Electronic Money Institution Authorisation (licence)

Introduction

At Buckingham Capital Consulting, we specialise in navigating the complex regulatory landscape surrounding e-money EMI (electronic money institution) authorisation to help firms register with the FCA. Our team of experts possesses a deep understanding of the intricacies involved in obtaining and maintaining EMI authorisation. We stay updated with the latest regulatory developments and provide the expertise needed to obtain the authorisation and ensure compliance.

 

Our EMI authorisation service is designed to take the burden off your shoulders. We guide you through each step of the authorisation process, from the initial application to ongoing compliance requirements. By leveraging our in-depth knowledge and experience, we streamline the process, saving you valuable time and resources. With Buckingham Capital Consulting as your trusted partner, you can focus on what you do best – running your business – while we handle the intricacies of the authorisation process.

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Definition of E-money

As per Article 2(2) of Directive 2009/110/EC, “e-money” means “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions, and which is accepted by a natural or legal person other than the electronic money issuer.” Prepaid cards and electronic wallets are examples of electronic money.

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Electronic Money Regulations

The following laws and regulations are applicable to e-money (EMI) firms in the UK and EU:

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• The Financial Services and Markets Act 2000

• The Payment Service Directive (Directive 2015/2366)

• The Electronic Money Regulations 2011

• Directive 2009/110/EC of the European Parliament

• The Payment Service Regulations 2017

• Payments in Euro (Credit Transfers and Direct Debits) Regulations 2012

• Regulation (EC) No 924/2009

• The SEPA Regulation (Regulation (EU) 260/2012)

• The Payment Accounts Regulations 2015

• EU Payment Accounts Directive

• Data Protection Act 2018

• Guide to the UK General Data Protection Regulation (UK GDPR)

• Proceeds of Crime Act 2002 (POCA)

• Terrorism Act 2000

• Money Laundering, Terrorist Financing and Transfer of Funds 2017

• Regulation on interchange fees for card-based payment transactions (EU) 2015/751

• The Money Laundering and Terrorist Financing Regulations 2019

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What are the FCA Threshold Conditions for EMI Authorisation?

The FCA’s Threshold Conditions are the minimum standards that firms must meet to be authorised. These include:

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• Location of Offices: Your head office and registered office must be located in the UK.

• Effective Supervision: Your business must be capable of being effectively supervised by the FCA.

• Appropriate Resources: Your firm must have appropriate financial and non-financial resources.

• Suitability: Your firm’s management must be competent, financially sound, and reputable.

• Business Model: Your business model must be suitable and sustainable.

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How to Prepare a Strong EMI Application?

To prepare a strong EMI application:

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• Detailed Business Plan: Ensure your business plan includes clear objectives, a description of services, target market analysis, and detailed financial projections.

• Comprehensive Policies: Develop robust AML/CTF policies, risk management strategies, and data protection measures.

• Qualified Management Team: Ensure that all key personnel have relevant experience and qualifications.

• Capital Requirements: Provide evidence of the required initial capital of €350,000 and outline how you will maintain ongoing capital requirements.

• Safeguarding Measures: Clearly describe how you will safeguard customers' funds, such as through segregated accounts or insurance policies.

 

What is Consumer Duty and How Does It Apply to EMI?

Consumer Duty requires firms to act in the best interests of their customers. For EMIs, this means:

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• Transparency: Providing clear information about fees and services.

• Fair Treatment: Ensuring products and services are suitable for customers.

• Complaint Handling: Efficiently addressing customer complaints and feedback.

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What are Operational Resilience and Operational Readiness?

• Operational Resilience: The ability to prevent, adapt, respond to, recover, and learn from operational disruptions. For EMIs, this involves having robust systems in place to manage risks and ensure continuity of service.

• Operational Readiness: Preparing your firm to meet regulatory requirements and market demands. This includes having the necessary infrastructure, trained staff, and compliance measures in place.

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Documents Required for EMI Authorisation

To apply for EMI authorisation, you will need to complete the application form and supplementary forms, and submit evidence to the FCA. Buckingham Capital Consulting can prepare and manage these documents on your behalf to strengthen your application.

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As part of your EMI authorisation application, you will need to prepare the following information:

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1. Business Plan: Including financial forecasts for a period covering three years.

2. Programme of Operations: Detailed description of your business activities.

3. Business Organisation: Description of your organisational structure.

4. Initial Capital Evidence: Proof of your initial capital.

5. Safeguarding Measures: Details on how you will safeguard users' funds.

6. Compliance & Governance Arrangements: Internal controls and compliance procedures.

7. Security Incident Procedures: Methods for monitoring, handling, and following up on security incidents and complaints.

8. Data Protection Processes: Methods for managing and protecting sensitive payment data.

9. Business Continuity Measures: Plans for ensuring business continuity.

10. Data Collection Methodology: Methods for collecting performance, transaction, and fraud-related data.

11. Security Policy: Your business's security policies.

12. Financial Crime Policy: Internal mechanisms to comply with AML/CTF obligations.

13. Qualifying Holders Information: Details of shareholders holding or controlling 10% or more of the applicant firm.

14. Outsourcing Arrangements: Details of any outsourcing arrangements.

15. Management Team Information: Details of individuals responsible for managing your firm.

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Registering Management Team Members or Directors

You will need to submit individual forms for each person responsible for managing your EMI. This includes the money laundering reporting officer and other key function holders.

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Registering People with Qualifying Holdings

Submit details of any person or firm holding or controlling 10% or more of the company's capital or voting rights. Inform the FCA of any changes to the qualifying holdings.

 

Registering Agents

To engage an agent for distributing e-money or providing payment services, it is mandatory to register them. As the principal firm, you must ensure your agent complies with relevant regulations. Establish suitable systems and controls to effectively supervise their activities and take accountability for their actions.

 

Time Frame to Obtain the EMI Licence

The FCA is required to assess and decide on an EMI authorisation application within three months of receiving a complete application. We help ensure your application is complete and meets all regulatory conditions to avoid delays.

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Services Offered by an EMI

Electronic money institutions can issue electronic money like prepaid cards and e-wallets, and offer payment services such as:

• Issuing electronic money (e.g., prepaid cards, electronic wallets).

• Services enabling cash to be placed on a payment account.

• Services enabling cash withdrawals from a payment account.

• Execution of payment transactions, including transfers of funds, direct debits, payment card transactions, and credit transfers.

• Payment instruments or acquiring payment transactions.

• Money remittance.

• Payment initiation services.

• Account information services.

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Initial and Ongoing Capital Requirements for the EMI Licence

The initial capital required for an EMI is €350,000. The ongoing capital requirement is 2% of the outstanding electronic money issued by the firm.

 

Key Requirements for the EMI Licence

1. Minimum Capital Requirement: €350,000 to establish an EMI.

2. Safeguarding Client Funds: Using a segregated client bank account or insurance policy.

3. Management Body Requirements: The management team must have good reputations and relevant qualifications.

4. Capital Requirements: Initial and ongoing capital requirements as described above.

5. Compliance with Local/National Requirements: Meeting the Threshold Condition set by the FCA for the UK EMI authorisation.

 

By following these guidelines and ensuring compliance with the regulatory framework, you can successfully navigate the process of obtaining an EMI licence. Buckingham Capital Consulting is here to assist you at every step, making the process as smooth and efficient as possible.