparing, completing and submitting the application form
Submitting the individual directorship and shareholding forms
Preparing, completing and submitting compliance documents such as the business plan, financial statements, AML procedure, monitoring programme, compliance and risk management.
Submitting your application to the financial regulator
Assisting you with any correspondence/further questions from the financial regulator after submitting your application until your licence has been granted.
11. Next Steps
The next step involves us arranging a telephone call or a meeting to discuss your business ambitions and plan. We will discuss any business and regulatory requirements that you will be required to meet and help guide you through these. Once we have finalised the above we can then proceed with your application. Remember, our service is expert-led and so you will be working with and communicating with a director at all times.
How Regulatory Counsel can help
We are one of the UK's leading regulatory consulting firms, helping companies with regulatory authorisations (licencing), compliance and consulting. Our focus and expertise have enabled us to work closely with regulators and understand the regulatory standards which are required from regulated firms.
Contact us by email at info@regulatorycounsel.co.uk or call us on 0203 6274 724.
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