EMI&PSP in Latvia

ELECTRONIC MONEY and PAYMENT PROVIDERS IN LATVIA

The European Parliament and the Council approved a directive that has been adaptedalso with Latvia. Act on Payment Services and Electronic Money identified a new type of financial market participants in Latvia – electronic money issuer.

Electronic money issuer conducts its activities through electronic (virtual) money issued by him in exchange for the funds received from its customers. Customers received electronic money in exchange for their cash, can make payments to other clients of the issuer, ready to accept the electronic money of the issuerfor their services or products.

Issuer, issuing electronic money, undertakes to buy off electronic money from any holder of electronic money at any moment.

Terms of obtaining a license

Term of preparation of documents is about 1-1.5 months, the term of consideration of documents in FKTK – from 1 to 3 months.
However FKTK can ask additional questions and request documents, so that the terms can be increased slightly – on the preparation of the Commission’s response.

Requirements for the electronic money issuer

According to the law, if the amount of issued electronic money provided in commercial terms will not exceed € 2 million per year, the company can start operating in Latvia after registration (without a license).In this case, information about the company, board members, business plan, documentation of anti-money laundering and information on measures to ensure the safety of client money is submitted tothe FKTK (the Financial and Capital Market Commission). A license is not necessary to receive, no capital requirements.

If you are planning a bigger turnover, a licenseobtaining is required. In this case the main (initial) capital of the company, applying for a license must be at least 350 000 euro. In case of obtaining a license, information and documents specified in the law are being prepared (more details can be provided, if not just registration, but a license obtainingneeded,).

If you are planning to establish an electronic payment company, as an option we offer to do it as following:

Implement the companyregistration in Latvia. In this case, in addition to the company registration, you need to prepare a smaller set of documents for FKTK, which on one hand simplifies the process of passing the necessary procedures for start-up, on the other hand – will allow to find and settle all of possible FKTK claims regarding board members and commercial plan on the primary stage (the basis of which will then be used for license obtaining)and at the third party – will allow you to get acquainted with FKTK as a company to facilitate the eventual procedure of license obtaining.

The registered companies must operate only on the territory of Latvia, on the other hand, in providing Internet media services it is difficult to identify the territoriality of service provision, i.e. when signing the contract in Riga, Latvia, we can insist that the service is provided in Latvia (as many working with foreign clients and registered in Latviacompanies do).

We recommend you to pass the first stage of registration, regardless of the fact whether you are ready to go immediately to the licensing or not, as this will give FKTK an opportunity to get acquainted with your company and simplify the subsequent passage of licensing procedures.

LICENSING OF PSP COMPANY IN LATVIA (PSP – Payment Service Provider)

PSP enterprises – are Latvian financial market participants operating under the Act on payment services and electronic money. For the construction of the EU internal market, elimination of obstacles to the free movement of goods, services and finances, the European Parliament and the Council of Europe approved Directive that defines the procedure for providing payment services in the community.

Services that payment companies are authorized to provide:

• Services, which may result crediting the cash to the account of the payment system user.
• Services,which may resultwithdrawing cash from the account of the payment systemuser.
• Implementation of payments, including direct debit payments using payment card or similar device, credit transfer, or regular payments.
• Same as in the previous paragraph, only with the use of the credit limit.
• The issue of payment instruments (such as recharge cards).
• Transfers without opening an account.

The main purpose of PSP company

The function of thePSP company is the financial intermediation in the implementation of customer payment. The Payment company is a cash-flow channel, thatdo not belong to the Payment company. Payment company service is limited in time (no more than 5 working days). The source and purpose of the payment are always known. A payment service cannotsplit up the payment amount (except commissions to intermediaries) in order to be performed for a number of purposes. When performing payment services, the payment company is responsible for its implementation.

The Payment company can organize, for example, the collection of utility payments and the further allocation of funds between providers of public services, collection of payments to third parties (for example, internet marketers and mobile operators). Also they can provide services of faster transfers between financial institutions in different regionsat their own expense.

Activity, financial condition and other parameters of a payment company are controlled by state supervisory body – the Commission of Financial and Capital Market (FKTK).

The main difference between the use of electronic money and the use of payment services is that the issuer customer has the electronic money account in the issuer payment system, and the client uses it in order to:

• Acceptance of electronic money as payment for their services or goods.
• Accumulation of funds from a large number of small payments.
• Division of large payments and using parts for different purposes.
• Conversion of e-money from one currency to another.
• Storage of funds forunlimited time.
• Mutual settlements with suppliers who are also customers of the Company.
• Implementation of electronic money and getting real money to your bank account.

Requirements and restrictions for the payment provider

According to the Act on payment services and electronic money, if provided commercially arithmetic mean value of payments over the next 12 months will not exceed EUR 500 000 per month, the company can begin providing payment services in Latvia after registration (small license or registration).In this case, information about the company, board members, business plan, information on measures taken to ensure the safety of client money, AML and other supporting documents submit to FKTK. No capital requirements.

It should be noted that on the one hand registered companies must provide their services only on the territory of Latvia, on the other hand, in providing Internet media services it is difficult to identify the territoriality of service provision, i.e. when signing the contract in Riga, Latvia, we can insist that the service is provided in Latvia (as many working with foreign clients and registered in Latvia companies do).

Terms of obtaining a license

Term of documents preparation is about 1-1.5 months, the term of documents consideration in FKTK – from 1 to 2 months.

However FKTK can ask additional questions and request documents, in consequence of that terms may increase slightly –up to the preparation of the Commission’s response.

Basic requirements for the applicant:

• of course, it is better if at least one board member is local (or has a long-term work permit), resides in Latvia and who can be contacted by FKTK if necessary;
• board members (directors) must be competent in financial matters (to be confirmed by providing a CV);
• must have relevant education (higher educationrequired) and three years of professional experience (confirmed by documents on education and CV);
• must have an impeccable reputation and the right to engage in commercial activities should not be taken away (a simple proof is given, but FKTK can check it in publicly available databases);
• should not be judged (criminal recordprovided).

We suggest you to implement registration of the payment company in Latvia.In this case, in addition to the company registration, you need to prepare a smaller set of documents for FKTK, which on one hand simplifies the process of passing the necessary procedures for start-up, on the other hand – will allow to find and settle all of possible FKTK claims regarding board members and commercial plan on the primary stage (the basis of which will then be used for license obtaining)and at the third party – will allow you to get acquainted with FKTK as a company to facilitate the eventual procedure of license obtaining.

If any help in obtaining a license for electronic money needed, please feel free to contact our specialists via phone numbers, listed on a web-page, or by submitting a form, located on the left side of the page or by the e-mail info@sb-sb.com

Key words: obtaining a license for electronic money, a European license for electronic money, e-money license, EMI, license for electronic payments, PSP, Electronic money institution, Payment service provider in Latvia