Ireland is home to some of the world’s leading payments companies, attracted in part by Ireland’s thriving financial services and growing FinTech sector.
There are a number of advantages to being authorised in Ireland as an electronic money (“e-money”) or payment institution including:
- the ability to passport throughout the European Economic Area (“EEA”), 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 (roughly 17%).
E-Money is regulated under the European Communities (Electronic Money) Regulations 2011, which transpose the E-Money Directive1 into Irish law, without any significant additional national measures or “gold plating”.
Currently, payment institutions are regulated under the European Communities (Payment Services) Regulations 2009, which transpose the Payment Services Directive2 into Irish law, again without any significant national gold plating. The existing framework will be replaced by a new regulatory regime, once the revised Payment Services Directive3 is transposed into Irish law: the transposition date is 13 January 2018.
The Central Bank of Ireland (“CBI”) is responsible for the authorisation, prudential regulation and supervision of both e-money and payment institutions in Ireland. The CBI has published guidance on prudential requirements for e-money and payment institutions respectively, (here) and (here).
Passporting and Third Country Firms
E-Money and payment institutions authorised in Ireland can passport to other EEA member states on either a services or cross-border establishment basis, subject to the fulfilment of certain notification requirements. An e-money institution/ payment institution authorised in another EEA member state can also passport into Ireland.
An e-money or a payments business established in a non-EEA member state (“Third Country”), can establish itself in the EEA with passporting rights by obtaining authorisation for itself or a subsidiary in Ireland or by acquiring an existing EEA authorised e-money/payment institution.
The Authorisation Process
All applications for authorisation as an e-money/payment institution in Ireland must be submitted to the CBI. The application form for authorisation as an e-money institution is available here and the application form for authorisation as a payment institution is available here.
There are five stages to the authorisation process for an e-money/payment institution. In the first two stages, the CBI acknowledges receipt of the application for authorisation and checks that the applicant has submitted all the key information and documentation. In Stage 3, the CBI assesses the application and issues comments to the applicant on its application. In Stage 4, the CBI notifies the applicant of the outcome of the assessment process, indicating whether or not it proposes to authorise the applicant. 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.
The entire authorisation process is likely to take at least six months and may take more time, depending on when the CBI receives the material it requires to complete its assessment. The CBI has published a guidance note on the completion of an application for authorisation as an e-money institution (here) and as a payment institution (here).
An e-money/payment institution must notify the CBI in respect of any proposed material change in its ownership.
An entity that wishes to become authorised as an e-money/payment institution under Irish law must fulfil a number of requirements. For existing groups with substantial operations outside Ireland, an important requirement will be the CBI’s 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 personnel who are to fulfil the applicant’s core functions should operate out of Ireland.
There is nothing to prevent an Irish authorised e-money/payment institution from outsourcing/delegating some of its activities to entities in other jurisdictions. However, overall responsibility for ensuring compliance with legislative requirements must stay in Ireland. In addition, the CBI must be notified of any material outsourcing of activities.