An Electronic Money Institution Comparison – Malta vs. Luxembourg

electronic money institution emi malta vs Luxembourg comparison

03 Apr 2019 An Electronic Money Institution Comparison – Malta vs. Luxembourg

An Electronic Money Institution (“EMI”) ‘is a financial institution that has been licensed in accordance with the Financial Institutions Act, Chapter 376 of the Laws of Malta (the “FIA”) and authorised to issue electronic money or that holds an equivalent authorisation in another country in terms of Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC (the “Electronic Money Directive”) to use electronic money.’[1]

 

Both Malta and Luxembourg are members of the European Union (the “EU”), they are both regulated by the same EU laws in relation to payment services and the issuing of electronic money and hence there are a number of similarities when it comes to the regulatory requirements for both jurisdictions.

 

Disclaimer: This newsletter aims to provide the required information with regards to the regulatory requirements for the establishment of a payment services and electronic money institution in Malta and in Luxembourg. Readers of this newsletter should note that at the date of circulation of this article, the laws and regulations to which this newsletter makes reference to may be subject to further amendments which will not be reflected in this newsletter.

 

  Malta Luxembourg
EU Law Directive 2007/64 on payment services in the internal market;

Directive 2015/2366 on payment services in the internal market; and

Directive 2009/110 on the taking up, pursuit and prudential supervision of the business of electronic money institutions.

Directive 2007/64 on payment services in the internal market;

Directive 2015/2366 on payment services in the internal market; and

Directive 2009/110 on the taking up, pursuit and prudential supervision of the business of electronic money institutions

Local Law FIA (Chapter 376 of the laws of Malta) Law of 10 November 2009 on payment services (being currently updated)
Is authorisation required? Yes Yes
Regulatory Authority Malta Financial Services Authority (MFSA) Commission de Surveillance du Secteur Financier (CSSF)
Legal Form Limited Liability Company (Ltd) (i)            Public Limited Liability Company;

(ii)           Limited Partnership with Share Capital; or

(iii)          Cooperative Society

Services – Payment Services As a payment service provider, a company may provide the following payment services:

(i)             Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;

(ii)            Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;

(iii)           Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider among which:

  • execution of direct debits, including one-off direct debits;
  • execution of payment transactions through a payment card or a similar device;
  • execution of credit transfers, including standing orders.

(iv)          Execution of payment transactions where the funds are covered by a credit line for a payment service user among which:

  • execution of direct debits, including one-off direct debits;
  • execution of payment transactions through a payment card or a similar device;
  • execution of credit transfers, including standing orders.

(v)           Issuing and/or acquiring of payment instruments;

(vi)          Money remittance; and

(vii)          Execution of payment transactions where the consent of the payer to a payment transaction is transmitted by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting solely as an intermediary on behalf of the payment service user and the supplier of the goods and services.

As a payment service provider, a company may provide the following payment services:

(i)           Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;

(ii)            Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;

(iii)           Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider among which:

  • execution of direct debits, including one-off direct debits;
  • execution of payment transactions through a payment card or a similar device;
  • execution of credit transfers, including standing orders.

(iv)          Execution of payment transactions where the funds are covered by a credit line for a payment service user among which:

  • execution of direct debits, including one-off direct debits;
  • execution of payment transactions through a payment card or a similar device;
  • execution of credit transfers, including standing orders.

(v)           Issuing and/or acquiring of payment instruments;

(vi)          Money remittance; and

(vii)          Execution of payment transactions where the consent of the payer to a payment transaction is transmitted by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting solely as an intermediary on behalf of the payment service user and the supplier of the goods and services.

Services – Issuing of Electronic Money In addition to issuing electronic money, electronic money institutions may also engage in any of the following activities:
(i)            the provision of payment services listed in paragraph 2 of the Second Schedule of the FIA;(ii)           the granting of credit related to payment services referred to in paragraph 2(d), (e) and (g) of the Second Schedule of the FIA, where the conditions laid down in paragraph 3(e) of the Second Schedule of the FIA are met;(iii)          the provision of operational services and closely related ancillary services in respect of the issuing of electronic money or to the provision of payment services referred to in point (i);(iv)          the operation of payment systems as defined in the Second Schedule of the FIA; and (v) business activities other than the issuance of electronic money, having regard to the applicable law regulating such activities.
In addition to issuing electronic money, electronic money institutions may also engage in any of the following activities:

(i)            the provision of payment services listed in the Annex to the Law of 10 November 2009;(ii)           the granting of credit related to payment services referred to in points (4), (5) or (7) of the Annex of the Law of 10 November 2009, where the conditions laid down in Article 10(3) and (5) of the Law of 10 November 2009 are met;

(iii)          the provision of operational services and closely related ancillary services in respect of the issuing of electronic money or to the provision of payment services referred to in point (i);

(iv)          the management of payment systems, without prejudice to Article 57 of the Law of 10 November 2009; and

(v)           business activities other than the issuance of electronic money, having regard to the applicable law regulating such activities.

Minimum Capital – Payment Institutions EUR 20,000 – EUR 125,000 depending on the type of payment services EUR 20,000 – EUR 125,000 depending on the type of payment services
Minimum Capital – Electronic Money Institutions EUR 350,000 EUR 350,000
Own Fund Requirement Yes – the actual capital will be calculated by the MFSA as this depends on the company’s business model and intended services.

This means that the authorities might require a higher share capital than that stipulated in the above rows depending on the company’s business model and intended services.

Yes – the actual capital will be calculated by the CSSF as this depends on the company’s business model and intended services.

This means that the authorities might require a higher share capital than that stipulated in the above rows depending on the company’s business model and intended services.

Regulatory Requirements The below persons need to be involved/appointed:

(i)          Directors;

(ii)         Company Secretary;

(iii)        Compliance Officer;

(iv)        Money Laundering and Reporting Officer;

(v)         Risk Officer;

(vi)        Shareholders;

(vii)       Management;

(viii)      Internal Audit;

(ix)        External Auditors and Accountants; and

(x)         Employees

The MFSA has discretion to request additional appointments depending on the nature, scale and complexity of the company.

The below persons need to be involved/appointed:

(i)          Directors;

(ii)         Risk Officer;

(iii)        Shareholders;

(iv)        Management;

(v)         External Auditor and Accountants; and

(vi)        Employees

 

 

The CSSF has discretion to request additional appointments depending on the nature, scale and complexity of the company.

Application Process The application process to obtain a licence with the MFSA will involve the following steps:

(i)            Setting up of a meeting with the MFSA to discuss any specific questions about any aspect of the application process and completing the necessary documentation;

 

(ii)           Submission of the completed application form together with the supporting documents to the MFSA (listed here under);

 

(iii)          The MFSA will acknowledge receipt of the application within three (3) working days;

 

(iv)          The MFSA will check the application material to proceed with the assessment phase;

 

(v)           Within ten (10) days of receipt of the application, the MFSA will either inform you that it has sufficient material to proceed to assessment phase or advice that the application does not contain sufficient material to proceed to the assessment phase;

 

(vi)          If the MFSA declares that it will move forward with the assessment phase, then it will review the application documents and provide its comments;

 

(vii)         Once all comments are duly answered by the company, the MFSA will issue its in-principle approval;

 

(viii)        The MFSA might attach a number of conditions to be satisfied by the company following the in-principle approval however ahead of the issuing of the licence;

(ix)          Once all in-principle approval conditions are met, the MFSA will issue the licence;

 

(x)           Usually, the MFSA attaches another set of conditions to be satisfied by the company after the licensing of the Company and before the commencement of business; and

 

(xi)          Upon the satisfactorily resolution of these conditions, the MFSA will authorise the company to commence business.

The application process to obtain a licence with the CSSF will involve the following steps:

(i)         The authorisation is granted upon written application by the Minister responsible for the CSSF and after investigation by the CSSF on the conditions required under this section;

 

(ii)        The application for authorisation shall be accompanied by the information and the evidences as required by law;

 

(iii)       The authorisation shall be granted if the information and evidence accompanying the application comply with all the requirements under this section and if the overall assessment of the Minister responsible for the CSSF is favourable;

 

(iv)       Before granting an authorisation, the Minister responsible for the CSSF may, if necessary, consult the Banque Centrale du Luxembourg or other appropriate public authorities; and

 

(v)        The decision taken on an application for authorisation must be supported by a statement of the reasons on which it is based and must be notified to the applicant within three months of receipt of the application or, should the latter be incomplete, within three months of receipt of the information required for the decision. A decision shall, in any case, be taken within twelve (12) months of the receipt of the application, otherwise the absence of a decision implies a refusal.

Information/Documents to be provided at application stage The below documents are the minimum documents which need to be drafted for a company requesting authorisation as a payment service and electronic money institution:

(i)            Application Form;

(ii)           The memorandum and articles of association;

(iii)          Business Plan;

(iv)          Organisational By-Laws;

(v)           Payment Service Directive;

(vi)          Compliance Manual;

(vii)         Code of Conduct Behaviour;

(viii)        AML Directive;

(ix)          Business Continuity Plan;

(x)           Lending Directive;

(xi)          Cross Border Directive;

(xii)         Outsourcing Directive;

(xiii)        IT Policy;

(xiv)        Risk Management Policy; and

(xv)         Financial Projections and Assumptions

The MFSA has discretion to request additional documents depending on the nature, scale and complexity of the company.

The law of Luxembourg lists down the information which needs to be disclosed to the CSSF when a company requests authorisation as a payment service and electronic money institution:

(i)          A programme of operations;

 

(ii)         A business plan including a forecast budget calculation for the first three (3) financial years;

 

(iii)        Evidence that the company holds the initial capital as required;

 

(iv)        A description of the measures taken for safeguarding funds;

 

(v)         A description of internal governance and internal control mechanisms, including administrative, risk management and accounting procedures, which demonstrates that these internal governance arrangements, control mechanisms and procedures are proportionate, appropriate, sound and adequate;

 

(vi)        A description of the internal control mechanisms which the applicant has established in order to comply with the obligations to fight against money laundering and terrorist financing;

 

(vii)       A description of the applicant’s structural organisation;

 

(viii)      The identity of shareholders or members, whether legal or natural persons, holding directly or indirectly qualifying holdings in the company, the size of their holdings and evidence of their suitability taking into account the need to ensure the sound and prudent management of the company;

 

(ix)        The identity of members of the administrative bodies and persons responsible for the management of the company;

(x)         Where appropriate, the identity of the approved statutory auditors;

 

(xi)        The company’s legal status and articles of association; and

 

(xii)       The address of the head office.

Outsourcing When outsourcing any of its functions, the company will seek to ensure that the service providers’ organisational structure and ownership structure are appropriately monitored and assessed by the company’s management so that any necessary corrective measure will be taken promptly.

The company shall ensure, when relying on a service provider for the performance of operational functions, which are critical for the provision of continuous and satisfactory performance of the company’s activities, that it takes reasonable steps to avoid undue additional operational risk.

Outsourcing of important operational functions may not be undertaken in such a way as to impair materially the quality of its internal control and the ability of the MFSA to monitor the company’s compliance with all obligations.

Outsourcing of important operational functions may not be undertaken in a way such as to materially impair the quality of the company’s internal control, and the ability of the CSSF to control the company’s compliance with all obligations laid down in the law.

In case the company outsources important operational functions, they have to comply with the following conditions:

(i)         the outsourcing must not result in a delegation by the senior management of the company of its responsibilities;

 

(ii)         neither the relationship of the company with its users, nor the obligations of the company towards its users shall be altered;

 

(iii)        the conditions with which the company has to comply in order to be authorised and to remain so in accordance with this chapter shall not be undermined; and

(iv)        none of the other conditions subject to which the company’s authorisation was granted shall be removed or modified.

Application Fee EUR 3,500 EUR 10,000
Annual Fee EUR 2,500 – EUR 50,000 calculated as an equivalent to the percentage of the total items in balance sheet.

 

EUR 20,000
Running Costs The running costs in Malta are cheaper than in Luxembourg and this also includes costs with regards to the workforce and employment of personnel in Malta.

 

The running costs in Luxembourg are higher than in Malta.

 

 

celaine vella

Author:

Celaine Vella

Regulatory advice in corporate, banking, trust and finance regulatory matters.

 

 

 

 

Footnote Reference:

[1] Electronic Money Institution definition in accordance with the FIA



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