Operate a Cyprus Electronic Money Institution (EMI)

Following an earlier article discussing the advantages, the activities and services of a Cyprus Electronic Money Institution (EMI), in this article the team at SALVUS goes through the details governed by the legal framework of the Central Bank of Cyprus (CBC) to ensure compliance with the operations of a Cyprus Electronic Money Institution (EMI).

An Electronic Money Institution (EMI) is the digital alternative of a bank with the Client deposits stored in an ‘electronic wallet’. An EMI operates through an online platform and its license allows for the issuance of debit cards. Therefore, payment transactions can be carried out by the clients of the EMI, either via the platform or via the issued debit card.

The Central Bank of Cyprus acts as the regulatory body for all things related to electronic money in Cyprus. Electronic money can be issued by;

• Banks,
• Cooperative credit institutions, and
• Electronic money institutions.

The EMI, once established and duly licensed, can offer its services in all EU member states on a cross-border basis without any further authorization.

Key points for the legal framework and regulatory requirements of EMIs in sequential order

1.  The authorization for the operation of a Cyprus EMI is ONLY granted to a legal entity incorporated in Cyprus,
2. The management and control of the EMI must be exercised by the headquarters, which shall be incorporated in Cyprus,
3. A business plan including the forecast budget of the first three financial years is required within the application, for the applicant to ensure its ability to employ resources and develop adequate systems and procedures for smooth operation of the EMI,
4. The initial capital of at least EUR 350,000 is required at the time of the authorisation along with the proof of available funds for the three years of operations,
5. An EMI is required to maintain the minimum own funds of the 2% of the average value of electronic money in circulation, while the own funds may not fall (at any time) below the level of the initial capital,
6. Description of the outsourcing arrangements, the use of agents (if any) and the intention of the EMI to provide its services in another EU member state via branch need to be specified within the application,
7. If agents are employed within the structure of the EMI, then it is required to ensure the agents meet the criteria and requirements to be listed in the public register maintained by the CBC,
8. The organizational structure of the EMI need to be disclosed,
9. Detailed information of the systems and procedures governed in the Internal Operations Manual, including the creation of sounds policies and procedures reflecting the operations of the accounting and payments, the risk management, the compliance and anti-money laundering departments,
10. It is highly important to establish adequate internal controls and mechanisms for the safe keeping of clients’ funds.

Terminating the EMI license

An EMI authorisation is terminated if;

• it is not used within 12 months of its issue or partly terminated for the activities for which no use was made,
• it is expressly renounced by the EMI, or
• the EMI has not issued electronic money or not provided payment services for a period exceeding 6 months.

Lastly, the CBC has the power to revoke any authorisation granted in certain circumstances. A revocation needs to be duly justified, notified to the EMI and be made public.

How can SALVUS support you?

Though our licensing service, our team will support you for the efficient and effective implementation of all the steps required for the establishment of a company authorized to act as an Electronic Money Institution. Our licensing service covers;

• the Incorporation of a Company with special articles of association applicable to the EMI license,
• the preparation of the EMI license, tailored to the applicants’ business plan,
• the due diligence of the shareholders, directors and other stakeholders,
• assistance in relation to recruitment for the fulfilment of the necessary positions, as well as for any outsourcing arrangement,
• act as the promoter of the application until the license is obtained by the CBC.

Post-authorisation, SALVUS provides on-going consulting support services to the Senior Management to ensure compliance within the regulatory framework and we can also be appointed as the internal auditor. Finally, we remain available to guide the Senior Management through ad hoc requests, and in performing their responsibilities adequately in a timely manner.

Through our project management service, we take a hands-on approach to deliver tailor-made solutions to meet your needs. We document and design the project specifications and supervise a project’s implementation from scratch to full completion with a third-party vendor or in-house developers.  By extension, we can support in developing, leasing or buying the EMI platform, the processing system and payment system architecture.

We remain at your disposal should you have any questions on EMIs or anything not covered in all the above. Please contact us via info@savlusfunds.com.

The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.