Complete Guide to Obtaining an Electronic Money Institution License in Cyprus

Introduction

As the digital financial landscape continues to expand, Cyprus has emerged as a key player in the European Union, offering a strategic platform for Electronic Money Institutions (EMIs). With its favorable regulatory environment and competitive business incentives, Cyprus attracts a plethora of FinTech companies looking to leverage robust infrastructure and clear regulatory guidelines. This guide provides a detailed roadmap for obtaining an EMI license in Cyprus, covering everything from the types of services offered under such a license to the detailed application process.

What is an Electronic Money Institution (EMI)?

An Electronic Money Institution, commonly referred to as an EMI, is a financial entity authorized by regulatory bodies to issue electronic money. Electronic money (or e-money) represents monetary value that is electronically stored and is used for making payment transactions. EMIs facilitate a wide range of financial services, primarily focusing on digital payments, including transferring money and processing electronic transactions without direct bank involvement. These institutions play a vital role in the financial technology sector by bridging traditional banking services and modern digital finance needs.

Services Offered Under a Cyprus EMI License

EMIs licensed in Cyprus are authorized to provide a wide range of payment and financial services, including:

1. Payment Account Operations: Manage cash deposits and payment account-related operations.
2. Cash Withdrawals: Facilitate withdrawals from payment accounts, along with account management.
3. Execution of Payment Transactions: Conduct transactions such as direct debits, card payments, and fund transfers between accounts, including standing orders.
4. Credit-Funded Transactions: Handle payments backed by a credit line, including card payments and direct debits.
5. Issuing and Acquiring Payment Instruments: Issue payment instruments like cards and acquire transactions on behalf of merchants.
6. Money Remittance: Transfer money without the need for a payment account for either party.
7. Telecommunications/IT-Based Payments: Process payments where consent is given via digital platforms, with telecom or IT operators acting as intermediaries.
8. Account Information Services: Provide consolidated account information, even if the accounts are held with different providers.
9. Issuance of Electronic Money: Issue e-money for use in transactions involving goods and services.

Types of EMI and Payment Licenses:

1. EMI License:
   • Comprehensive financial services, including electronic money issuance, payment transaction execution, and operational risk management.
2. Money Remittance License:
   • Basic payment services, including money remittance, instrument issuance/acquisition, and credit transfers.
3. Payment Processing License:
   • Covers money remittance and transactions initiated through telecom, digital, or IT platforms, ideal for broader payment services.
4. Full Payment Institution License:
   • Extensive services, including operating payment systems, providing foreign exchange, and storing/processing payment transaction data, suited for largescale service providers. Selecting the appropriate license is critical and should align with your business model.

Key Requirements for EMI Licensing:

To obtain an EMI license in Cyprus, certain requirements must be met:

1. Company Structure: The applicant must establish a Cyprus-incorporated company with a robust organizational structure, including at least two executive directors and three independent directors.
2. Minimum Capital: The required initial capital for an EMI license is EUR 350,000.
3. Business Plan: A comprehensive business plan detailing the business model, target market, financial forecasts, and risk mitigation strategies.
4. Management Standards: Directors and senior management must meet “fit and proper” standards, demonstrating the necessary skills, experience, and integrity.
5. Control Mechanisms: Strong internal systems for risk management, compliance, and audit are required to ensure the security and smooth operation of the institution

List of Requirement Documents:

1. CVs and Qualifications: Resumes of shareholders and key team members to demonstrate their expertise and suitability for operating in the payment and electronic money sectors.
2. Source of Funds/Source of Wealth of Shareholders: Documentation for shareholders holding more than 10% of the company’s shares, verifying the origin of their funds and wealth.
3. Business Plan: A comprehensive document outlining the company’s strategic goals, service offerings, market analysis, and financial projections.
4. License Application: Completion and submission of the official application form for a Payment Institution (PI) or Electronic Money Institution (EMI) license in Cyprus.
5. Internal Policies and Manuals: Development of internal operational, compliance, and client management policies and procedures.
6. IT Management: Documentation of the company’s IT systems, including agreements with software providers or details of any proprietary software in use.
7. KYC/AML Agreements: Contracts with providers of Know Your Customer (KYC) and AntiMoney Laundering (AML) services.
8. Organizational Structure: A detailed description of the company’s structure
9. Articles of Association/Memorandum: Submission of the company’s foundational corporate documents.
10. Operations Program Figure: A detailed plan describing the company’s operational processes and procedures.
11. Draft Service Agreements: Preliminary service agreements prepared for clients.
12. ICT and Security Management: Documentation outlining the company’s information, communications technology, and security management protocols.
13. Cloud Computing Services: Details of agreements with cloud service providers, (if applicable)
14. Methods of Safeguarding: Strategies for ensuring the protection of client funds and data.
15. Civil Liability Insurance: Proof of adequate civil liability insurance to cover potential operational risks.
16. Business Address Approval: Confirmation of a physical office in Cyprus, ensuring compliance with local regulations.
17. Non-criminal Record: Submission of a clean criminal record certificate for major shareholders and key team members.

Business Premises Requirements:

To secure an EMI license in Cyprus, applicants are required to establish a physical office within the country. This office must house key personnel, facilitate data management, and serve as the operational headquarters, ensuring compliance with regulatory standards set by the authorities.

Government Fees:
The fees associated with obtaining an EMI license in Cyprus include:

• Application Fee: EUR 5,000 for the initial EMI license application.
• Additional Services Fee: EUR 1,000 for each additional service which you would like to include that the EMI provides
• Account Information Services Fee: An extra fee of EUR 500 when applying for Account Information Services
  Any addition of services must align with the business plan, which should be updated and adjusted to reflect the new service accordingly.

Licensing Procedure:

Step 1: Submission of Application:

• The application, along with required documents such as the business plan, risk management policies, and company structure details, is submitted to the Central Bank of Cyprus.

Step 2: Review and Evaluation:

• The Central Bank of Cyprus thoroughly assesses the application to ensure compliance with regulatory criteria, focusing on the institution’s financial stability, business model, and adherence to AML (Anti-Money Laundering) standards. Step 3: License Approval:
• Upon successful review, the EMI license is granted, allowing the institution to issue e-money and offer payment services.

Responsibilities:

Once licensed, EMIs must comply with several ongoing regulatory obligations:

1. Regulatory Filings:

• EMIs must regularly report their financial status, risk management, and regulatory compliance to the Central Bank of Cyprus.

2. AML Obligations:

• Strict adherence to anti-money laundering and counter-terrorism financing rules, including customer due diligence, transaction monitoring, and suspicious activity reporting.

3. Client Protection:

• EMIs must ensure transparency in fees, protect client funds, and effectively handle customer complaints. 

Timeline:

The timeframe for obtaining an EMI license in Cyprus can range from 6 months to 2 years, depending on the complexity of the application, the readiness of the required documentation, and the responsiveness to Central Bank of Cyprus requests.

Conclusion

Navigating the path to obtaining an EMI license in Cyprus can be complex but offers significant advantages for businesses looking to thrive in the European financial services market. By understanding the requirements and preparing thoroughly, companies can effectively manage the licensing process. At Polycarpos Philippou & Associates LLC, we provide expert guidance and comprehensive support to help our clients achieve their business objectives within Cyprus’s dynamic financial sector.

How We Can Assist

As specialists in corporate law and financial regulations, Polycarpos Philippou & Associates LLC offers tailored services to assist with the acquisition of EMI licenses in Cyprus. From initial consultation to ongoing compliance management, our team ensures that your journey towards establishing a licensed EMI is smooth and successful. Contact us today to learn how we can support your financial services endeavours.