Ireland

Electronic Money Institution (E-Money)
or Authorised Payment Institution License
In Ireland

Advantages of obtaining an Electronic Money Institution (e-money) license in Ireland
Key features of the Electronic Money Institution (e-money) license in Ireland
Provision of “Payment Services”
Services excluded from the definition of “Payment Services”
Payment Institutions
Electronic Money Institutions
Ireland as a Location for E-Money Institutions
Regulatory Framework
Passporting
Authorisation Requirements
Substance
Capital Requirements
Apply to become an Authorised Electronic Money Institution
Documentation Required to Make an Application for Authorisation/Registration
Fitness and Probity
Authorisation Process
How long does it take to obtain the license?
How to prepare a strong license application
Key considerations
How TBA can help you

How to obtain an EMI or PIL License
In Ireland

The Central Bank of Ireland (Central Bank) is the competent authority in Ireland for the authorisation and supervision of electronic money institutions under the European Communities (Electronic Money) Regulations 2011 (as amended) (EMR).

Each applicant seeking authorisation/ registration must satisfy the Central Bank that it can meet the authorisation/registration standards set out in the EMR. In fulfilling its statutory role in this regard, the Central Bank adopts a robust, structured and risk-based process that seeks to ensure that only those applicants that demonstrate compliance with these authorisation requirements are authorised.

The Central Bank seeks to process each application as expeditiously as possible while meeting its obligation to operate a rigorous and effective gatekeeper function. It aims to ensure that the application process is facilitative and accessible from the perspective of applicants and, importantly, that applicants have clarity regarding the process, its requirements and timelines.

Council Directive 2015/2366/EC, the Payment Services Directive 2 (“PSD2”) provides the legal framework for the operation of the single market in payment services. It aims to facilitate safer and more innovative payment services across the EEA. PSD2 sets out common rules in relation to electronic payments such as credit transfers, direct debits, card payments, and mobile and online payments. It also regulates payment service providers in EEA Member States.
Generally, the following types of firm, among others, will require authorisation or registration for their payment services activities:

Credit card companies and card issuers;
Non-bank credit card issuers;
Merchant acquirers;
Payroll operators;
Certain telecommunications network operators;
Money remitters;
Payment initiation service providers (“PISPs”);
Account information service providers (“AISPs”); and
The agents thereof.

PSD2 focuses on the provision of payment services in electronic form and does not apply to cash only transactions or paper transactions (i.e. cheques, bills of exchange, promissory notes or other instruments or vouchers).

Advantages of obtaining an Electronic Money Institution (e-money) license in Ireland

– Top 15 most innovative countries in the world.
– 1st in the world for investment incentives.
– Low corporation tax rate of 12.5%.
– 1st in the world for flexibility and adaptability for people.
– Best country in Western Europe to invest in.
– Top 10 global ranking for education and skills.
– 2nd most competitive economy in Europe.

Key features of the Electronic Money Institution (e-money) license in Ireland

– A license issued in Ireland is recognised in all other EEA (European Economic Area) member states. Through ‘passporting’, this enables the electronic money institution to operate across all EEA countries with a single license.
– Issue e-money, such as prepaid cards, electronic wallets and payment accounts with IBAN codes, across Europe.
– Join payment schemes such as SEPA.
– Issue Visa or Mastercard payment cards for both individual and business users.

Provision of “Payment Services”

Subject to certain exclusions, an entity which provides a “payment service” by way of business in Ireland will fall within scope of the Regulations. The person providing the “payment service” is referred to as the “payment services provider” for the purposes of the Regulations.

A “payment service” is defined in the Schedule to the Regulations as:

– Services enabling cash to be placed on a payment account as well as all operations required for operating a payment account;
– Services enabling cash withdrawals from a payment account and all of the operations required for operating a payment account;
– The execution of the following types of payment
transactions- (i) direct debits, including one-off direct debits;
(ii) payment transactions through a payment card or similar device;
(iii) credit transfers, including standing orders;
– The execution of the following types of payment transactions where the funds are covered by a credit line for the payment user- (i) direct debits, including one-off direct debits;
(ii) payment transactions executed through a payment card or similar device;
(iii) credit transfers, including standing orders;
– Issuing payment instruments or acquiring payment transactions;
– Money remittance;
– Payment initiation services (“PIS”); and
– Account information services (“AIS”).

Services excluded from the definition of “Payment Services”

Regulation 4 of the Regulations provides a list of a broad range of activities which are not captured under the Regulations, as summarised below:

– Payment transactions made exclusively in cash directly by a payer to a payee, without any intermediary intervention;
– Payment transactions from a payer to a payee through a commercial agent in certain circumstances;
– The business of physical transport (including collection, processing and delivery) of banknotes and coins;
– Non-professional cash collection and delivery within the framework of a non-profit or charitable activity;
– The provision of cash back at the point of sale;
– Cash-to-cash currency exchange operations where the funds are not held on a payment account;
– Payment transactions based on certain types of paper documents drawn on a payment service provider (“PSP”) with a view to placing funds at the disposal of a payee (i.e. paper based vouchers);
– Payment transactions carried out within a payment or securities settlement system between on the one hand, settlement agents, central counterparties, clearing house or central banks and other participants of the system and on the other hand a PSP;
– Payment transactions related to securities asset servicing in certain circumstances;
– Services provided by technical service providers that support the provision of payment services without them at any time entering into possession of the funds to be transferred (with the exclusion of PIS and AIS) in certain circumstances;
– Services based on specific payment instruments that can be used only in a limited way, that meet certain conditions (e.g. staff catering cards, store cards etc.);
– Certain low value payment transactions resulting from services provided by a provider of electronic communications networks or services in certain circumstances;
– Payment transactions carried out between PSPs, their agents or branches for their own account;
– Payment transactions between group undertakings (without any intermediary intervention by a PSP other than an undertaking belonging to the same group); or
– The provision of a cash withdrawal facility by means of an automated teller machine (“ATM”) in certain circumstances, however, the ATM operator must still provide the customer with certain information on withdrawal charge.

Payment Institutions

Regulation 6 provides that a person shall not provide a payment service in Ireland unless the person is:

– A credit institution within the meaning of EU Banking Directives authorised in Ireland or in an EEA Member State;
– An e-money institution authorised in Ireland or in an EEA Member State;
– A Post or the postal authority of another Member State (in its/their capacity as the provider of a giro service);
– The Central Bank, the European Central Bank, or the central bank of another Member State when not acting in its capacity as a monetary authority;
– A Member State or a regional or local authority of a Member State;
– A payment institution authorised by the Central Bank;
– A credit union;
– A small payment institution as outlined in Regulation 41;
– A registered AIS as outlined in Regulation 42;
– A payment institution subject to certain transitional arrangements outlined in Regulation 140; or
– A payment institution authorised as such in another Member State pursuant to the law of that Member State giving effect to PSD2.

Each of the above are referred to as a “payment institution” under the Regulations.

Electronic Money Institutions

Progress in technology has contributed to the development of a new kind of payment instrument – electronic money.

This may be in the form of value stored on a technical device such as a chip card or a computer. Electronic money (e-Money) can be best described as a digital form of cash since it has many of the characteristics of cash.

Customers buy the electronic equivalent of coins and notes. The customer, in effect, has exchanged cash for another means of payment. Instead of using a debit card (which requires a bank account) or a credit card (which requires a contract agreement) the customer has purchased a non-cash means of payment, which can be used in much the same way as cash or other forms of card payment but without the requirement of third-party authorisation.

E-money can therefore be defined as monetary value as represented by a claim on the issuer, which is:

– electronically stored
– issued on receipt of funds for the purposes of making payment transactions
– accepted as means of payment by a natural or legal person other than the issuer

An e-money institution is an undertaking that has been authorised to issue e-money in accordance with the European Communities (Electronic Money) Regulations 2011, as amended (EMR).

Ireland as a Location for E-Money Institutions

The last few years have seen a surge in e-money institutions authorised in Ireland, many of which were attracted to Ireland by its active and thriving FinTech Sector.

Aside from Ireland’s position as a FinTech hub, there are a number of advantages to being authorised in Ireland as an e-money institution, including:

– a credible and experienced regulator, the Central Bank of Ireland (“CBI”);
– the ability to passport to other EEA member states either on a branch or a cross-border services basis;
– a favourable tax regime, due to a combination of a 12.5% corporate tax rate and an exceptionally extensive and comprehensive set of double tax agreements; and
– access to a sophisticated financial services ecosystem with a deep pool of staff, managers, professional advisers, regulators and service providers including not only native English speakers but a sizeable international population.

Regulatory Framework

E-money is regulated under the European Communities (Electronic Money) Regulations 2011 (the “E-Money Regulations”), which transpose the E-Money Directive 2009/110 into Irish law, without any significant additional national measures or “gold plating”.

The CBI is responsible for the authorisation, prudential regulation and supervision of e-money institutions in Ireland.

Passporting

If you are authorised as a regulated financial service firm within a country inside the European Economic Area, you can provide your regulated services, as a payment service provider or electronic money provider across the rest of the countries within the European Economic Area without requiring additional licenses in those countries.

The EEA states are Austria, Belgium, Bulgaria, Croatia, Cyprus (Republic of), Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

Accordingly, if you were regulated in Ireland, you would be able to provide regulated services within the above countries without requiring additional licenses in those countries. To achieve this, you would need to apply for a ‘passport’ to do so.

With passporting, you are able to set up a branch in an EEA state and/or provide cross-border services or advice.
Passporting is only available to authorised firms i.e. authorised payment institutions and electronic money institutions. It is not available to local-level or small firms such as small electronic money institutions or small payment institutions.

Authorisation Requirements

An entity that wishes to become authorised as an e-money institution under Irish law must fulfil a number of requirements. In particular, applicants will be expected to show that they will have substance in Ireland, be adequately capitalised, have appropriate arrangements in place to run an e-money institution and comply with fitness and probity requirements.

Substance

The CBI places considerable emphasis on ensuring that the applicant’s “heart and mind” will be located in Ireland. This essentially means that the CBI will need to be satisfied that the applicant will be properly run in Ireland and that the CBI will be able to supervise it effectively. Among other things, the CBI will expect to see present in Ireland:

– a senior management team with strength and depth overseen and directed by a strong board; and
– organisation structure and reporting lines which ensure there is appropriate separation and oversight of all activities.

There is no requirement for any specific individual to be resident in Ireland. However, ideally, the persons who are to fulfil the applicant’s core functions should operate out of Ireland.

An Irish authorised e-money institution can outsource/delegate activities to entities in other jurisdictions. However, overall responsibility for ensuring compliance with legislative requirements must stay in Ireland. In addition, an e-money institution must notify the CBI when it intends to outsource critical or important functions (or when it intends to materially alter its existing outsourcing arrangements for such functions). The E-Money Regulations set out a number of requirements with which a e-money institution must comply when outsourcing “important” operational functions, such as IT systems. The CBI will also expect an e-money institution to comply with the EBA’s Guidelines on Outsourcing.

Capital Requirements

A payment institution authorised under the Regulations is subject to the following:

– Initial Capital requirement: At the time of authorisation a payment institution is required to hold a minimum level of initial capital which is dependent on the level of authorisation. This ranges from €20,000 to €125,000.
– Own Funds requirement: On an ongoing basis a payment institution must ensure it has sufficient capital (“Own Funds”) in its own right to meet the applicable capital requirement. A payment institution is required to hold a minimum level of capital equal to the higher of its initial capital or the capital requirement calculated in accordance with one of the following methods:
– (a) Method A – 10% of the previous year’s fixed overheads (or in the first year the projected overheads);
– (b) Method B – Formula based calculation based on the level of payment transactions in the previous year (or projected in the first year); or
– (c) Method C – Formula based on the level of income of the payment institution.

The Central Bank will specify in its letter of authorisation which of the above methods is to be used.

Apply to become an Authorised Electronic Money Institution

As part of your Authorised Electronic Money Institution (e-money) license application, you will be required to provide the following information as part of your application:

– company identification details
– programme of operations
– business plan and financial forecasts
– a description of your business’s organisation structure
– evidence of your initial capital
– your measures to safeguard funds of your users
– your compliance & governance arrangements and internal controls
– your procedure for monitoring, handling, and following up on security incidents and security-related customer complaints
– your processes for filing, monitoring, tracking and restricting access to sensitive payment data
– your business continuity measures
– the principles and definitions applicable to the collection of statistical data on performance, transaction and fraud
– security policy
– your internal control mechanisms to comply with obligations in relation to money laundering and terrorist financing (AML/CFT obligations)
– details of your qualifying holdings (shareholders)
– details of any outsourcing arrangements

An applicant will need to provide detailed information to the CBI regarding how it intends to function as an e-money institution, including details of its: programme of operations; business plan; structural organisation; governance arrangements and internal control mechanisms; and business continuity arrangements procedure for dealing with security incidents.

Documentation Required to Make an Application for Authorisation/Registration

Applicants should submit the following documentation, which should be fully completed:

1. Application Form for Authorisation as an Electronic Money Institution or Application Form for Registration as Small Electronic Money Institution (including the specific information and documentation requested therein)
2. Anti-Money Laundering, Counter-Terrorist Financing and Financial Sanctions Pre-Authorisation Risk Evaluation Questionnaire for Payment Institution and Electronic Money Institution Applicants
3. Qualifying Holder Application Forms, as appropriate:
a) Application for a Legal Person or other entity type with Qualifying Holdings in an Applicant Payment Institution or Electronic Money Institution
b) Application for a Natural Person with Qualifying Holding in an Applicant Payment Institution or Electronic Money Institution
c) Application for a Director with Qualifying Holdings in an Applicant Payment Institution or Electronic Money Institution

Once an application is submitted the applicant will also need to ensure that all relevant individuals proposed to hold a Pre-Approval Controlled Function role (typically board members, senior management, key function holders) complete Fitness and Probity Individual Questionnaires.

Individual Questionnaires must be submitted electronically via the Central Bank’s Online Reporting System by all relevant individuals. Applicants should review the Guidance on the sector specific requirements that apply to persons seeking approval for a Pre-Approval Controlled Function role in a Payment Institution or Electronic Money Institution before submitting an Individual Questionnaire. Please note that access to the online Individual Questionnaire only becomes available after an application has been deemed to contain all the key information needed to progress to the assessment phase of the application process.

The completed Application Form, along with all relevant accompanying material, should be submitted in both paper and electronic format to the Central Bank.

The paper copy should be sent to: EMI Authorisations Team, Consumer Protection: Policy & Authorisations, Central Bank of Ireland, PO Box 559, Dublin 1.

The electronic version can be included with the paper copy or sent to:
emiauthorisations@centralbank.ie

The use of regular postal services and/or unsecured email is not recommended for sensitive or confidential material.

If the firm has any queries in respect of the application process it can contact the Central Bank at: emiauthorisations@centralbank.ie

Fitness and Probity

Once an application is submitted, the applicant will also need to ensure that all relevant individuals proposed to hold a Pre-Approval Controlled Function (“PCF”) role (typically board members, senior management, key function holders) complete Fitness and Probity Individual Questionnaires.

The CBI’s fitness and probity requirements are based on Guideline 16 of the “EBA Guidelines on the information to be provided for the authorisation of payment institutions and e-money institutions and for the registration of account information service providers” which relates to the “identity and suitability assessment of directors and persons responsible for the management of the payment institution or electronic money institution”.

The CBI has published “Guidance on the Specific Requirements that apply to persons seeking approval for a Pre-Approval Controlled Function role in a Payment Institution or Electronic Money Institution” (here).

All relevant individuals must submit an Individual Questionnaire electronically via the CBI’s Online Reporting System, however, access to the online Individual Questionnaire only becomes available after an application has been deemed to contain all the key information needed to progress to the assessment phase of the application process.

Authorisation Process

An application for authorisation as an e-money institution must be submitted to the CBI.

According to the CBI, it:

– seeks to process each application as expeditiously as possible while meeting its obligation to operate a rigorous and effective gatekeeper function.
– It aims to ensure that the application process is facilitative and accessible from the perspective of applicants and, importantly, that applicants have clarity with regard to the process, its requirements and timelines.

All applications for authorisation as an e-money institution in Ireland must be submitted using the follow forms:

– Authorisation as an Electronic Money Institution (here); and
– Registration as a Small Electronic Money Institution (here).

The CBI has also published a Guidance Note on completing authorisation/registration applications under the E-Money Regulations (here). In addition, an applicant must complete:

– the Anti-money Laundering, Counter-Terrorist Financing and Financial Sanctions Pre-Authorisation Risk Evaluation Questionnaire for Payment Institution and Electronic Money Institution Applicants (here); and
– Qualifying Holder Application Forms (here) as appropriate.

The CBI offers the facility of an optional pre-application meeting to potential applicants to answer any specific questions those applicants may have about any aspect of the application process.

How long does it take to obtain the license?

The Central Bank of Ireland must make a decision within three months of receiving a complete application. In reality, it takes around 4-5 months to obtain the license.

How to prepare a strong license application

You will need to demonstrate that you have your mind and management as well as operational setup and presence in Ireland. This means establishing a physical base, including a physical office.

Furthermore, you must have adequate resources in place. This includes financial resources, i.e. possessing sufficient funds to manage and operate the business. You will be required to demonstrate that you have suitable and experienced management and employees to manage the business. Firms must also demonstrate that they adequate IT systems and internal controls to ensure the safety of payments and manage fraud adequately and effectively.

You must ensure that their business plan describes your payment activities and market plan and its execution. Your firm’s financial statements must adequately address your business lines of income, calculations of initial and ongoing capital requirements and provide financial forecasts for the first three years.

You must provide policies and procedural documents that clearly demonstrate that you understand your business risks. Firms should prepare a risk framework and address how they will mitigate their risks, including operational, security and money laundering risks.

Key considerations

An entity that wishes to become authorised as an e-money/payment institution under Irish law must fulfil a number of requirements. For existing groups with substantial operations outside Ireland, an important requirement will be the CBI’s emphasis on ensuring that the applicant’s ‘heart and mind’ will be located in Ireland. This essentially means that the CBI will need to be satisfied that the applicant will be properly run in Ireland and that the CBI will be able to supervise it effectively. Among other things, the CBI will expect to see present in Ireland:

– a senior management team with strength and depth overseen and directed by a strong board; and
– organisation structure and reporting lines which ensure there is appropriate separation and oversight of all activities.

There is no requirement for any specific individual to be resident in Ireland. However, ideally, the personnel who are to fulfil the applicant’s core functions should operate out of Ireland.

An Irish authorised e-money/payment institution can outsource/delegate activities to entities in other jurisdictions. However, overall responsibility for ensuring compliance with legislative requirements must stay in Ireland.

In addition, a payment institution must notify the CBI when it intends to outsource operational functions of payment services. The Payment Services Regulations set out a number of requirements with which a payment institution must comply when outsourcing ‘important’ operational functions, such as IT systems.

How can TBA Help you?

TBA is a premier law firm and advises on the full range of legal, tax and compliance activities undertaken by e-money institutions in Ireland. We have substantial experience in successfully guiding applicants through the regulatory authorisation process and in helping them to comply with their legal obligations, once established. If you are considering setting up an e-money institution authorised under Irish legislation, please contact us for further information as to how we can help.

This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.

 

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