Licensed electronic money institution

To prevent a circulation of the electronic money (e-money) in Latvia which has not been issued in accordance with the procedures specified in regulatory enactments, i.e. it shall be put into circulation by an entity that is not entitled to issue electronic money in accordance with the provisions of Directive 2015/2366/EC and the Law, Latvijas Banka shall indicate that the activity of commercial companies including distribution of electronic money issued by a foreign issuer in Latvia (except for the activities of agents of electronic money institutions licensed in an EU Member State, which operate in Latvia within the framework of the freedom to provide cross-border services), shall be regarded as the issuance of electronic money, and such commercial companies have to receive a licence for the issuance of electronic money in accordance with the provisions of Section 11 of that Law.

In accordance with Section 2 (8) of the Law an electronic money account (e-money account) is an account which is opened by a natural or legal person in a closed system created and maintained by an electronic money institution and which may be used by the account holder for the recording of issuing and redeeming of electronic money, as well as for recording such payments with electronic money which are executed only in the closed system of the electronic money institution.

A closed system means that e-money account holders do not have the option to transfer e-money from their e-money account to third parties outside this system. The only payments that can be made are payments between e-money accounts in this system. In the event that an e-money account is linked to an international debit card, a prepaid card or a credit card that enables e-money stored in an e-money account to be used by any trader accepting card payments, such e-money system becomes an open system, and the account in which electronic money is stored shall also meet the definition of a payment account and the requirements of the Law for the servicing of payment accounts and the provision of information shall apply to it.

• persons involved in the management have adequate education and experience to manage the payment institution in accordance with the requirements of Section 20 of the Law;
• persons involved in the management and in the case of shareholders holding 10% or more of the share capital or voting rights with good repute and no criminal record in accordance with the requirements of Section 21 of the Law;
• provision of own funds of at least of 350 000 euro in accordance with Section 12 of the Law and capital requirement in accordance with Section 35 of the Law.

Preparation for the submission of application: an introductory stage, during which Latvijas Banka organises a meeting with an entrepreneur to discuss its planned activities. At this stage, the enterprise does not necessarily have to be established yet.

What does the entrepreneur do

• Prepares information on the shareholder, stockholder and officials of the enterprise.
• Prepares general information on the type of capital financing and the origin of funds.
• Prepares information on the planned business model: procedures for the provision of services, organising payment flows, customers, countries in which the service will be provided.
• Starts the drafting of the necessary documents.

What does Latvijas Banka do

• Provides advice regarding the applicable regulatory framework.
• Carries out an assessment of the initial business project and procedures.
• Assesses whether the authorisation process can be continued.
• Provides advice on documents to be submitted.

What should be taken into account

• Please refer carefully to the regulatory requirements.
• Assess the need to attract qualified experts or consultants.
• By attracting consultants, the company shall actively participate in the process to ensure that the end result is in line with the business model and its risks.

Documents to be submitted

• the CVs of the shareholder, stockholder and officials.
• a description of the service and its provision.
• general information on the type of planned capital financing and the origin of funds.

Costs

Preparing for submission of the application and provision of advice by Latvijas Banka are free of charge.

Submission of application: an entrepreneur prepares and submits an application for authorisation.

What does the entrepreneur do

• Submits a fully completed licensing application and all necessary information, documents in accordance with the requirements of Article 11 of the Law and the FCMC regulations No. 138.
• Receives information from Latvijas Banka regarding the starting the examination of the application for authorisation or on deficiencies to be addressed in the submitted application.
• Provides the necessary additional explanations.

What does Latvijas Banka do

• Carries out an assessment of the completeness of the application within 15 working days (the assessment of the application as to the substance is not yet ongoing).
• If the application is incomplete, Latvijas Banka sends a letter to the entrepreneur indicating the deficiencies identified which need to be addressed.
• If the application is complete, Latvijas Banka sends a letter to the entrepreneur informing that an assessment of the application for authorisation is started.
• Latvijas Banka designates the project manager and gives the entrepreneur access to the project management tool, which will help to follow the process.

What should be taken into account

• Before submitting the application, please apply for advice offered by Latvijas Banka experts.
• Make certain that the documents to be submitted are complete and of high-quality.
• Prepare documents in accordance with the types of e-money issuance and chosen payment services and the risks inherent in them.
• Check that all necessary documents have been submitted (see a list of documents to be submitted).

List of documents to be submitted

1. A legal person shall apply for the authorisation of an electronic money institution. The application shall be prepared in accordance with Annex 1 to FCMC Regulation No 138 (hereinafter referred to also as Regulations No 138), to which the following are added:

• description of the structure of the shareholders (participants) of the commercial company, indicating the interest (capital, voting rights) of each shareholder or participant and the basis for such holding;
• completed Annexes 2, 3, 5 (if applicable), 6, 7, 8, 9 and 10 to FCMC Regulations No 92 "List of information to be attached to the notification regarding the acquisition or increase of a qualifying holding and the main principles and procedures for the examination of the notification” (hereinafter - Regulations No 92), and the information and documents specified in these Annexes, including information the origin of initial capital funds;
• completed Annexes 4–16 to Regulations No 138 and the information and documents specified in these Annexes.

2. Documents resulting from the requirements of Section 11 of the Law and Regulations No 138, and shall be submitted together with an application for an electronic money institution licence:

2.1. the programme of operations of the institution, indicating the types of intended payment services (if any intended). If the electronic money institution intends to carry out only the issuance of electronic money, it shall indicate in the programme the information regarding the planned issuing of electronic money; Annex 4 to Regulation No 138;

2.2. the business plan of the institution for not less than the first three financial years, which reflects in detail the operational strategy of the institution, the financial forecasts, as well as the draft balance sheet, profit or loss account, the capital adequacy calculation project, market research plans and other information, as specified in Regulations 138, which demonstrate that the applicant will be able to provide sound, stable and prudent operation of the institution; Annex 5 to Regulations No 138;

2.3. evidence of the existence of the initial capital;

2.4. description of the measures taken for safeguarding the money of payment service users and electronic money holders in accordance with the provisions of Section 38 of the Law, including information regarding the fulfilment of the requirements of Paragraph one of the said Section; Annex 7 to Regulations No 138;

2.5. description of the internal control system and risk management, which also includes a description of the administrative, risk management and accounting procedures necessary to ensure appropriate and sufficient management of an institution; Annex 8 to Regulations No 138;

2.6. procedures of the institution which ensure the establishment and efficient operation of the internal control system for the prevention of money laundering and terrorism and proliferation financing, including a detailed assessment of the risk associated with the services provided; Annex 14 to Regulations No 138; find more detailed information here;

2.7. description of the structural organisation of the institution, including information regarding the agents, branches, outsourcing contracts of the institution and its participation in a national or international payment system; Annex 6 to Regulations No 138;

2.8. information regarding the identity of the persons who have acquired a qualifying holding directly or indirectly in the institution, as well as the amount of their actual holding and a certificate of the compliance of such persons with Article 15 of the Law; Annexes 2, 3, 5 (if applicable), 6, 7, 8, 9 and 10 of Regulations No 92 and information and documents indicated in these Annexes, including information on the origin of initial capital funds;

2.9. list of those persons with whom the institution has close links within the meaning of the Credit Institution Law, indicating their identity and the nature of their relationship;

2.10. information regarding the members of the board and council of the institution, who, upon taking significant decisions on behalf of the institution, cause civil liabilities to the institution, the person responsible for the fulfilment of the requirements for the prevention of money laundering and terrorism and proliferation financing, as well as such person who is directly responsible for the management of the operation of payment services of the institution or the issuing of electronic money, as well as documents (CV, educational evidence documents, Punishment Register statement) which certify the compliance of the relevant persons with the requirements of Sections 20 and 21 of the Law; Annex 15 to Regulations No 138;

2.11. information on a sworn auditor or a commercial company of sworn auditors, if required in accordance with the Law on the Annual Accounts and Consolidated Annual Reports; Paragraph 4 of Annex 1 to Regulations No 138;

2.12. the articles of association of the institution, if such information is not available in public registers;

2.13. description of the internal control and management system of the institution in relation to security incident management and of the examination of complaints submitted by payment service users and electronic money holders in relation to the security and monitoring of information systems, including a mechanism according to which incidents are reported, arising from the requirements of Section 104.² of this Law, including the procedure for recording and reporting incidents; Annex 9 to Regulations No 138;

2.14. description of the processes developed to record, monitor, track and restrict access to sensitive payment data; Annex 13 to Regulations no 138;

2.15. description of the institution's commercial activity continuity arrangements, including effective emergency plans and a description of the regular verification and review procedures for the conformity and efficiency of these plans; Annex 11 to Regulations No 138;

2.16. description of the process for compiling statistics on the performance of the institution, a procedure or manual, which summarises data on the effectiveness of the activities of the institution, services provided and cases of fraud; Annex 10 to Regulations No 138;

2.17. information to be included in the description of information systems security policy, including a procedure or policy, including a detailed assessment of the risks associated with the services provided, as well as a description of security control and risk mitigation measures; Annex 12 to Regulations No 138;

2.18. policies and procedures for supervision and control of outsourcing functions in order to avoid deterioration of the quality of internal control of the applicant in accordance with Sections 29 to 30 of the Law (if applicable);

2.19. policy and procedure regarding supervision and control of agents and branches within the framework of internal control of the applicant; in accordance with Sections 27 to 28 of the Law (if applicable);

2.20. if the applicant is a subsidiary of a regulated institution in another Member State of the European Union – a description of the management of the group (if applicable). An applicant who further wishes to provide a payment initiation service or account information service shall submit to Latvijas Banka a certified copy of his professional indemnity insurance policy or a document attesting to a guarantee issued by a credit institution comparable to a professional indemnity insurance policy until the date of the decision regarding the issuance of the licence.

Costs

5000 euro for examining documents and information submitted for authorisation (should be paid upon official submitting of the application).

450 euro for examining documents and information submitted for obtaining the license of an electronic money institution, if a person intends to offer only an innovative service in the field of electronic payments.

Innovative service in the field of electronic payments – a new or significantly improved electronic payment or electronic money service on the scale of Latvia.

Payment should be made at the time of the submission of application.

Time limit for examining the application

Latvijas Banka starts examining the application within 3 months from confirmation that the application is complete. The time limit for examining the application may be extended if the information provided in the application is not sufficient to take a decision on the issue of authorisation.

Assessment of application: Latvijas Banka carries out the assessment of the application as to the substance.

What does the entrepreneur do

• Follows the examination process by using the project management tool.
• Provides answers to additional information requests by Latvijas Banka as soon as possible, as well as appoints a contact person for more effective communication.
• Corrects the submitted documents according to Latvijas Banka instructions.
• Participates in meetings held by Latvijas Banka.

What does Latvija Banka do

• Carries out the assessment of the application as to the substance.
• Contacts the contact person of the entrepreneur in case of identification of deficiencies.
• Draws up a letter if deficiencies are identified in the application.
• Continues the examination of the application pursuant to the additions submitted.
• Completes the examination of the application.

What should be taken into account

• Follow the course of the examination of the application.
• Provide additional explanations and make the necessary corrections as soon as possible.
• Representatives of the entrepreneur are invited to participate in meetings of Latvijas Banka, not just consultants (if any).

Costs

No additional costs associated with the examination of documents during the assessment stage of the application are applied.

Receipt of authorisation: Latvijas Banka finalises the examination of the application and takes a decision on the issue or refusal to issue authorisation.

What does the entrepreneur do

• Prepares to obtain authorisation and commence operations in accordance with the business plan.
• Designates users of Latvijas Banka Data Reporting System for future communication with Latvijas Banka and submission of performance reports.

What does Latvijas Banka do

• Prepares a decision on the issue or refusal to issue authorisation.
• Informs the entrepreneur of the decision taken.
• Places information on the website and in the EBA register of electronic money institutions.

What should be taken into account

• Please refer to the information provided by Latvijas Banka on access to the Data Reporting System.
• Please refer to information related to the requirements and procedures for reporting.
• Prepare to commence activities in accordance with the approved business plan and procedures.

Costs

No additional costs associated with obtaining authorisation during the stage of obtaining authorisation.

Supervision: Latvijas Banka supervises activities of the enterprise in accordance with requirements of Law.

What does the entrepreneur do

• Provides answers to Latvijas Banka's requests.
• Prepares reports in accordance with laws and regulations No 244.
• Notifies Latvijas Banka of changes in documents submitted for authorisation.
• Notifies Latvijas Banka of changes in the procedures for the provision of services.
• Reports on material incidents in the course of the issuance of e-money or the provision of payment services.
• Gets acquainted with the enterprise's curator designated by Latvijas Banka.

What does the Latvijas Banka do

• Designates the enterprise's curator.
• Assesses compliance of enterprise with the regulatory requirements.
• Requests additional information on the business and performance of the enterprise.
• Examines the reports submitted and supervisory information.

What should be taken into account

• In case of uncertainties, please contact the curator designated by Latvijas Banka.
• Submit reports and requested supervisory information on a regular basis.
• Notify of changes in the process of the provision of services, as well as changes in documents submitted for authorisation, including in case of changes to the structure officials or participants.

Costs

An electronic money institution that has received a licence from Latvijas Banka shall pay 7000 euro per year for financing the activities of Latvijas Banka and additionally up to 1.4 per cent (inclusive) of its gross income related to the provision of electronic money institution services per year, but not more than 100 000 euro per year.

Where an institution offers only an innovative service in the field of electronic payments, it shall pay 1000 euro per year for the financing of Latvijas Banka's activities for the next three years from the date on which the institution obtains a licence.

Innovative service in the field of electronic payments – a new or significantly improved electronic payment or electronic money service on the scale of Latvia.

Latvijas Banka annually issues regulatory enactments for determining the amount of payments for financing Latvijas Banka made by financial and capital market participants and submitting reports, in which the variable part of the payment is determined for each market participant, as well as the procedure for making payments.