EMI License in Europe

EMI License

In order to make payment service companies or register a company for e-money, depending on specific demands for conducting commercial activities and services’ nature, it is necessary to get an appropriate permission. EMI permits issuing e-money. EMIs are viewed as competitors to standard banking means. Getting EMI permission is a new tool that allows you to solve problems in the interests of banks and their clients, diversify risks, and reduce operating costs. In current commercial conditions, businesspersons often turn to EMI for sale, because this option is more profitable and easier than establishing commercial project from scratch.

Legal issues of getting European EMI license

Permission is provided in state where organization has its head office, meaning that there is at least one branch in the EU. Once licensed (e.g. Malta EMI license, Liechtenstein EMI license, Cyprus EMI license, UK EMI license), it can be passported throughout EU – all EU countries will be allowed to provide services to people.

Procedure takes from 6 to 24 months, depending on country of subsidiary. Some regulatory bodies do not grant certain types of licenses (obtaining an e-money permission in Poland is not possible), while others are very thorough and recognized worldwide (like the FCA UK – i.e. EMI in UK).

You may get Small E-money License. Such small licenses have a simplified verification process, small transaction volume limits and cannot be passportized. Accordingly, small volume, small risks. Of course, this permission will be required if services are to be offered to EU citizens who are in the EU, but there are many gray areas in this case.

Gray areas:

  • if the client is a US citizen and is serviced by a branch in the US, and the money is sent by a person in the EU, a license in the EU is not required;
  • if the customer is a US citizen working in the EU, an EU permit and a US MSP license will be required;
  • if the customer is an EU citizen, but the service is not active in the EU (no marketing or specific country language), a license may not be required.

Restrictions placed on transactions on client sub-accounts generally depend on the degree of identification of the client and vary by jurisdiction. Currently, the provisions of the legislation governing this issue are dynamically changing all over the world, and therefore it is recommended to conduct a separate clarifying study for each new project.

EMI based e-wallet

EMI allows you to link existing payment bank cards to client sub-accounts. It is possible to issue cards of major vendors (VISA, MC). Additionally, on EMI basis, it is possible to create your own card payment system.

EMI license is required when it is planned to create a user’s e-wallet on a site with the ability to withdraw funds, or the wallet currency is supposed to be used for mutual settlements on other sites (sites owned by third parties). In the case when the internal currency is created without the need to withdraw funds outside the system, EMI license isn’t mandatory to open an e-wallet.

Other features

E-money permission includes all features offered by Payment institution permission. A wider toolkit is provided only by a banking license. Such a tool as its own digital quasi-currency provides ample opportunities for fraudulent operations and illegal money circulation. Due to this feature of e-money structure, firm’s owners applying for permission are subject to a thorough check, which lasts from 3 to 6 months.

In addition to many other documents, the final list of which depends on the specific jurisdiction, the general mandatory requirement is confirmation of the availability of funds to launch the project declared in the business plan and confirmation of the purity of their origin. To do this, it is required to provide extracts from personal or corporate accounts of the company belonging to the future owner, as well as proof of payment of taxes on the corresponding amounts.

Thus, the share of e-commerce in international transactions is constantly growing. One of the new forms of settlements used in international trade is e-settlements. New players appeared in the financial sector – payment service providers. An application for authorization is submitted to the competent authorities of applicant’s state.

Together with application, necessary list of documents is submitted, in particular, the business plan of the organization, evidence of the presence of authorized capital, and security policy. The EMI authorization procedure may vary by country. Authorization times may also vary. For example, under Irish law, the total duration of the authorization procedure takes no more than 90 working days. At the same time, authorization in state of domicile allows organization to perform its activities on territory of other participating countries through a representative office or agency, as well as directly if the organization provides its services free of charge.

As a result of the adoption of the Second Directive, the European market has experienced a number of fundamental changes that are necessary to modernize the rules for opening a payment system in Eurozone and getting a payment license in EU. Consequently, a new separate industry of payment companies in FinTech sector has been created, which do not fall under the definition of banks, but act as providers of traditional banking services.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.