Regulatory Framework for EMI in the UK
Financial Conduct Authority (FCA) is the regulatory body overseeing electronic money institutions in the United Kingdom.
Businesses aiming to offer services like prepaid cards or e-wallets must apply for an England AEMI Licence.
- Electronic Money Regulations (EMR): Implementing Directive 2009/110/EC outlines operational and supervisory standards for E-money Institutions.
- Payment Service Regulations 2017.
- Financial Services and Markets Act 2000: Setting the broader regulatory framework.
- Electronic Money Regulations 2011 and EU Directive 2009/110/EC (EMD).
- FCA Guidelines and Instruments: Including the Principles for Businesses and Payment Services and Electronic Money Approach.
- Anti-Money Laundering and Counter-Terrorism Financing Regulations: Such as the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017.
Criminal Finances Act 2017, outlining firms’ responsibilities in preventing financial crimes.
What Activities are Covered by the Payment License in the UK
Here are the core services governed by the England Electronic Money Institution License:
- E-money Issuance: This includes tools like prepaid cards and electronic wallets.
- Payment Account Services: This embraces depositing and withdrawing cash, ensuring the smooth operation of payment accounts.
- Payment Transactions: Encompassing fund transfers within or outside your payment service provider. Essential transaction methods include direct debits, payment card operations, and credit transfers, even when facilitated under a credit line.
- Payment Tools: Pertains to the issuance of payment instruments and transaction acquisitions.
- Money Transfer: This refers to money remittance.
- Digital Services: These involve payment initiation and account information services.
Why Should You Choose an EMI License in the UK?
Obtaining an E-money license in the UK offers a plethora of advantages:
- Obtain an English SWIFT code for global transactions.
- Issue English IBAN accounts and register accounts remotely for both individuals and businesses.
- Facilitate credit and debit card payments directly linked to client accounts.
- Currency Diversity: With an England EMI license, you can bank transfers in over 45 currencies worldwide.
- Accept payments from any global account utilizing the SWIFT system.
- Establish correspondent accounts in numerous countries.
- Compliance and Security: Set up your Anti-Money Laundering (AML) department.
- Benefit from the VAT exemption for financial services within the UK.
- Enjoy no restrictions on the company’s turnover.
Types of UK EMI Licenses
- The England AEMI license (Authorized Electronic Money Institution) provides a full range of services, including operations in the European Economic Area. It will be necessary to pay 5000 GBP to obtain this authorization.
- SEMI, namely the Small EMI License UK, is suitable for small companies with a turnover of no more than 3 million euros. Services can be provided only in the UK. The fee for this license is 1000 pounds sterling.
UK EMI License and Other Jurisdictions
By obtaining an E-money license in the UK, the company gains a strong position in the financial sector, where the FCA provides a reliable and transparent environment. This is not just a permit with a regulatory requirement but a strategic asset that can transform a business in the e-payments niche into a bank and a host of other opportunities. All this is in one of the world’s financial centers.
A country like Cyprus will become an attractive environment for fintech companies. It will offer efficient virtual currency management and innovative opportunities in the field of finance. Cyprus companies can operate throughout the EU and so on.
However, after Brexit, the license of Cyprus or any other European jurisdiction does not allow the advertising of financial services in the UK without a UK EMI license.
Requirements for Obtaining an EMI License in Great Britain
To secure a Great Britain E-Money Institution License, applicants must navigate through a set of regulatory demands that affirm their operational integrity and financial stability:
- A foundation of financial solidity is required, with a minimum capital of €350,000 (approximately 305,000 GBP), to establish an authorized E-money business.
- An operational capital pegged at 2% of the electronic money issued is necessary to support the firm’s financial health.
- There must be mechanisms, such as segregated client bank accounts or insurance policies, to protect client funds adequately.
- The governing body must be credible, with the qualifications and experience to carry out their responsibilities effectively.
Further stipulations, as outlined by the FCA, include:
- The institution should be legally recognized as a corporate body.
- All payment services are to be executed within the UK territory.
- Implementation of robust governance structures and a strategic business plan is required.
- Stringent measures must be in place for the safeguarding of users’ funds.
- Adequate indemnity insurance should be held to cover potential risks.
- Directors must have a clean reputation and possess the skills appropriate for their roles.
- There should be no history of money laundering among any of the managers.
- The primary office of the institution must be located within the UK.
- Compliance with all relevant money laundering regulations is non-negotiable.
- Shareholders with a stake of 10% or more must pass a ‘fit and proper’ test.
- Any significant relationships with other individuals must be clear to the FCA’s ability to supervise the business effectively.
To apply for an EMI license in the UK, the following documentation and information are essential:
- Business identification specifics.
- Program of operations.
- Business plan and financial projections.
- Describe how a business is organized.
- Provide proof of initial capital.
- Measures to secure client funds.
- Compliance, governance arrangements, and internal controls.
- Procedures for handling security incidents and related customer complaints.
- Processes for handling sensitive payment data,
- Measures in place to maintain operations.
- Methods for collecting performance, transaction, and fraud-related data.
- Internal controls for adhering to Anti-Money Laundering and Counter-Terrorist Financing obligations.
- Provide information on qualifying holdings or shareholders.
- Detail any arrangements for outsourced services.
Stages and Timeframe for Obtaining a UK EMI License
To secure an England AEMI License, follow this condensed guide ensuring compliance and readiness for FCA evaluations:
Assessing the Best Business Structure and EMI License Requirements in the UK
- The advisory team will provide guidance on the most suitable business entity and license, tailored to the expected operational scope of the business.
- Before initiating activities in the jurisdiction, a group of specialists will outline all the licensing needs, including:
- Necessary capital
- Local economic contribution
- Process details
Executing Fit & Proper Evaluation
All key management staff possess the required qualifications and aptitude for their roles by scrutinizing their informational data and supporting documents.
Registration of the Company
- Due diligence will be conducted on the company’s directors and shareholders. The process to register the entity with the local Business Registry will begin once all KYC details, incorporation paperwork, and power of attorney are in place.
- After successful registration, corporate documentation such as the Incorporation Certificate, Memorandum, Articles of Association, and other relevant papers will be dispatched.
- Legal specialists will compose all necessary paperwork for the licensing application, which may include the business strategy, AML/CFT policy, and other crucial documents, depending on local regulations.
- Once these documents are prepared, they will be sent for e-signature and the licensing application process will commence.
Complying with Local Economic Substance Norms
- In cases where local regulations mandate economic substance, assistance will be provided to meet these criteria. This includes help with hiring qualified local professionals.
- The Human Resources team will manage the preliminary selection and interviewing of candidates. The final decision on the suitable team members lies with the business. Following selection, aid in drafting an employment agreement with the agreed terms will be provided.
- Additionally, a list of potential office spaces, detailing rent, location, size, and more, will be compiled for better decision-making. Once an office is chosen, a lease agreement will be prepared for signing with the property owner.
Submitting the License Application
- The license application will be submitted to the local regulatory authority.
- Depending on the specific jurisdiction, an interview with the regulator might be required before license approval.
- Preparation for this interview and assistance with subsequent regulatory requirements will be provided.
- Upon successful application, the firm will receive the UK EMI license and must commence operations within a defined period to maintain the license.
Ensuring Banking Facilities
- Obtaining an EMI license necessitates specialized banking services, including client safeguarding accounts and access to payment systems like IBAN and SWIFT, along with the necessary business management systems and software.
- The Banking Team will facilitate these requirements, arranging for banking services such as safeguarding accounts, card issuance, and access to payment infrastructures.
More Important Services for Establishing a Business
In addition to obtaining the EMI license in the UK, we will look closer at our services for businesses to help facilitate the process.
- We will consider all the client’s needs before applying to the regulator when developing the required documents.
- We also provide an effective service for finalizing existing documents: business plans, financial statements, risk assessments, etc.
- It is possible to connect White Label, which significantly simplifies the process.
- An IT compliance analysis can be conducted for clients who already have the software. This is necessary to ensure that the software meets the regulator’s standards. When modernizing, switching to already-proven BAAS or SAAS options is recommended. Most often, we work with Crasula or Canopus.
- You can expand the payment processing capabilities with the help of third-party providers, allowing you to make transactions in different currencies. Integrations with systems such as Railsr or Modulr will provide the client with cost savings and operational efficiency.
- Regarding card issuance, the best solution is White Label through DECTA and Wallester. It is economical and efficient in contrast to direct membership in the network. All this significantly contributes to the successful establishment of companies and obtaining an e-money license in the UK.
Fee for Obtaining an EMI License in the UK
For obtaining a license as an Authorized Payment Institution (PI) in the UK, the application fee stands at either GBP 1,500 or GBP 5,000. This fee applies explicitly to payment institutions that deal in money transmission, payment initiation services, and/or account information services, setting the cost at EUR 1,500.
To acquire an Authorized UK E-Money Institution Licence, the standard enrollment fee is GBP 5,000.
For smaller PI or EMI licenses within the UK, the applicable charge is GBP 500.
Upon receiving authorization for operations, businesses are mandated to remit an annual subscription to the FCA, the value of which is determined by the regulatory body itself.
What are the costs associated with obtaining a UK EMI license?
The cost for a UK EMI license varies, depending on the scope of services required during the process. It includes fees for company formation, the actual licensing, and any ancillary charges that may come up. Clients will receive a detailed breakdown of all costs before the registration process starts, ensuring clarity and transparency of all service fees outlined in the initial agreement.
How does an EMI differ from a traditional bank?
EMIs primarily offer electronic payment accounts that enable users to make and receive payments without a traditional bank account. In contrast, banks provide a more comprehensive range of financial services beyond payment processing, including loans, investments, and other financial products.
What does the FCA consider when evaluating an EMI license application?
The FCA reviews an EMI application for evidence of effective risk management, financial crime prevention, sound safeguarding of customer funds, and a robust system for maintaining records and reports.
Is it necessary to travel to the UK during the EMI license application process?
The application process for a UK EMI license is designed to be conducted with minimal to no travel required as long as all documents are correctly submitted and signed. The process accommodates the needs of international applicants by allowing for remote completion.