Malta EMI License

Malta EMI License 

• Obtain a Malta EMI license with Tetra Consultants’ assistance and operate your Electronic Money Institution (EMI) smoothly and further without any governmental interference. Malta has emerged as one of the most dynamic environments for starting electronic gambling businesses, and as a result, the number of Electronic Money Institutions (EMIs) that provide the infrastructure for conducting transactions in this industry has increased dramatically. Malta currently has the third-highest number of EMIs in Europe, following nations like the United Kingdom and Lithuania.
• Malta was among the first EU nations to enact EMI regulations. Today, Malta is the leader in technology regulation and fintech, having been the first country to implement particular legal frameworks for DLT (Blockchain) and cryptocurrencies. The main benefits that Malta provides to EMIs are a significant level of political and economic stability an extremely good telecom and IT infrastructure with exceptional levels of accessibility and consistency, Malta’s early implementation of laws relating to cryptocurrency and other financial services, and, perhaps most importantly, Malta’s member status in the European Union, which implies that Malta-based EMIs have a passport to offer services throughout the EU.
• Tetra Consultants specializes in getting a Malta EMI license, which includes the preparation and filing of all documents necessary for authorization/registration, as well as legal consultation on Maltese business law and incorporation. Furthermore, our team of experts will assist in communications with Malta Financial Services Authority (MFSA) throughout the process to ensure that all queries posed by the regulator are addressed. Additionally, we provide assistance with the business plan, banking partners, and suitable employees, and help you open a corporate bank account. 
• If you want to offer regulated e-money institution services you must get a license for operating as an E-money Institution. However, without the right expertise and market insights, the procedure of obtaining a Malta EMI license can be time-consuming. While you may be certain of the business model you desire, it may be unclear to you what type of licenses and permits are necessary from a regulatory standpoint. 

What are the regulations governing a Malta EMI license? 

• Malta Electronic Money Institutions (EMIs), previously regulated under the Banking Act (Chapter 371 of the Laws of Malta) are now regulated by the Financial Institutions Act (Chapter 376 of the Laws of Malta) (the “Act”) and Regulations issued thereunder which is considered as a solid regime for standalone e-Money Institutions. The legislative amendments enacted in April 2011 brought the regulation of EMIs in Malta, previously regulated under the banking regulations, within the remit of the Financial Institutions Act. This essentially provided Maltese EMIs with a milder legislative touch, resulting in a considerably more appealing environment for operators wishing to commence EMI operations.
• The change in legislation is widely credited with sparking the sector’s expansion and has had significant regulatory and financial ramifications on the current EMI regime, including, among other things, a decrease in the initial capital requirement from €1m to €350,000, an augmentation of the definition of “electronic money” and the range of activities conducted by EMIs, the introduction of safeguarding prerequisites and redemption rules intended to strengthen protection for consumers.
• The removal of EMIs from the Banking Act’s purview was warmly welcomed by both professionals and companies, not least because it is generally agreed that the issuance of electronic money does not qualify as a deposit-taking activity under banking law due to its unique function as an electronic substitute for coins and banknotes that are intended to be used for making payments, typically of a limited sum and not as a method of saving.
• Legislation: Accordingly, the Financial Institutions Act and Financial Institutions Rules govern the establishment of electronic money institutions in Malta. The Electronic Money Institutions Directives along with the Financial Institutions Act, and the Financial Institutions Rules reflect the requirements for setting up an e-money institution in Malta. These regulations are focused on the establishment, conduct, and prudential oversight of financial institutions authorized to issue electronic money.
• Passporting rights: Considering both payment services and the issuance of electronic money are pursuant to harmonized EU legislation, such specialized operations may be passported into other EU member states and EEA jurisdictions if the necessary notification procedure is followed. This would allow the Maltese licensee to deliver its services throughout the relevant Member State/s, either via the construction of a branch or by the provision of services across borders.

What is an Electronic Money Institution? 

• The Third Schedule of the Financial Institutions Act defines an Electronic Money Institution (“EMI”) as “a financial institution that has been licensed in accordance with this Act and authorized to issue electronic money or that holds an equivalent authorization to issue electronic money in another country in terms of the Electronic Money Directive.”
• While a license allowing one to manage/operate such an asset as electronic money is known as an “Electronic Money Institution License” or “EMI License.” Further, to run payment systems and make arrangements for payments using electronic wallets, in particular, authorization is needed. The ability to issue e-money is also granted by an EMI license.

What is electronic money? 

• The term “electronic money” is defined in the Financial Institutions Act to include “magnetically stored monetary value,” which also refers to payment cards and computer hard drives. Accordingly, “electronic money” fits in this definition whether it is kept on a payment device in the possession of the electronic money holder or stored remotely at a server and managed by the electronic money holder through a dedicated account for electronic money and may eventually include payment by mobile phone.
• Accordingly, e-money can be broadly categorized into two types, namely:
  • Card or device-based e-money enables users to make modest purchases without using actual currency by utilizing a portable card or electronic device as an e-wallet. Card/device-based e-money is largely acknowledged as having sparked regulatory growth in the sector.
• Server-based e-money has apparently become more popular in recent years, and Server based e-money is held remotely at a server that can typically be retrieved and controlled by users. 
• The “wide” definition of e-money is intended to remove any unnecessary limitations on the wide array of electronic money products currently on the market and those that may be developed in the future, efficaciously facilitating technology advancement, which is undoubtedly this generation’s most remarkable accomplishment and a crucial lineage for subsequent millennia.

What are the benefits of obtaining a Malta EMI License? 

• The driving forces behind Malta’s e-money industry’s exponential development are quite similar to those driving the expansion and success of Malta’s financial services sector as comprehensively. These comprise
  • A regulator who is approachable, inventive, and sensible;
  • The country’s good track record as a Eurozone economy;
  • A jurisdiction with strong tax efficiency, cost-effectiveness, and access to a massive array of tax treaties;
  • Developed FinTech industry;
  • Lower operating costs compared to other EU countries;
  • The possibility to obtain a license quickly;
  • The chance to use “passporting” to target a market throughout the whole EU;
  • A reliable technical infrastructure;
  • The availability of foreign financial service providers and a knowledgeable English-speaking workforce with extensive industry expertise;
  • The use of English in all official correspondence, forms, and documents, as well as in the formulation of financial services laws, rules, and regulations.
• Tetra Consultants’ team of experts further believes that Malta’s e-money business has also benefited from the country’s reputation as a center of competence for online and remote gaming operations, giving EMI promoters easy access to these e-commerce industries.
• A specialized e-Money market has successfully developed due to the rapid growth of our e-Commerce sector and Malta’s strong IT infrastructure, which has raised interest in using Malta as a platform for financial institutions offering electronic money and payment services abroad.

What are the activities allowed under a Malta EMI License?

Along with the issuance of e-money a Maltese Licensed EMI may engage in other activities, such as payment services which are regulated under the Second Schedule of the Financial Institutions Act. Such activities include: 

• Provision of services allowing cash to be placed on a payment account as well as all the operations required for operating a payment account;
• Provision of services allowing cash withdrawals from a payment account as well as all the operations required for operating a payment account;
• Completion of a money transaction, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider
  • Processing of direct debits, including one-off direct debits
  • Processing of payment transactions through a payment card or  similar device
  • Processing of credit transfers, including standing orders;
• Completion of a money transaction where the funds are covered by a credit line for a payment service user:
  • Processing of direct debits, including one-off direct debits
  • Processing of payment transactions through a payment card or similar device
  • Processing of credit transfers, including standing orders
• Issuing and/or acquiring payment instruments;
• Money remittance;
• Completion of a money transaction in which the payer’s assent to the money transfer is communicated via any telecommunications, digital, or IT devices, and the payment is made to the controller of the telecommunications, IT system, or network, functioning merely as a middleman on behest of the user of the payment service and the provider of the goods and services;
• Payment initiation services;
• Account information assistance; 
• Operational and intently associated ancillary services like ensuring monetary transactions completion, foreign exchange services specifically related to payment services, safekeeping activities, and the storage and processing of data, as well as business activities other than the provision of payment services; and
• Business activities other than the issuance of electronic money, having regard to the applicable law regulating such activities.

Who is the authority responsible for regulating Electronic Money Institutions (EMIs) in Malta? 

• The Malta Financial Services Authority (MFSA) regulates the licensing of electronic money institutions in Malta, which describes an electronic money institution as an institution that provides payment services and issues electronic money. EMIs headquartered in Malta are permitted to issue debit cards (such as chip cards), but not credit cards, because such institutions are not permitted to engage in lending or other bank-related operations.
• The Malta Financial Services Authority is a single regulator for the financial services sector in Malta. It regulates the payment system services in Malta under the Financial Institutions Act (‘FIA’) which is the key act transposing the EU Payment Services Directive 2015/2366 (‘PSD2’).
• The regulatory body of Malta is a strong proponent of developing fintech services. The MFSA’s FinTech Strategy aspires to make Malta a global FinTech center that encourages and supports financial services firms to use technology in their product and service offerings in order to spur innovation. The MFSA welcomes face-to-face interactions with foreign businesses interested in operating out of Malta and is accessible and friendly. However, Malta’s regulatory authority and framework place great emphasis on anti-money laundering and anti-fraud measures.
• An application for a Malta EMI license is deemed to be determined by the MFSA by
  • Granting a license without condition; 
  • Granting a license subject to such conditions it may deem appropriate;
  • Refusing to grant a license

Small Electronic Money Institution License

• Subject to the satisfaction of conditions stipulated below, the MFSA has the authority to grant authorization to an applicant for registration/recognition as a “small electronic money issuer” thereby waiving the application of all or part of the provisions relating to general prudential requirements, initial capital, own funds, and safeguarding requirements, as set out in the Financial Institutions Act and the applicable MFSA Rules.
• Small EMIs, are defined as companies
  • whose head office is in Malta; and
  • that issue electronic money in Malta; and
  • the total business activities of the institution generate an average outstanding electronic money that does not exceed two million euros (€2,000,000), and
  • none of the natural persons responsible for the management or operation of the business has been convicted of offenses relating to money laundering or terrorist financing or other financial crimes

What are the minimum regulatory requirements for obtaining a Malta EMI license? 

• Obtaining a Malta EMI license implies the company’s compliance with certain requirements concerning the amount of registered capital, personnel issues (company structure, top managers’ reputation, fit and proper), and asset safeguarding policy.

Minimum capital requirements: 

• In addition to a number of other systemic, organizational, and operational criteria, up until 2011, entities applying for a Malta EMI license had to meet a minimum initial capital threshold of one million (€1,000,000). It is the licensee EMI’s responsibility to make sure that its own resources will not get below this threshold of initial capital.
• Nevertheless, the regulations have been relaxed as a result of Directive 2009/110/EC, which Malta implemented in April 2011. The most notable modification was the decrease in the starting capital requirement from the required share capital amount of €1,000,000 to €350,000.
• Furthermore, an EMI must keep its own funds in an amount equal to at least 2% of the average outstanding electronic money (which percentage may be increased in proportion to the risk loss and risk management procedures presented by the applicant, and in the case of companies with no history, based on percentages of their business plan).
• Whereas, the initial capital of small e-money issuers is calculated as follows:
  • Where the business activities of the applicant small electronic money issuer generate an average outstanding electronic money of less than one million euros (€1,000,000), it is required to hold an amount of initial capital equal to fifty thousand euros (€50,000); or 
• Where an applicant small electronic money issuer generates an average outstanding electronic money between one million euros (€1,000,000) and two million euros (€2,000,000), it is required to hold initial capital amounting to one hundred thousand euros (€100,000).

Physical Office:

• A prerequisite for obtaining an e-money license in Malta is the availability of a real physical head office in the territory of the Republic.

Directors and other key roles: 

• An entity applying for a Malta EMI license is required to fulfill the requirements with respect to the appointment of a minimum number of directors,  and local employees as well as ensuring the positioning of key roles with the relevant experience. Generally, an EMI institution in Malta is required to at least have 2 individuals locally present in Malta who can effectively manage and direct the business of the institution (this particular position can be filled by a local director, an AML/CFT compliance Officer, or a risk manager). The requirements for directors and key roles can be enumerated as follow:
• Board of Directors – An EMI institution in Malta is required to have at least 2 directors (with a mix of executive and non-executive directors). Wherein it is usually recommended that at least one such director be locally present. Tetra Consultants can assist with the fulfillment of local directorship roles by providing our nominee director services. 
• Risk Manager – Institutions providing e-money services in Malta are required to appoint a risk manager who is a resident of Malta and who is proficient in overseeing comprehensive insurance and risk management program, assessing and identifying risks that could impede the reputation, safety, security, or financial success of the organization. Further, the duties of this particular role can also be delegated to the Compliance Officer. 
• Compliance Officer – The other key role that an e-money institution must comply with is that of a compliance officer who monitors the AML/CFT compliances and experienced with the relevant laws and regulations governing the same. This compliance officer needs to be a resident of Malta. Tetra Consultant’s HR team will assist with the recruitment of local personnel who can overtake the compliance operation of the entity. 
• MLRO (Money Laundering Reporting Officer) – This function requires access to the company’s business records in order to make fully rational decisions in accordance with the applicable UK money laundering laws and regulations. This individual might be located anywhere and does not have to be a resident of Malta. As a result, if you have the manpower that you want to use, you can do so as long as they pass the FIAU MLRO interview. 

Conduct of rules and regulations for an EMI in Malta: 

• An authorized institution shall be considered as conducting its business in a prudent manner if inter alia: It appoints non-executive directors as MFSA considers appropriate having regard to the nature and scale of operations of the institution. Every person who is a director, controller, partner, or any other officer of the institution is a fit and proper person to hold that particular position and to carry out business with integrity and skill. In assessing whether a person has the relevant competence, soundness of judgment, and diligence, MFSA will consider the experience with similar responsibilities, qualifications, and training. 
• The institution shall maintain adequate accounting and other records and adequate systems of control for its business and records that are commensurate with its needs and particular circumstances in such a way as to enable the business of the institution to be prudently managed and for it to comply with the requirements prescribed by law.
• The MFSA will consider the possibility of it receiving adequate flows of information from the institution and relevant connected parties in order to monitor the fulfillment of prudential criteria and to identify and assess any threats to the Maltese financial system. 
• The MFSA must also be satisfied that the institution and group to which it may belong could be subject to consolidated supervision while taking account of any faction which might inhibit such effective supervision.

What is the procedure to apply for a Malta EMI License?

Tetra Consultants’ team of licensing experts recommends going through the steps below in order to understand the typical procedure for applying for a Malta EMI license.