This article looks at the process and the key requirements of obtaining an Electronic Money Institution E-money license. If you wish to become an Electronic Money Institution then you must prepare and submit an Electronic Money Institution license / EMI application to the financial regulator. Buckingham Capital Consulting can help you if you become an Electronic Money Institution / E-money firm anywhere in Europe. 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 / E-money as well as looking at the key regulatory requirements of becoming an electronic money institution / E-money firm.
The regulatory framework for E-money / Electronic Money Institutions
PSD2, or the Payment Service Directive 2, is an EU Directive (Directive 2015/2366) that 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.
What is electronic money?
In order to successfully apply for the E-money / Electronic Money Institution, the type of service you wish to provide must fit into the 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 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 E-money / 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.
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 financial resources in place. This means possessing sufficient funds to manage and operate the business. You will be required to show 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.
Electronic Money Institution / E-money firm document requirement
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
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)
Amount of time it takes to obtain the Electronic Money Institution / E-money license
The financial regulator must make a decision within three months of receiving a complete Electronic Money Institution / E-money license application. In reality, it takes, on average, around 4-6 months for an application to be assessed and a decision to be made by the regulator.
Initial capital requirement for the UK Electronic Money Institution EMI license
The initial capital required for an Electronic Money Institution is €350,000
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 at www.buckinghamcapitalconsulting.com.
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