An EMI license controls and oversees companies that issue digital money and offer associated financial services. In other words, Payment Service Providers (PSPs) must have an EMI license to facilitate electronic payments and services like electronic wallets. These services are classified as Electronic Money Institutions.
In the UK, the FCA (Financial Conduct Authority) licenses eligible entities to create and manage electronic money for use in digital transactions. The authority has specified standards that must be met to get a license, which differ for SEMIs and AEMIs. Below, we discuss the key requirements for obtaining the UK EMI license.
Authorized Electronic Money Institutions (AEMIs)
Sufficient Starting Capital
AEMIs have to prove that they have enough money to start and run their electronic money services.
Suitable Ethical Standing
Anyone with qualifying holdings in the organization must be in good moral standing. Directors and those overseeing e-money and payment services must comply with this criterion. The FCA must evaluate their financial stability, competency, and integrity.
Stable Internal Controls, Governance Structures, and Risk Management Processes
AEMIs must set up and maintain strong internal controls, corporate structures, and risk management processes. This entails putting in place systems that efficiently recognize, evaluate, and manage the risks connected to electronic money services.
Security Measures
AEMIs must implement sufficient safeguards to protect the funds held by e-money holders. This involves implementing security procedures to protect the money obtained in return for electronic money services.
Adherence to Money Laundering Regulations (MLRs)
AEMIs must comply with the Money Laundering Regulations (MLRs) to combat and spot money laundering and terrorist financing. This calls for implementing strong anti-money laundering (AML) procedures.
Efficient Supervision
AEMIs should not impede the FCA from exercising appropriate supervision. If the business has links outside the UK, foreign laws shouldn’t make it harder for the FCA to monitor it.
Small Electronic Money Institutions (SEMIs)
The EU and the UK have less stringent rules and licensing requirements for small electronic money institutions. A company has to fulfill the following criteria to be qualified as a small EMI:
Investment Capital and Transaction Caps
SEMIs should not produce more than €5 million in average outstanding e-money. In addition, the average monthly payment transactions over a 12-month period must not surpass €3 million.
Proper-standing Individuals
SEMIs, like AEMIs, are required to verify the suitability of those holding qualifying assets. This pertains to the directors and individuals in charge of overseeing payment services and e-money.
Security Procedures
SEMIs are required to put procedures in place to protect money collected in exchange for the funds of e-money users. This is essential to safeguarding client finances.
Compliance With MLRs
SEMIs must adhere to the Money Laundering Regulations (MLRs) to mitigate the risk of money laundering mostly associated with their operations.
Effective Supervision
Just like with AEMIs, SEMIs shouldn’t prevent the FCA from exercising effective supervision, particularly if there are strong connections to another individual, even if they are based outside the UK.
Conclusion
Prospective companies must fulfill these conditions and submit the required supporting documentation during application to obtain and keep an EMI License in the UK.