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E-money institutions (EMI) constitute an essential part of Europe’s financial market as they assist individuals and businesses in easily managing their money. Made for the digitalized era, EMIs open access to the main services with finances across various sectors. However, prior to the delivery of services, each organization must apply for a license to ensure compliance with the law. Below are the key details about an EMI license in the EU.
The operation of EMIs is under the regulation of PSD 2, which entered force on 13 January 2018. This is an EU Directive (2015/2366) that establishes a set of obligations for organizations that deliver a wide range of online payment methods as their core operation. The PSD 2 aims to encourage innovation within the monetary sector, particularly, the payment domain. What’s more, it is designed to strengthen protection for clients and make payment operations safer.
To become a licensee, you should establish a business presence in the country where the sector of finances is under the regulation of special authorities. For example, in the United Kingdom, the regulative body for monetary system is FCA. For jurisdictions such as the UK, your CEO and AML compliance officer should be local residents. Other jurisdictions, such as the Lithuanian, propose more flexibility in the respect that your CEO and MLRO do not need to be domicile physically in Lithuania. Also, you should establish an operational office that must be used solely for business activities.
Subject to your license type and the underlying authorizations, you should meet capital obligations. For the EMI license, the start capital is EUR 350,000. For the PI license, it varies from EUR 20,000 to 125,000 subject to the activities you intend to deliver. You also must satisfy the ongoing capital obligations for the business.
Under the applicable legislation, you are obliged to guarantee the highest level of protection of client funds. You can do this by either placing the client money into a separate ring-fenced client account or by acquiring an insurance policy. However, insurance policies are very rare and so you will likely have to ring-fence the client money into a separate account to guarantee secure operations and storage.
While getting your EMI license, you will be asked to share the details of the IT platforms applied in your business operations. You are not obliged to already have your software in place at the time of applying for licensing, however, you will need to have the details in place when the application is assessed.
The upper management, including the Chief Executing Officer and the AML compliance officer, must have sustainable knowledge and background in the financial domain to conduct their duties in a proper manner. They will be assessed on this obligation during the application assessment.
The lawyers of Eternity Law International will kindly recommend the best course of action and strategy grounded on your business plan and financial product or service. We can assist you with licensing, compliance, company formation, and related services, including, obtaining banking facilities.
Please contact us to get more information.
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The international company Eternity Law International provides professional services in the field of international consulting, auditing services, legal and tax services.