Electronic money institution licence in Spain

What is an electronic money institution granted in Spain?

Electronic money institutions are legal entities authorized to issue electronic money, defined as any monetary value stored electronically or magnetically, representing a claim on the issuer, used for payment transactions.
Additionally, they have the possibility to provide payment services in addition to the issuance of electronic money, both concerning the electronic money they issue and other funds, without the need for authorization as a payment institution.

Where is the license to operate as an electronic money institution regulated in Spain?

The regulatory framework for electronic money institutions is established in Law 21/2011, of July 26, on electronic money, modified by “Real Decreto” (Decree Law) 19/2018, of November 23, on payment services and other urgent measures in financial matters. Additionally, it is regulated by its implementing “Reglamento” approved by “Real Decreto” (Decree Law) 778/2012, of May 4, on the legal framework for electronic money institutions.

What types of licenses are regulated?

Electronic money institutions have their own license and cannot operate without obtaining the requisite electronic money license.
The electronic money license (also known as an EMI license) is a regulatory authorization granted by relevant financial authorities to companies intending to provide electronic money services primarily through the issuance of electronic money.
There are two types of EMI licenses: a license for small electronic money institutions and a license for electronic money institutions.
For a small or new fintech company with limited operations and transactions aiming to offer specific electronic money services in a European country, it is advisable to apply for a small electronic money institution license.
Conversely, if the company has broader operational scope and provides a wide range of electronic money services throughout the EU, it is necessary to apply for an electronic money institution license.
These licenses encourage financial innovation among companies offering consumers convenient ways to make payments, transfer, and manage their funds electronically.

What activities can be carried out with an electronic money institution license?
A company holding an electronic money license is authorized to carry out the following activities:
• Issuing, distributing, and redeeming electronic money.
• Providing payment services that enable transactions with electronic money, such as cash withdrawals from a payment account, fund transfers to third parties, and remittance delivery.
• Issuing payment cards that allow users to withdraw and deposit cash.
• Providing information about accounts.”

How is the application processed to obtain the license?

It will be the responsibility of the Bank of Spain, following a report from the Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offenses, to authorize the establishment of electronic money institutions.
The application to establish an electronic money institution must be submitted to the Bank of Spain in person, by postal mail, or through electronic registration, along with all necessary forms and documentation.
There are no fees associated with the authorization or registration application, and no deposit needs to be made.
The maximum period for resolving electronic money institution authorization procedures is three months, starting from the receipt of the complete application or from the moment when all necessary documentation is provided. If no express resolution is communicated within this timeframe, the application will be considered denied, and the procedure will be concluded accordingly.

What requirements are necessary to obtain the electronic money institution license?

• Structure: Electronic money institutions must have a proper administrative and accounting organization along with the required internal control procedures to ensure effective management.
• Suitability of partners and shareholders: The interest’s groups of the company must be deemed suitable. This involves assessing their integrity, as well as evaluating if they have sufficient means to fulfill their obligations. Additionally, the transparency of the group to which the company belongs and the suitability of administrators and executives will be considered.
• Capital: It is necessary to have an initial capital of at least 350,000 euros and comply with the minimum own fund’s requirements.
• Registration: They must be registered in the Spanish mercantile registry and in the Special Registry of Electronic Money Institutions of Spain, and obtain the mandatory authorization from the Bank of Spain.

What documentation is required to be provided with the application for an electronic money institution license?
The Bank of Spain has created specific forms for each of the authorization procedures, based on both the EBA GL/2017/09 Banking Guidelines and the applicable regulations.
The application will be considered complete when it contains all the information needed by the Bank of Spain to evaluate the request, following the forms and the applicable regulations.
The application form for an electronic money license must be accompanied by the following documents:
• Identification data of the entity requesting authorization, as well as the draft of the company bylaws consistent with the activities that the entity will provide once it obtains authorization.
• A report identifying the services the entity intends to provide and describing how electronic money operations will be carried out.
• A business plan referring to all the activities the entity will undertake. The business plan must contain sufficient detail to demonstrate that the entity will have enough financial and other resources necessary to carry out the activity. The business plan should also include details of the main items of the profit and loss account and the balance sheet.
• Description of the structural organization of the entity, which, where appropriate, includes a description of the use intended for agents and branches, as well as a description of the provisions regarding the outsourcing of functions.
• Measures to safeguard user funds; indicate the procedure the entity will adopt to protect received funds.
• Description of corporate governance procedures and internal control mechanisms.
• Description of the established procedure for monitoring, processing, and tracking security incidents and user complaints.
• Description of the procedure established to register, control, trace, and restrict access to sensitive payment data.
• Description of mechanisms ensuring the continuity of the entity’s activity, with a delineation of significant operational functions, effective contingency plans, and a procedure for periodically testing and reviewing the adequacy and efficiency of these plans.
• Description of the principles and definitions applied to collect statistical data on results, operations, and fraud.
• Documents including a detailed risk assessment related to the services provided and a description of security control measures and risk mitigations to adequately protect service users.
• Description of the mechanisms, procedures, and internal control bodies to prevent and hinder money laundering or terrorist financing operations.
• Identification of individuals holding or planning to hold a significant participation in the entity, as well as the amount of such participation and whether it is direct or indirect.
• Identification of the managers and general directors responsible for management and the issuance of electronic money.
• Identification of the auditor responsible for auditing the entity’s accounts.
• Identification of the customer service holder of the entity and the contact details of the CSH (postal address and email). A memorandum must be provided describing the measures the entity will adopt to separate the CSH from the rest of the commercial and operational services of the organization.
• Proof of the existence of professional liability insurance or comparable guarantees if the entity were to provide payment initiation and/or account information services.
Once the application has been evaluated with the documentation provided, authorization will be granted or denied.
If the procedure is resolved favourably, certain conditions may be included that the entity must comply with prior to its registration in the Special Register of the Bank of Spain, as well as obligations or recommendations that the authorized entity must comply with or take into account, as the case may be.

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