This article looks at obtaining an Electronic Money Institution EMI license in the United Kingdom (UK). If you wish to become an Electronic Money Institution in the UK then you must prepare and submit an Electronic Money Institution license / EMI application in the UK to the Financial Conduct Authority. Buckingham Capital Consulting can help you if you become an Electronic Money Institution - EMI in the UK. An Electronic Money Institution EMI license will enable you to offer all the services of a payment institution.
Below we will look at the process of becoming an electronic money institution - EMI in the UK as well as looking at the key regulatory requirements of becoming an electronic money institution.
The regulatory framework for Electronic Money Institutions in the UK
PSD2, or the Payment Service Directive 2, is an EU Directive (Directive 2015/2366) which sets requirements for businesses that provide payment services. It applies to banks, building societies, payment institutions, electronic money institutions and their customers.
PSD aims to promote innovation within the payments sector. Furthermore, it aims to improve protection for consumers and make payments both safer and more secure.
The following laws and regulations are applicable to Electronic Money Institutions in the UK.
- 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
- The SEPA Regulation (Regulation (EU) 260/2012
- The Payment Accounts Regulations 2015
- EU Payment Accounts Directive
- Guide to the UK General Data Protection Regulation (UK GDPR)
- Proceeds of Crime Act 2002 (POCA)
- 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
The UK regulator for Electronic Money Institutions
The Financial Conduct Authority in the UK regulates firms that provide regulated services, including, consumer credit, payment services, e-money, lending, insurance and investment services.
If you wish to issue electronic money services in the UK, such as prepaid cards or electronic wallets, you will require an Electronic Money Institution license from the Financial Conduct Authority by submitting an electronic money institution license application.
The Financial Conduct Authority expects firms to meet a range of requirements before it allows them to provide regulated financial services as an electronic money institution. When an applicant firm submits an application seeking authorisation as an electronic money institution, the Financial Conduct Authority will review their business plans, risks, budget, resources, systems, controls and people.
What is electronic 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 transaction, 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.
Preparing a strong Electronic Money Institution license application
As part of your Electronic Money Institution - EMI license application, you will be required to submit a number of documents, policies and procedures, including, a business plan, your safeguarding measures (how you will keep your client money separated and ring-fenced), your governance arrangements and risk management, your procedures for managing and handling security incidents and customer complaints, your security policy and your measures against financial crime, including AML. These policy and procedural documents must be specific to your firm and adequately address key aspects as set out by the regulator. Submitting templated documents will not be accepted and will cause delay, and potential rejection of your application. This is why it is important to prepare policies and procedures that are well thought-through and adequately address the regulator’s requirements and what it expects to see.
An important part of your Electronic Money Institution - EMI license application is to ensure you meet the regulator’s basic conditions. Think of the basic condition as the basic requirements you must have in place. For example, your employees must be located in the United Kingdom. You will need to demonstrate through your application that you have appropriate resources to operate your business. This includes having sufficient financial, management, staff, and systems to manage your business. Your team should be suitable and competent in their roles.
As part of your electronic money institution license application, you will need to provide details of your IT systems, including both core systems and any support systems. The regulator will expect to see that you have these in place before it issues your electronic money institution license.
Furthermore, you must have adequate resources in place. This includes financial resources, i.e. possessing sufficient funds to manage and operate the business. You will be required to demonstrate that you have suitable and experienced management and employees to manage the business. Firms must also demonstrate that they adequate IT systems and internal controls to ensure the safety of payments and manage fraud adequately and effectively.
You must provide policies and procedural documents that clearly demonstrate that you understand your business risks. Firms should prepare a risk framework and address how they will mitigate their risks, including operational, security and money laundering risks.
Documents required to apply and become an Electronic Money Institution in the UK
As part of your Electronic Money Institution (e-money) license application, you will be required to provide the following information as part of your application:
company identification details
programme of operations
business plan and financial forecasts
a description of your business’s organisation structure
evidence of your initial capital
your measures to safeguard funds of your users
your compliance & governance arrangements and internal controls
your procedure for monitoring, handling, and following up on security incidents and security-related customer complaints
your processes for filing, monitoring, tracking and restricting access to sensitive payment data
your business continuity measures
the principles and definitions applicable to the collection of statistical data on performance, transaction and fraud
security policy
your internal control mechanisms to comply with obligations in relation to money laundering and terrorist financing (AML/CTF obligations)
details of your qualifying holdings (shareholders)
details of any outsourcing arrangements
Amount of time it takes to obtain the Electronic Money Institution in the UK
The Financial Conduct Authority must make a decision within three months of receiving a complete Electronic Money Institution application. In reality, it takes, on average, around 4-5 months for an application to be assessed and a decision to be made.
Initial capital requirement for the UK Electronic Money Institution EMI license
The initial capital required for an Electronic Money Institution is €350,000
Next steps
Buckingham Capital Consulting is a leading international consulting firm, specialising in payment services, electronic money, banking and investment services. We are able to advise you on the best course of action and strategy based upon your business plan and financial product or service. We can help you with licencing, compliance, operational setup and related services, including, obtaining banking facilities. For more information, visit our website on www.buckinghamcapitalconsulting.com.
Call us today on 020 7866 2512 or 0800 689 0501. Alternatively, please send an email to info@buckinghamcapitalconsulting.co.uk to arrange a telephone call or to discuss your requirements and plan. We are also able to arrange calls or conference calls using Skype. Our Skype ID is BCC54321.
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