Electronic money institutions

  • Section:

I. Licensed Electronic Money Institution
II. Registered Electronic Money Institution
Requirements for the board members, council members and persons with qualifying holding
Fee for document handling
Cancellation of an electronic money institution registration or licence upon the institution’s own application
Meeting with potential market participants

An electronic money institution is a commercial company that has received a licence from the Financial and Capital Market Commission (hereinafter – Commission) for issuing electronic money or a legal entity that does not need a licence to issue electronic money and is registered in the register of institutions maintained by the Commission. The electronic money institution is entitled to provide payment services in accordance with Section 2, Paragraph 2 of the Law on Payment Services and Electronic Money (hereinafter – the Law).

About electronic money
In order to prevent a situation where electronic money is not in circulation in Latvia that has not been issued in accordance with the procedures specified in regulatory enactments, i.e. it is issued by an entity that is not entitled to issue electronic money in accordance with the provisions of Directive 2009/110/EC and the Law; the Commission notes that the activities of commercial companies that include the issuance of electronic money issued by a foreign (non-member countries) issuer in Latvia (except the activities of electronic money institutions licensed in the EU Member State and operating in Latvia within the framework of the provision of cross-border services) are considered to be electronic money issuance and such companies have receive a licence to issue electronic money in accordance with the provisions of Article 11 of the Law.

What is an Electronic Money Account?
An electronic money account (e-money account) in accordance with Section 2, Paragraph eight of the Law is a limited functionality account opened in a closed system set up and maintained by an electronic money institution and used by its holder for accounting of electronic money issuance and repurchase transactions, as well as accounting for electronic money payments made only in the closed system of this electronic money institution.
A closed system means that e-money account holders do not have the option to transfer e-money from their e-money account to third parties outside of this system. The only payments that can be made are payments between e-money accounts in this system.
In the event that an international card scheme debit card, prepaid card or credit card is attached to an e-money account that allows the use of e-money stored in an e-money account with any merchant accepting card payments, such e-money system becomes an open system, and the account in which the electronic money is stored will also meet the definition of a payment account and is subject to the statutory requirements for servicing payment accounts.

I. Licensed Electronic Money Institution

In order to obtain a licence to operate an electronic money institution, the company must submit a relevant application to the Commission, by attaching documents and information referred to in Article 11 of the Law and Commission’s Regulation No 155.

Initial capital requirements
The initial capital of the licensed electronic money institution shall be at least EUR 350,000.
Providing additional payment services, the initial capital of the licensed electronic money institution remains the same, at least EUR 350,000

If the licensed electronic money institution additionally provides an account information service or payment initiation service (types of payment services), it needs to insure its professional civil liability.

The Commission shall take a decision on the issuance of a licence or refusal to issue a licence and inform the participant thereof within three months after receipt of all necessary documents, giving reasons for the refusal in the event of refusal. The Commission shall issue a licence for the operation of an electronic money institution for an indefinite period.

Regulatory requirements for the operation of electronic money institutions are available at: https://www.fktk.lv/en/law/electronic-money-institutions/

II. Registered Electronic Money Institution

In exceptional cases, if a person’s planned commercial activity meets the conditions specified in Article 5.1 of the Law, the person does not have to obtain a licence issued by the Commission for the operation of an electronic money institution, but only to obtain the status of a registered electronic money institution.

In order to start the operation of a registered electronic money institution, a commercial company shall submit to the Commission a relevant application, by attaching documents and information referred to in Article 5.1 paragraph two of the Law and Commission’s Regulation No 155.

Conditions for the launching of the operation
A registered electronic money institution does not need initial capital. At the same time, it must have sufficient resources at its disposal to start the planned business.

A person’s intended commercial activity must meet the following conditions:
(1) an electronic money institution shall provide only a closed system for issuing and redeeming electronic money; in parallel, an electronic money institution may also offer a money remittance service and a payment instrument issuing service;
(2) the average amount of electronic money in circulation within the framework of the commercial activity performed by the electronic money institution shall not exceed two million euros in accordance with the business plan;
(3) electronic money holders and users of payment services, if any, shall be related to the Republic of Latvia (for example: a resident of Latvia, a company registered in Latvia);
(4) the board (seat) and legal address of the electronic money institution shall be located in the Republic of Latvia. The place of business shall be limited to the territory of the Republic of Latvia. It does not intend to offer and provide electronic money and payment services outside the territory of Latvia or through international payment schemes.

A registered electronic money institution shall take into account that if it intends to open its closed system for e-money issuance to a wider activity (possible transfers from the system to third parties with which the electronic money institution has no contractual relationship), or in addition provide any of the payment services referred to in Article 1 Paragraph 1 Points “a”, “b”, “c”, “d”, “h” or “i” of the Law, it must obtain a licence in accordance with Article 11 of the Law, regardless of planned turnover.

After receiving all the information and documents specified in the Law and Commission’s Regulation No 155, the Commission shall assess within 30 days, whether the person complies with the requirements of the Law.

Regulatory requirements for the operation of electronic money institutions are available at: https://www.fktk.lv/en/law/electronic-money-institutions/

Requirements for the board members, council members and persons with qualifying holding

Persons who will act on the board or the council of the electronic money institution, or the persons responsible for preventing money laundering and terrorist financing, must have an impeccable reputation, appropriate competence and education. On the other hand, persons who have acquired a qualifying holding directly or indirectly in the institution must have an impeccable reputation.

Regulatory requirements for the operation of electronic money institutions are available at: https://www.fktk.lv/en/law/electronic-money-institutions/

Fee for document handling

The fee for handling the documents submitted for obtaining the licence is 5000 euros.
The fee for handling the documents submitted for the registration of electronic money institution is 2500 euros.

If a person plans to offer an innovative service in the field of electronic payments, the fee for handling documents is 450 euros. The person should notify the grounds to the Commission on which it considers that its relevant service should be considered innovative.

Regulatory requirements for the operation of electronic money institutions are available at: https://www.fktk.lv/en/law/electronic-money-institutions/

Cancellation of an electronic money institution registration or licence upon the institution’s own application

If an electronic money institution requests the cancellation of its entry in the register of electronic money institutions in accordance with Section 25.1 Paragraph one, Point 6 of the Law, or cancel its licence in accordance with Section 25, Paragraph one, point 8 of the Law, it shall submit an application to the Commission and the following documents shall be attached:
1) the decision of the electronic money institution to terminate the provision of payment and electronic money services;
2) the balance and the off-balance of the electronic money institution on the date of which it terminated the provision of payment services and electronic money services, indicating the positions in which the funds related to the provision of payment services were listed;
3) confirmation that the electronic money institution has no liabilities to its customers – electronic money holders and payment service users;
4) a statement issued by a credit institution, in which the electronic money institution has an account to hold the money of the electronic money holder separately from the property of the institution, stating that there is no balance on that institution’s account.

After receiving these documents, the Commission shall examine the application within 30 days and take a decision on cancellation. The Commission could also ask for an explanation of the decision taken by the electronic money institution. The Commission will inform the public in writing of the decision taken as well as will inform about the final settlement related to the electronic money institution’s contributions to the Commission.

Meeting with potential market participants

The Commission’s experts offer consultations to potential market participants to help them better understand regulatory requirements for licensing and registration of e-money and payment institutions, as well as identify potential challenges by developing new and innovative products or business models.

Our experts provide:

  • clarifying certain aspects of regulatory requirements;
  • advice on regulatory requirements for early stage of an innovative product or business model.

Please apply in advance to make an appointment: fktk@fktk.lv

Contacts


Address:
Kungu iela 1, Riga, LV-1050
Phone:
6 7774800
E-mail:
Previous sign-in to the secretary:
67 774 801
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