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Monday, April 15, 2024

Electronic Money Institution: How To Get a UK EMI License

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What is an EMI License and how can you get one? We’ll examine the application process for an electronic money institution (EMI) in the UK in this post. The Financial Conduct Authority is in charge of overseeing electronic money institutions in the UK. If you want to open an electronic money institution in the UK, you must first prepare and submit an application to the Financial Conduct Authority there. In the sections that follow, we’ll examine the procedure for establishing an electronic money institution in the UK and go through the necessary conditions.

What is a License for Electronic Money Institution?

The FCA (which serves as the industry’s primary regulator) grants an Electronic Money Institution permission to operate through the issuance of an Electronic Money License. Although there are often fewer standards for FCA certification, this also offers fewer safeguards than a traditional banking license. It enables an Electronic Money Institution (EMI) to keep customer funds on hand for as long as a person has an active IBAN account.

An EMI institution has the legal right to issue electronic money in addition to the services that a traditional payment institution offers. This is the main practical distinction between the two types of organizations.

Requirements For EMI License Application

You must include specific information with your application if you want to qualify for authorization and licensing as an EMI. This can contain your company strategy, information about the payment services you’ll offer, information about compliance and governance, information about how you’ll protect users, and information about your starting capital needs.

Read: What is the Trademark Registration Process in Germany?

The FCA lists 12 requirements that a company must satisfy before applying:

  • You are an organization.
  • Payment services will be provided in the United Kingdom.
  • You have effective governance structures.
  • You have an operational plan.
  • You have taken adequate measures to safeguard the user’s funds
  • You hold adequate indemnity cover
  • Directors must have a solid reputation and the necessary qualifications.
  • No management should have a history of money laundering convictions.
  • There must be a UK headquarters.
  • You must abide by money laundering laws.
  • Those who own 10% or more of the company must be “fit and proper.”

If the applicant is closely connected to another individual, the connection must not pose a threat to the FCA’s ability to effectively supervise the company.

Electronic Money Institution: How To Get a UK EMI License
Electronic Money Institution: How To Get a UK EMI License

Step By Step Guide

Assessing the ideal business structure and the UK’s EMI licensing criteria

look out for the license requirements, including eligibility requirements, paid-up capital requirements, local economic substance requirements, deadlines, and processes, prior to the engagement in the jurisdiction starting.

Carrying out a fit

Ensure that the informative data and supporting documentation for the EMI license are suitable and they fit the qualifications. After receiving the necessary incorporation documents, including the power of attorney, you will subsequently proceed to register the entity with the local Companies Registry.

Document preparation

These papers will include the company strategy, the AML/CFT policy, and any other required paperwork, depending on the other local legislation.

Submission of a license application

 You might need to appear in an interview with the regulator before your license is approved, depending on the jurisdiction. If all goes according to plan, your company will be granted a UK EMI license and will be needed to launch operations within the allotted time period in order to keep the license active.

Safeguarding financial accounts

You will require specialized banking resources, such as client-protecting accounts, and access to payment networks, including IBAN and SWIFT, in order to receive an EMI license. To operate your firm, you will also need systems and software.

Read: Money Laundering and Compliance Issues in the Peer to Peer Industry

Why do you Need a UK EMI License?

An EMI with full authorization can offer a total of nine core services under the terms of its UK EMI license. They include all services that the payment institution is capable of offering, including supplementary services and the ability to issue e-money. Consequently, the holder of an EMI license in the UK is permitted to provide a variety of services:

  • Issuing digital wallets and prepaid cards as examples of money.
  • Services that allow money to be deposited into a payment account and all activities necessary to run a payment account;
  • Services that make it possible to withdraw money in cash from a payment account. Also, all of the activities necessary to run a payment account;
  • Executing payment transactions, including transfers of money from a user’s payment service provider to another payment service provider. Furthermore, direct debits, including one-time direct debits, credit transfers, standing orders, and payment transactions using a payment card.
  • Executing payment transactions where the funds are covered by a credit line for a payment service user.
  • Executing Payment Transactions Through a Payment Card or a Similar Device; Executing Credit Transfers, including Standing Orders;
    • Issuing Payment Instruments or Acquiring Payment Transactions; Money Remittance.
Electronic Money Institution How To Get a UK EMI License
Electronic Money Institution How To Get a UK EMI License

Benefits of EMI License in the UK 

If your company holds the status of being a licensed EMI, you will be able to operate globally and take advantage of privileges like creating IBAN, SWIFT, and SEPA accounts and providing your own payment cards. The main distinction between an EMI’s offers and those of a traditional bank is that the former cannot make loans or maintain interest-bearing deposits.

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Less regulation applies to the EMI sector because it cannot provide loans or interest-bearing deposits. This indicates that an EMI is subject to less stringent supervisory regulations. It’s therefore, far more flexible corporate structure than a traditional bank.

Partying Shot

Electric money may only be issued by a legal body known as an electronic money institution or EMI. It is authorized and controlled by the relevant authority. Depending on the changes being made to the local laws and regulations, there may be several ways to set up an electronic money institution. There you have it, then! You must adhere to these procedures in order to get your e-money or payment license. They may appear a little intimidating at first, but if you follow the steps in a systematic manner, you can make sure that you clear all the hurdles in the way of getting started.

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