Electronic Money Institution (EMI)
Belongs to the Financial Institution licence class
Alternative name: E-Wallet licence
Electronic Money Institution is a licence for the issuance of electronic money. It allows for the issuance of a proprietary quasi-currency. The issued electronic currency can be used outside the payment system’s website. It can be withdrawn and converted into any other currencies. An Electronic Money Institution licence also allows the use of its quasi-currency to service payments for third-party organisations. Typical examples are PayPal, PerfectMoney.
Electronic Money Institution
An Electronic Money Institution is essentially a bank, but without the right to issue loans. The licence allows for the opening of sub-accounts for clients within the institution’s own bank account, effectively creating an “electronic wallet”. However, the “Know Your Client” (KYC) rule applies to such structures in a modified form, through limits on transactions.
Restrictions imposed on transactions through client sub-accounts typically depend on the degree of client identification and vary by jurisdiction. Currently, regulations governing this area are rapidly evolving globally, therefore, a separate due diligence investigation is recommended for each new project.
An EMI License allows for the linking of existing payment bank cards to client sub-accounts. There is also the possibility of issuing cards from major vendors (VISA, MC). Additionally, an EMI can be used as a basis for creating a proprietary card payment system.
Electronic Wallet Based on an EMI
An Electronic Money Institution License is required when planning to create a user e-wallet on a website with the ability to withdraw funds, or if the wallet’s currency is intended to be used for settlements on other platforms (third-party websites). In cases where the internal currency is created without the need to withdraw funds outside the system, an EMI License is NOT required to create an electronic wallet.
Other Possibilities
An Electronic Money Institution License includes all the possibilities provided by a Payment Institution License. Only a banking license provides a broader range of instruments.
Requirements for Owners, Licensing Procedure, Costs, and Timeframes
An instrument such as a proprietary electronic quasi-currency provides ample opportunities for fraudulent activities and money laundering. Due to this characteristic of electronic money institutions, the owners of a company applying for a license undergo thorough due diligence, which lasts from 3 to 6 months.
In addition to numerous other documents, the final list of which depends on the specific jurisdiction, a general mandatory requirement is proof of funds to launch the project declared in the business plan and confirmation of the legitimate origin of these funds. This requires providing statements from personal or corporate accounts belonging to the future owner, as well as confirmation of tax payments on the relevant amounts.
Basic requirements for the beneficiary:
1. Absence of tax arrears;
2. No unspent convictions;
3. Availability of a current account.
If some documents are missing, alternative evidence may be requested.
Also, to control the activities carried out under the licence, there is always a requirement to establish a financial company and have its head office in the licensing jurisdiction, as well as to include several directors who are citizens/subjects of this jurisdiction on the licensee’s management board. The number of directors varies from two to five people. In addition, if not all, then most directors must be citizens/subjects of the licensing jurisdiction.
To provide additional financial guarantees of law-abidingness, after the approval of the owners and directors, to activate the licence, it is necessary to deposit capitalisation into the company’s current account. The amount of capitalisation may vary, however, for example, within the European Union for Electronic Money Institution licences, it is fixed at €350,000. These funds must be held in an account with a local bank for the entire duration of the licence.
Our services
Preparation of a “passable” set of documents, consultation of the beneficiary for passing the interview, submission of documents to the supervisory authority, selection and hiring of directors, negotiations with the licensor, approval of the Business Plan and preparation of financial forecasting for the first three years of operation. Carrying out these and other actions aimed at obtaining a licence will cost approximately €30,000 – €40,000, depending on the jurisdiction, plus a success fee of €10,000 upon receipt of the licence. The duration of the procedure is from 3-4 months to six months.
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* In the Russian Federation, there is a unique organisation called WebMoney. It operates without the appropriate licence and calls its currencies anything but “currency”. Currently, it is impossible to create another structure operating on this principle. WebMoney is an exception to the rule, which became so due to its transformation into a system-forming enterprise even before the emergence of a legal framework regulating this kind of business. Please do not ask how to make a “second WebMoney” – it is impossible.
Alexey Zarin
Moscow, 2013