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Cyprus, the best post-Brexit EMI jurisdiction
Brexit
was a political and economic earthquake. That one of the cornerstones and major
powers of the European Union was the first country that decided to leave was a
shock to many. It was one of the most important political news of the past
decade, and its effects will be felt in Europe during this decade as well.
During
2020, the UK and the EU are in a transitional negotiation phase to see what
their relationship will be post-Brexit. However, with the coronavirus crisis,
negotiations are pretty much stalled, and there is much uncertainty about what
will happen.
Right
now, the UK is on a transition period until December 31, 2020, where it still
has passporting rights. Nevertheless, the conditions after that period will
depend on the agreement the EU and the UK reach this year.
And
there's one particular industry that might be pretty rocked by Brexit. We're
talking about e-money institutions (EMIs).
The UK
holds almost three-quarters of the European EMIs. The EU doesn't have many
well-established license providers, and the UK offers a solid and reliable
legal framework and has the best licensing and financial services reputation
across Europe.
At
least until the end of this year, e-money institutions can offer their services
across the EEA with a UK license. That means they have passporting rights. If
you receive your license in one EU member state, you can offer that same
service in other EU states without needing an additional license or having to
establish a branch or office as long as the regulatory authority of the country
you wish to operate at is duly notified.
However,
after this year, that may end.
Even if
you don't like the EU and support Brexit, if you're interested in the EMI
world, you're likely a bit anxious about what can happen to the business in Europe
after the transitional phase ends in December 2020.
Due to
this deep European dependence on the UK, it is quite likely that both parties
will reach a deal.
But in
the financial world, one can handle only a certain amount of uncertainty.
This
may be an issue if you're thinking of establishing an EMI. However, as usual,
in Mundo, we have a solution for you.
We can
help you establish your e-money business in the most flourishing country in the
EU and our favorite post-Brexit jurisdiction in Europe. We're talking about
Cyprus.
This
stunning Mediterranean island is more than just blissful beaches, fantastic
archaeological sites, and great food and wine. It's one of the best European
jurisdictions for financial, investment, and banking business.
It has
a well-established and reputable regulatory authority (the Central Bank of
Cyprus), fantastic service providers, and one of the best tax regimes in the
EU, which includes a meager 12.5 % corporate tax rate.
That's
why in Mundo, we offer a wide array of services in Cyprus.
And
among them, we can help you receive an EMI license and setup your e-money
business in this otherworldly island.
As we've
told you in our Country Focus, we are faithful servants of Saint Mamus.
Let's
talk about the main benefits of an e-money license in Cyprus.
Why Cyprus? Five benefits of
establishing your EMI in Cyprus
An
efficient legislative framework compliant with EU laws and regulations
The
Central Bank of Cyprus is well-known as one of the top banking regulatory
entities in the EU. Moreover, after the 2013 financial crisis, Cyprus made a
significant turn towards the future, which included some updating and simplificationof
its financial laws and regulations while keeping them solid enough. All this
led Cyprus to be one of the most reputable jurisdictions in the whole world.
Passporting
rights
As
Cyprus is a well-established EU jurisdiction, its e-money institutions have
passporting rights. That means they can operate their business in any other EEA
jurisdiction without additional licensing processes and without establishing a
physical branch or office in that country. A Cyprus EMI license will allow you
to do business all over the EU freely, without licensing bureaucratic
processes, and from Cyprus without needing to establish additional offices in
other places.
Beneficial
tax regime
One of
the main benefits of setting up any type of business in Cyprus is its tax
regime. The island offers an extremely attractive tax regime with an extensive
network of double tax treaties, a low corporate tax rate at 12,5 %, and severalincentives
for foreign investors, such as no withholding tax on dividend distributions.
Fantastic
for business
Cyprus
has an ideal environment for doing business. English is one of the islands'
official languages and the main business language. As it is a well-established
financial jurisdiction, you'll find top-level professional service providers
(e.g., accounting firms, legal firms, consultancy firms). You will be able to
hire a qualified workforce for your business.
Straightforward process
The
process in Cyprus isn't necessarily the simplest, but it is straightforward.
What we mean is that you have an authority that clearly communicates the
requirements and steps and allows for transparency in the process. That means
that even if the process isn't short, with a helping hand, you shouldn't have
too many headaches.
What is a Cyprus EMI?
An EMI
is an institution that is authorized by the competent authorities to issue
electronic money. The term refers to money that is electronically stored and
can be used to make transactions either with the issuer (EMI) or other parties
that accept the money. An example of this can be loyalty discount cards that
are issued by a brand and accepted by several other brands as a money
equivalent of an agreed standard value.
In
Cyprus, the regulatory entity that emits EMI authorizations is the Central Bank
of Cyprus, following these laws and regulations:
- The Electronic Money Laws of 2012 and 2018.
- 2009/110/EC of September 16, 2009, on the taking
up, pursuit and prudential supervision of the business of electronic money
institutions.
- (EU) 2015/2366 of November 25, 2015, on payment
services in the internal market.
Now, under the EU and Cyprus law, which are the
authorized activities your EMI can conduct after it receives its license?
- Services
allowingplacement of cash on a payment account and all operations required to
operate a payment account.
- Services
allowing cash withdrawals from a payment account and all operations as required
for operating such an account.
- Execution
of payment transactions, including transfers of funds on a payment account with
the user's payment provider or with another payment service provider:
- Execution
of direct debits, including one-off direct debits;
- Execution
of payment transactions through a payment card or a similar device;
- Execution
of credit transfers, including standing orders.
- Execution
of payment transactions where a credit line covers the funds for a payment
service user:
- Execution
of direct debits, including one-off direct debits;
- Execution
of payment transactions through a payment card or a similar device;
- Execution
of credit transfers, including standing orders.
- Issue
of payment instruments and/or acquiring of payment transactions.
- Money
remittance.
- Payment
initiation services.
- Account
information services.
On top of all these
payment services, EMIs can issue e-money. Electronic money is defined as a
monetary value represented by a claim on the issues, such as:
- Electronically-including
magnetically-stored money (such as a chargeable internet-based account with its
debit or credit card).
- Money issued on receipt of funds to make payment transactions
(conversion of bank money into electronic money).
- Money accepted by anyindividual or legal person aside from the
electronic money institution.
A licensed EMI in Cyprus can open bank accounts with all banks in
Cyprus. We work with many associate banks as we generally recommend to open two
bank accounts: one with a local bank and one with a European bank with a branch
in Cyprus to diversify risk exposure.
How to apply for a Cyprus EMI
license?
Now, let's walk you
through the main requirements and features you need to know before applying for
a Cyprus EMI license.
Timeframe
Preparing your
application package can take less than a month if you provide us with all the
documents opportunely, but, generally, it takes between one and two months as
we help you to improve your package.
After submitting the
application package, the CBC will examine it and will usually also ask for
additional information and clarifications. In most cases, it will designate a
timeframe within which to reply. When the CBC is satisfied with the application,
the company will be given a conditional license.
The Law stipulates
that the CBC must answer within three months from the date of the application.
However, the three months begin to run once the application is complete. In
other words, if the CBC reverts with follow up questions, the timeframe will
start counting only after they are fully contentwith the answers. For this
reason, the timeframe for the conditional license is approximately 6-9 months
and will largely depend on the approval of the ultimate beneficial owner of the
company.
The conditional
license will determine certain conditions the applicant must meet for the
license to be activated. These include renting/buying office space, hiring
employees, directors, having the proper software, and any other matters
necessary for the EMI to be operational. Current CBC practices demand that the
conditions are met immediately. Thus, all actions relating to activation must
be taken simultaneously with the preparation and filing of the application.
Once the company is
ready, an appointment will be booked with CBC for inspection, and if the
company satisfies the pre-conditions, their license will be activated.
This means it will
be extra work, but it also means the whole process can be completed in 12
months, and, in most cases, it takes only a a little more than a year.
Operational costs
All EMIs
established in an EU member state must have local office staffed with the key
personnel to offer the services, which means that the staff must live in the
jurisdiction. If they’re not citizens of the jurisdiction, they must have the
relevant work permits. All this leads to operational costs that must be
considered. We can help you find an adequate office space and staff for
operating your EMI.
In terms of
operational costs, a reasonable annual
budget for the EMI's operational expenses, including the salaries, IT,
telephone, rent, electricity, auditing, compliance, professional fees, etc.,
will be no less than approximately €150.000. The actual numberrelies mostly on
the size of the company, its operations, and the remuneration of executive
directors.
Minimum capital
requirements
The Law stipulates
that the initial minimum capital requirement for an EMI is EUR 350,000 and
there are also continuous capital requirements, calculated in accordance with
the provision of the Law, among other things, to maintain a balance of at least
the initial minimum capital requirement.
Organizational
structure
As with all
financial licenses in Cyprus, the Board of the EMI must be comprised of at
least two executive and two non-executive directors, of which the majority must
be Cyprus residents. Moreover, the company also requiresRegulatory Compliance
Officer, AML Compliance Officer, Chief Information Officer, and Risk Manager.
To reduce the cost
of establishment some positions can be taken by the same person. Nevertheless,
once it’s fully operational, additional staff will be needed to cover the
duties and responsibilities of the positions.
Shareholders and
UBOs
Shareholders can be
either natural persons or legal entities. However, CBC requires this to be
disclosed and assessed at the UBO (Ultimate Beneficial Owner) level. The UBOs
must be of good reputation with clean criminal records, clean financial records,
and the ability to provide financial assistance to the entity if needed.
When a shareholder
is a group of companies, the CBC must be informed of its structure, the group's
relations, and the EMI.
What documents do you need to
submit, and what is the process?
To begin the
application process, you need to fill the application form and submit it with these
documents to the CBC:
- Entity's
Incorporation Documents.
- A summary issued by the appropriate body explaining
the primary legal features of the applicant.
- Personal documents from the individuals that will
hold an essential function (Board of Directors, licensed services):
- Certificate of clean criminal record
- Certificate of non-bankruptcy
- CV
- Certified copy of the passport
- Documents from shareholders and ultimate beneficiary
owners (UBOs) evidencing their
legitimacy and share acquisition details including evidence of source of funds
and shareholding structure chart.
- Detailed
program of operations.
- Organization
structure.
- Detailed
business plan.
- Minimum
capital evidence.
- An
Internal Operations Manual that includes:
- Procedures
to protect the funds of electronic money users.
- Report
on the governance arrangements and internal control mechanisms including those about money laundering and terrorist financing.
- Description of the procedures for monitoring,
handling and following up on security incidents and security-related customer
complaints.
- Description of the processes for organizing,
monitoring, tracing, and restricting access to sensitive payment data.
- Description
of the business continuity arrangements.
- Description of the principles and notions applicable
to the collection of statistical data on performance, transactions, and fraud
including supporting documentation.
- Security policy document.
- Proposed professional indemnity insurance or equivalentguarantee
(if applicable).
- Latest audited
accounts (for existing companies).
- Most
recent management accounts (for existing companies).
The process has
five main steps:
- Pre-application:
We help you prepare and improve your application, so the CBC doesn't have to
revert many times asking for additional information.
- Submitting
the documents.
- CBC
reverts: They'll come back asking for clarification in some documents and
asking you to add supporting documents and reports.
- CBC
issues a conditional license: After they're satisfied with the application,
they will issue this document.
- Comply
with the last requirements to receive a full license. These include
renting/buying office space, hiring employees, directors, having the proper
software, and any other matters necessary for the EMI to be operational.
Who are we, and what can we do
for you?
In Mundo, along
with NTL, we are committed to your freedom and that´s why we want to see you
thrive in your business. We want you to live, work, do business, and invest freely
whenever you want and wherever you want.
That's why we have
more than two decades offering the best financial, trust, banking, immigration,
and investment services in the world, in the best jurisdictions, and with the
best experts.
We have built an unparalleled
network of partners in Cyprus. We work with the finest experts on the island to
offer the best services and help you start your e-money institution.
Our team in Cyprus
can help you with these services and also can help you to obtain an e-money
institution license and to manage your EMI:
- Consulting
support towards authorization and registration of your EMI.
- Preparation
of the application package in a cost-efficient manner completely adapted to
your needs, including:
- Designing
your corporate structure in a cost-efficient manner.
- Preparing
a custom operation manual.
- Preparing
AML and KYC policies.
- Formulating
your business plan.
- Filling
the application form.
- Reviewing
all shareholder, director, and head of department questionnaires.
- Presenting
qualified executive and non-executive directors, if you need them.
- Guiding
you to submit all documents and certificates.
- Respond,
on your behalf, to any inquiries and suggestions made by the CBC.
- Headhunting
for qualified directors and personnel, including executive training.
- Legal,
accounting, and auditing support.
- Opening
a bank account for your EMI (we usually recommend one bank account with a local
bank and one bank account with a European bank present in Cyprus).
- Compliance
consulting.
We can also offer
support for choosing an adequate software provider and presenting software,
debit card, and providers for any other services the EMI may need.
We offer one of the
most comprehensive, all-encompassing service packages in Cyprus, which we consider
the best EMI jurisdiction in the EU, and we expect significant growth of such
businesses established on this gorgeous island.
Don't wait until we
see how the after-Brexit goes. Be one of the first to take advantage of the
fantastic benefits Cyprus provides for e-money institutions. All you need to
do is contact us right now and we'll find a tailor-made solution for you.
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