Directive 2009/110/EC on the taking up, pursuit and prudential supervision of the business of electronic money institutions (the Second EMD) has been implemented into Ireland by way of the European Communities (Electronic Money) Regulations 2011 (E-Money Regulations). The E-Money Regulations come into operation on 30 April 2011.
The first E-Money Directive, which was implemented in Irish law by the European Communities (Electronic Money) Regulations 2002 (2002 Regulations), was adopted to facilitate the development of the electronic payment industry. It was intended that the first E-Money Directive would create a clear and harmonised framework.
The Second EMD was adopted as the EU Commission considered that the first E-Money Directive did not sufficiently assist the development of the market for electronic money (e-money services). The Second EMD repeals the first E-Money Directive.
Overview of the E-Money Regulations
The provisions of the Second EMD are closely linked to the provisions of the Payment Services Directive (PSD), which was implemented in Ireland by the European Communities (Payments Services) Regulations 2009 (PSR).
The E-Money Regulations lay down the rules for the pursuit of the activity of issuing e-money.
The E-Money Regulations generally aim to:
- enable new, innovative and secure e-money services to be designed;?
- provide market access to new companies; and
- foster real and effective competition between all market participants.
Under the E-Money Regulations “electronic money” means: “electronically (including magnetically) stored monetary value as represented by a claim on the electronic money issuer which –
- is issued on receipt of funds for the purpose of making payment transactions;
- is accepted by a person other than the electronic money issuer; and
- is not excluded by Regulation 5.”
The following are those that may issue e-money:
- Credit institutions (defined under the Capital Requirements Directive (CRD)) (which includes a branch of a credit institution located within the EU whose head office is located outside of the EU);
- E-money institutions authorised under the E-Money Regulations (which includes a branch of an e-money institution located within the EU whose head office is located outside of the EU);
- An Post;
- The Central Bank of Ireland, the European Central Bank or the central bank of another Member State that is not acting in their capacity as monetary authority, or other public authority;
- A Member State, or a regional or local authority of a Member State, that is acting in its capacity as a public authority;
- Credit unions;
- A person that has been registered after qualifying as a small e-money institution under Regulation 33;
- A person for the time being permitted under Part 6 to issue e-money (please see the Transitional Period below); or
- An e-money institution authorised as such in another Member State pursuant to a law giving effect to the Second EMD.
The E-Money Regulations do not apply to:
(a) monetary value stored on instruments that can be used to acquire goods or services only – (i) in the premises used by the electronic money issuer, or (ii) under a commercial agreement with the electronic money issuer within a limited network of service providers or for a limited range of goods or services,
(b) monetary value that is used to make payment transactions executed by means of any telecommunication, digital or information technology device, where the goods or services purchased are delivered to and are to be used through a telecommunication, digital or information technology device, on the condition that the telecommunication, digital or information technology operator does not act only as an intermediary between the electronic money user and the supplier of goods and services.
Authorisation of an E-Money Institution
An application must be submitted to the Central Bank of Ireland together with the following:
- a programme of operations;
- a business plan;
- evidence of initial capital requirements;
- a description of the applicant's governance arrangements and internal control mechanisms, including, inter alia, risk management and accounting procedures;
- a description of the internal control mechanisms in relation to money laundering and terrorist financing;
- a description of the applicant's structural organisation, including, if applicable, a description of the intended use of agents and branches and a description of outsourcing arrangements;
- details in respect of the name of each qualifying shareholder;
- details in respect of each director and senior management;
- the name of the person who will carry out for the applicant the functions of audit required by the Companies Acts;
- the applicant’s legal status and memorandum and articles of association or other constitutional documents; and
- the address of the applicant’s head office.
The initial capital requirements of an e-money institution is initial capital of not less than €350,000, the composition of which is laid out in the E-Money Regulations (under the 2002 Regulations the initial capital for an e-money institution was €1 million).
The applicant is also to provide a description of its audit arrangements and the organisational arrangements it has set up with a view to taking all reasonable steps to protect the interests of its users and to ensure continuity and reliability in the performance of payment services.
The Central Bank of Ireland has three months in which to make their decisions of whether to grant authorisation upon receiving all information required by the Central Bank of Ireland. The Central Bank of Ireland may withdraw the authorisation if the e-money institution does not commence issuing e-money within 12 months of being granted authorisation.
Small E-Money Institutions
The E-Money Regulations contain a waiver for small e-money institutions. This means that the requirements of the application process and the general prudential requirements may be waived or reduced by the Central Bank.
A person qualifies as a small e-money institution where:
(a) the total business activities of the person immediately before the time of registration do not generate average outstanding e-money that exceeds €1 million, and
(b) the average amount of payment transactions executed by the person and any agent for which the person bears full responsibility during the previous 12 months, or the average amount of payment transactions likely to be executed by the person within the next 12 months, assessed on the projected total amount of payment transactions in its business plan, is not more than €3 million per month.
The institution’s head office must also be within the State in order to benefit from the waiver.
Where an institution is registered as a small e-money institution such registration is only valid within Ireland and the institution is not entitled to issue e-money in any other Member State.
A transitional period is available under the E-Money Regulations so as to create legal certainty and so that e-money institutions that are authorised under the 2002 Regulations are able to continue their activities. Such e-money institutions have until 30 October 2011 in order to submit all relevant information in order for the Central Bank of Ireland to assess whether they comply with the provisions of the E-Money Regulations and if not to identify which measures will be required in order for them to comply.
Those that benefited from the waiver provided under Regulation 19 of the 2002 Regulations are given until 30 April 2012 in order to be compliant with the E-Money Regulations.