Licensing and Supervision of Electronic Money Institution in Cyprus

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Question 1: Who should set up an institution for electronic money?

• E-money is generally characterized as an electronic currency store in a technological apparatus commonly used for the purposes of making payments to entities other than the issuer of e-money (source: ECB).

• Only an electronic money institution that is approved by the Central Bank of Cyprus (CBC) can provide electronic money services in the Republic of Cyprus.

• Authorisation to operate an electronic money institution shall only be issued to an incorporated legal individual with its headquarters in the Republic of Cyprus.

• Without prior approval from the CBC, the following entities may provide electronic money services in the Republic of Cyprus:

— Banks approved by either the CBC or a competent oversight body of another EU member state.

— Cooperative credit institutions accredited by the Cooperative Societies of Cyprus Supervision and Development Authority.

— entities that provide postal payments and which, under the applicable legislation, issue electronic money.

— The European Central Bank and national central banks not functioning as monetary or other government authorities in their power.

— Member States or national or local authorities when they do not serve as public authorities in their capacity.

— electronic cash institutions issued and retaining clear authorisation to work by other EU Member States’ competent supervisory authorities.

Such entities that either exercise the right to establish themselves or the right to provide services on a cross-border basis, provided that notification is submitted to the CBC by the competent authorities of the home Member State.

Question 2: Do limits exist?

Limits exist on:

• The sum of the initial capital to be held by electronic money institutions.

— A legal individual applying for an authorisation shall hold an initial capital of at least EUR 350,000 at the time of authorisation.

• the sum of own funds to be managed by electronic money institutions.

— Electronic money capital requirements shall be equivalent to 2 percent of the total amount of electronic money in circulation.

• The central bank determines the capital requirement to provide payment services not related to the issue of electronic money in one of the following three methods:

Method A

• Electronic money institutions own funds, which contribute to at least 10 percent of their fixed overheads in the previous year.

• In the case of a material shift in the company of an electronic money organization as of the previous year, this amount may be changed.

• Where an e-Money Institution has not completed its full-year business by the date of calculation, a prerequisite is to provide its own assets, subject to any changes made to the request of the Central Bank, at least 10% of the relevant fixed overheads as set out in its business plan.

Method B

• Where the amount payable in PV reflects one-twelfth of the total amount of the electronic money institution’s payment transactions in the previous year:-4,0 percent of the PV slice up to 5 million euros, plus – 2.5 percent of the PV slice exceeding 5 million euros to 10 million euros, plus -1 percent of the PV slice over 10 million euros to 100 million euros, Plu

Method C

• The own funds of the Electronic Money Institute shall amount to a minimum indicator (see point below), multiplied by a multiplying factor (see point b below) and by a scaling factor k, specified in terms of the payment services given as 0,5, 0,8 or 1.

(a) The corresponding metric shall be: I interest revenue, less expenditures of interest, (ii) fees and charges paid, and (iii) other operating income.

10% of the pertinent indicator’s section up to EUR 2.5 million; (ii) 8% of the pertinent indicator slice from EUR 2.5 million down to EUR 5 million; (iii) 6% of the pertinent indicator slice from EUR 5 million to EUR 25 million; (iv) 3% of the pertinent indicator slice from EUR 25 million to EUR 25 million

Question 3 : Overview of process

• Legal persons interested in obtaining an authorisation for the provision of electronic money services must-complete and send to CBC an application for authorisation as an Electronic Money Institution (EMI)-ensure that the details and documentation needed are included in the application before submission.

Per UBO must also send a Net Wealth Statement.

Question 4: Information to be submitted

The person concerned must send an application to the CBC to obtain an authorisation as a financial institution, accompanied by the following information and documentation

a. Operating plan setting out in particular the issue of electronic money and the form of payment services envisaged

b. A strategic plan including the estimate of the budget for the first three financial years showing the applicants being able to use sufficient and proportionate programs, services and operating procedures soundly .

c. Proof that the initial capital needed by the legal individual applying for authorisation amounts to at least EUR 350.000

d. An overview of the measures taken to secure electronic money users’ funds

e. A summary, including the administrative, risk and accounting procedures of the applicant governance structures and internal control processes, demonstrating that these governance structures, controls, and procedures are proportionate, effective, sound and acceptable .

f. Definition of the internal control mechanisms developed by the applicant for the prevention and deletion of money laundering operations Laws of 2007 and 2010 on information concerning the payer following transfers of funds amended or substituted

g. a definition of the applicant’s involvement in a scheme of national or international payments as well as planned arrangements for the relocation of operating companies, planned use of agents and branches and intended use for electronic money transfer and redemption of natural or legal persons

h. the identity, directly or indirectly, of the persons controlling the applicant, including the identity and adequacy of the natural persons holding shares or voting rights in one or more legal persons having power over the applicant, taking into account the need to ensure

i. the Identity of the directors and people responsible, where appropriate, for the management of the eMoney institution and for the provision of payment services activities, as well as proof that they have a strong reputation, experience and skills to issue the eMoney and to provide the payment service;

j. Statutory auditors identity

k. Legal standing of the claimant and organization articles

l. The applicant’s head office contact

m. Draft contract between the issuer of electronic money and the holder of electronic money and draft system contract

n. The mechanism to register, record, track and limit access to sensitive data on payment

o. Monitoring and follow-up protocols for security incidents and customer concerns related to health.

p. A security policy document, including summary of IT systems and the electronic money institution’s comprehensive risk assessment.

IMPORTANT NOTE • The CBC shall not issue an approval until it is satisfied that it maintains an acceptable organizational structure for its electronic money services business.

Question 5: How long does the CBC approval process take?

• Within three months of receiving a duly completed application for authorisation as an electronic money institution, the CBC shall
decide on the application and notify the legal person applying for authorisation of the approval or the rejection of the application.
• An application shall be considered as being duly completed only if it is submitted with all the required information (refer to question 4).
• Rejection of an application shall be duly justified.

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E : inquiries@flexi-group.net

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