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.
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.
An e-money institution can avail of the right to issue, redeem and distribute e-money and provide the services for which it is authorised in Ireland throughout the EEA.
An e-money business established outside the EEA can obtain passporting rights either by establishing itself or a subsidiary in Ireland (or in another Member State) or by acquiring an existing authorised e-money institution.
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.
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 arrangments 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.
An e-money institution must hold initial capital of at least €350,000. However, the actual amount required for each individual firm will be notified to the firm as a part of the authorisation process.
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.
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.
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.
There are five stages to the authorisation process for an e-money institution, once the applicant has submitted a completed Application Form and relevant accompanying documentation. These also apply to applicants applying for registration as account information service providers. The five stages are as follows:
Stage 1 - Acknowledgement: the CBI acknowledges receipt of the application within 3 working days.
Stage 2 - Key Information Check: the CBI checks that the applicant has submitted all the key information and documentation and confirms whether or not this is the case within 10 working days of receipt of the application. If the application is lacking any key information, the CBI will identify this information and the applicant can then decide to resubmit. Any subsequent applicant will be considered a new application and the application process will commence again.
Stage 3 - Assessment Phase: the CBI assesses the application against the authorisation requirements and issues initial comments to the applicant on its application as well as subsequent comments based on its review of the applicant’s responses. The CBI has committed to a 90 working day assessment phase however, this period will be paused should the CBI request further information.
Stage 4 – Notification of Assessment: the CBI notifies the applicant of the outcome of the assessment process. Where the assessment is favourable, the CBI will notify the applicant that it proposes to authorise. This letter will also specify any specific conditions the CBI proposes to impose on the authorisation itself once granted, along with the reasons for these conditions. Applicants will have the opportunity to make representations regarding these conditions before the CBI makes its decision.
If the CBI is not satisfied that it should authorise the applicant on the basis of the assessment, it will set out the areas to be addressed. The applicant has the right to respond to any issues raised by the CBI in its notification and the CBI will assess any responses made before notifying the applicant of its decision in Stage 5 of the process.
Stage 5 – Notification of Decision: where the CBI intends to authorise the applicant it aims to notify the applicant of its decision within 10 working days of any pre-conditions to authorisation being satisfied. In a case where the CBI is minded to refuse the application, the Central Bank will notify the applicant of the proposed grounds for refusal and the next steps in that process. These steps will include an opportunity for the applicant to make submissions in response to the proposed refusal.