Setting up a Digital Bank based on an AEMI licence in the UK
The European Parliament and the Council of Europe adopted a directive that was adapted, including by the UK. According to The Electronic Money Regulations 2011, a type of UK financial market participant is defined – an Authorised Electronic Money Institution (AEMI).
The main difference between using electronic money and using payment services is that the client of the issuer has an electronic money account in the issuer’s payment system, and the client uses it for:
1. Accepting electronic money as payment for their services or goods
2. Accumulating funds from a large number of small payments
3. Splitting large payments and using parts for different purposes
4. Converting electronic money from one currency to another
5. Storing funds for an unlimited time
6. Making settlements with suppliers – clients of the “Company”
7. Cashing out electronic money and receiving real money to your bank account
Requirements and limitations
imposed on the issuer of electronic money
The initial capital (capitalisation) of a company (UK resident, preferably LTD) applying for a licence must be at least EUR 350,000. According to the law, the capital must be at least 2% of the average amount of electronic money issued, but not less than EUR 350,000. It is crucial to show the origin of funds.
Main parameters
| Parameter | Value |
| Monthly limits – the volume of electronic money issued per month | No limits |
| Bank holding client funds | EU |
| Indicative time to obtain a licence | 6-9 months |
| Board members | Minimum 2 people: – UK tax residents (can be EU citizens with a flat in the UK to receive Utility Bills) – work permit – registration with the tax authorities CEO – Chief Executive Officer Analogue of the general director. Responsible for everything. CFO – Chief Financial Officer Analogue of the chief accountant. Responsible for AML (due diligence and compliance of clients) There are NO formal requirements for both individuals, the regulator in the UK, when assessing applicants, is guided by what is called “Common Sense”. Simply put, if they see that the person is suitable for the position, the candidacy is approved. At the same time, the procedure itself can be absolutely anything at the discretion of officials. If necessary, for the customer of the “Digital Bank”, specialists with the necessary competencies will be found and provided. |
| Wallet currency | Conversion within the wallet is possible. At the same time, the exchange rate can be taken from any third-party platforms. You can also set any commission. The main thing is that the client is NOT deceived. Also, these operations are tracked by the regulator, so it is impossible to use “completely extreme figures”. If necessary, the limits of the “spread” and commissions can be provided to the customer of the “Digital Bank”. |
| Fees to the Regulator | One-time payment when submitting documents – 5000 GBP No regular payments. |
| Software | Rent, purchase, White Label, own software There are no requirements for functionality There are requirements in terms of security: – where the server is located – who has access – security certificates The Contractor undertakes to manufacture software with any required functionality. |
Required minimum functionality of an ONLINE BANK
(within the AEMI licence)
| Function | Function parameters |
| 1. Issuance of electronic money |
YES – in unlimited quantities
The AEMI (EMI) licence from the FINANCIAL CONDUCT AUTHORITY fully covers any volume |
| 2. Correspondent accounts in USD and EUR in a jurisdiction where financial control is more liberal THE MOST DIFFICULT COMPONENT |
Yes – at the moment it is Poland and the Czech Republic
In the “traditional” Baltic states, banks have recently been afraid to open correspondent accounts because of AML risks, the US government’s crackdown on offshore work, and unwillingness to share their network of correspondent accounts, because if “money laundering” begins, questions may also arise to correspondents To “go to SWIFT” you need to work for 3-6 months “to do something” and get a “Letter of Recommendation” from the bank. Alternatively, this non-trivial task requires taking “corporate and corruption” steps. Which the Contractor can also help the Customer to implement. |
| 3. Connecting to a BIN sponsor for the prompt issuance of cards |
Yes. Experience shows that the easiest way is to connect to quasi-banking structures such as: http://www.contisgroup.com/ http://www.idtfinance.com/ http://www.wavecrest.gi/ |
| 4. Independent issuance of debit cards of different statuses from Classic to Platinum, as well as anonymous cards, without a name on the card. |
Yes – possible
Cheap – to negotiate with your own or a third-party bank, or an EMI that is a member of VISA/MC Medium – use someone else’s licence to issue cards under the D-Bank brand Minimum commissions and expensive – to become a member of VISA/MC yourself (400-500 thousand) Anonymous cards: |
| 5. The possibility of registration and verification of an account in the system under an online offer, without paperwork and remotely. |
Yes. Remote identification and compliance is possible.
For example, for individuals with accounts up to 30,000 euros, this is a remote upload of documents through special software without “human” contact. For corporate clients, depending on the volumes and jurisdictions, it may be necessary to request additional information |
Additional functionality of the project
| Function | |
| 6. Connection to SWIFT with international IBAN |
Yes
The whole world including dollar payments in the USA. There are many software options. The cost of payments depends on the banks. |
| 7. Connecting to SEPA |
Yes
SEPA – intra-European payments. The transaction fee is 35 euro cents. |
| 8. Connecting to FATCA |
Yes. However, in order to do this, in addition to the EMI licence, you need to add a Payment Service Provider. That is, two licences in one bottle, like QIWI Europe.
The Contractor undertakes to ensure that both licences are obtained if necessary. |
| 9. Connecting to third-party systems such as WebMoney for input-output (optional) |
Yes. However, in order to do this, in addition to the EMI licence, you need to add a Payment Service Provider. That is, two licences in one bottle, like QIWI Europe.
The Contractor undertakes to ensure that both licences are obtained if necessary. |
| 10. Issuance of a large number of bank cards per person |
Yes. Within the system, you can open, for example, 10 or more wallets per user. A card can be linked to each wallet.
However, this is a matter of a business model, which will require description and justification in the business plan as part of the preparation of documents for licensing. The Contractor undertakes to solve such a problem. |
| 11. Account replenishment within the payment system using Visa/Mastercard. |
Yes. You can link the client’s own bank card to the account in D-Bank. The procedure is called “pegging”.
When the client chooses this option, D-Bank redirects the client to the page of the bank with an acquiring licence that provides the “pegging” service, where the client enters the details: card number, first name, last name, expiry date, CVV or CVC2. After successful card verification, a certain amount of money is blocked on the client’s bank account. Next, the client enters the value of this amount of money in the appropriate window on the D-Bank page, the figure is checked and thereby the binding of the payment card is confirmed. At the same time, what is important, D-Bank itself does not have access to the client’s card details and does not store them, which relieves it of any responsibility for their use. That is, it is NOT acquiring and there is no acquiring commission, but there is only the cost of a transaction between banks. |
| 12. Working with cryptocurrencies. |
Yes. But at the stage of this “large” AEMI licence used to create a D-Bank, the requirements for internal control processes are higher. Therefore, BitPay must be provided for in the business plan from the very beginning.
The Contractor undertakes to provide for work with any cryptocurrency. |
Alexey Zarin
Moscow, 2015