Lithuania EMI license (Electronic Money Institution)
Tetra Consultants assists our international clients in securing a Lithuania EMI license (Electronic Money Institution). Every electronic money institution that issues digital money in Lithuania has to procure an EMI license. Such an institution licensed by Lithuania is allowed to transfer money abroad, provide services for withdrawing and depositing money, oversee e-transactions and conduct debit or credit transactions.
An institution can choose to apply for an EMI license for restricted activities or unrestricted activities. Obtaining a Lithuania EMI license for unrestricted activities will allow your company to provide any of the above electronic money related services in the European Economic Area (EEA) without having to procure a local license. On the other hand, an EMI holding an EMI license for restricted activities can only conduct business activities in Lithuania.
Introduction to Lithuania EMI license
- Currently, there are 80 electronic market institutions operating in Lithuania. In the fourth quarter of 2020, the total income from electronic money issuance and payment services in Lithuania was approximately EUR 114.4 million.
- All e-market institutions with a Lithuania EMI license are governed by the provisions in the Republic of Lithuania Law on Electronic Money and Electronic Money Institutions.
- Lithuania is a popular jurisdiction to obtain an EMI license. An EMI license for unrestricted activities will allow the applicant to operate in other countries in the EEA without having to procure additional licenses.
- With an EMI license for unrestricted activities, companies can issue digital money, virtual wallets and payment accounts across Europe. The license also allows companies to issue Visa or Mastercard payment cards to clients and access payment systems developed by the Bank of Lithuania.
- Moreover, setting up a company in Lithuania is a fast and simple process. There is no requirement for a resident director or shareholder to register a company in Lithuania.
- As such, Tetra Consultants recommends getting a Lithuania EMI license if you wish to provide e-money services to the European market.
When will you require a Lithuania EMI license?
- Under the Lithuania Law on Electronic Money Institutions, any institution that issues or wishes to issue electronic money will need to apply for this license.
- An electronic money has the following characteristics:
- Has a monetary value.
- Can be store electronically.
- Is issued in order to make payment.
- Is received by other parties (not including the issuer) as payment.
- The EMI must be a credit institution incorporated in the Republic of Lithuania or a Member State of the European Economic Area (EEA).
- Besides issuing electronic money, the licensed institution may conduct the following activities:
- Provide payment services
- Grant credit related to the services if the stipulated conditions have been met.
- Provide supporting services such as storage of funds, currency exchange, processing of relevant data, etc.
- Exchange digital currency with cash
- Distribute and redeem electronic money through an agent. However, the institution cannot issue it through the agent.
- There are two types of EMI licenses in Lithuania, namely the EMI license for unrestricted activities and the EMI license for restricted activities. An EMI License (for unrestricted activities) allows an electronic money institution to issue electronic money and provide payment services within the European Economic Area (EEA). On the other hand, an electronic money institution with an license for restricted activities can only operate within the Republic of Lithuania and is not allowed to provide electronic money services outside the country.
- The requirements for an EMI license (for unrestricted activities) are more stringent than that for restricted activities. For example, there are no minimum capital requirements or shareholder eligibility requirements for an EMI license for restricted activities.
- On the other hand, an EMI license for unrestricted activities requires a minimum initial capital of EUR 350,000 and proof of the qualifications and suitability of the shareholders of the EMI.
Documents required to apply for Lithuania EMI License
- Details of the applicant
- Articles of Association
- Certificate of Incorporation
- A document verifying the representative’s right to represent the company
- A document confirming the payment of a stamp duty for license issue
- A programme of operations
- A business plan
- Proof that applicant’s capital meets the minimum capital requirement (e.g. audited financial statements, bank statement, etc.)
- A description of the structural organisation
- A description of the measures implemented to protect consumer funds, including risk management and internal control mechanisms
- A questionnaire on operation risk of the company
- Questionnaires of the management team and key shareholders
- The Bank of Lithuania requires the established electronic money institution (EMI) to adhere strictly to the following requirements:
- Fitness of submitted documents: Submitted documents must be accurate and meet the requirements of the legal acts governing EMI activities and their administration.
- Adherence to minimum capital requirement: All EMI, with the exception of EMI engaged in restricted activities, must have a minimum initial capital of EUR 350,000. An EMI engaged in restricted activities does not have a minimum capital requirement. However, an EMI engaged in restricted activities generally cannot have average outstanding digital money greater than EUR 900,000 per month for the preceding 6 months. If the EMI exceeds this limit, the institution must apply for an EMI license for unrestricted activities within 30 days.
- Additionally, an EMI that holds a license for restricted activities cannot provide more than EUR 3,000,000 worth of payment services unrelated to virtual money issuance per month.
- Fitness and propriety of the EMI and its shareholders: Shareholders with a substantial share in the EMI’s authorised capital and/or voting rights must be trustworthy, financially stable and ensure fair and sensible administration of the EMI. An EMI engaged in restricted activities is not subjected to this requirement.
- Fitness and propriety of owners of an EMI: The directors and owners of an EMI must maintain a good reputation and be equipped with the necessary qualifications and experience needed to fulfil their roles.
- Implement measures to protect client funds: All EMIs that receive funds from clients must implement one of the following measures to safeguard client funds:
- Place them in a separate bank account that is opened by a financial institution in the Republic of Lithuania or another Member State.
- Ensure these funds are covered by an insurance agreement, guarantee or surety bond.
- The prospective EMI will be required to provide a comprehensive business plan that details the management and administration of electronic money insurance activity, based on the nature and range of financial activities provided. This includes an organizational structure defining clearly the responsibilities and functions of each employee, a system to monitor and assess possible risk of activities conducted, an internal control system, accounting measures and other prudent measures to facilitate the activities conducted in the EMI.
How long to secure Lithuania EMI license?
- Before applying, Tetra Consultants will assist you in registering a Lithuania company by providing a local company address and local company secretary. Typically, this process should take approximately 2 weeks.
- Upon registering the company, we will proceed to open a corporate bank account with a reputable local or international bank. You can expect your corporate bank account to be ready in 4 weeks.
- Generally, you can expect your Lithuania EMI license (Electronic Money Institution) application to take around 3 months for EMI license for unrestricted activities and 2 months for EMI license for restricted activities, if the initial application does not contain any deficiencies. Each application will be reviewed individually, and they may revert asking for additional supporting documents or information.
- For example, amendments may be requested by the Bank of Lithuania if the information previously provided is missing, incomplete, or inconsistent. Upon receiving an amendment request, you will have 3 months for EMI license for unrestricted activities and 2 months for EMI license for restricted activities to make the necessary amendments or to verify the information submitted previously.
How to apply for an EMI license in Lithuania?
Step 1: Arrangement of meeting with the Bank of Lithuania
- Tetra Consultants will arrange for a pre-application meeting with the Bank of Lithuania to assess your business model and potential risks.
- During the meeting, the Bank will clarify the procedure and requirements for procuring an EMI license in Lithuania. Based on the business plan and documents you provide, Tetra Consultants will prepare a PowerPoint presentation containing information about your company such as your funding model and sources, expected number of employees, outsourcing arrangements and the qualifications of the management team.
- You will not be required to attend the pre-application meeting. Tetra Consultants will send a representative to the meeting with the Bank of Lithuania.
Step 2: Preparation and submission of relevant documents
- Once the Bank of Lithuania has given approval for your company to proceed with the application submission, Tetra Consultants will assist in preparing and submitting the relevant documents to the Supervision Service of the Bank of Lithuania.
- The Supervision Service will assess the submitted documents within 5 business days. The level and duration of assessment is based on the scope and extent of activities the applicant plans to conduct.
- If there are no discrepancies or deficiencies with the submitted documents, the Supervision Service will accept the application for consideration.
- Alternatively, if the application documents submitted is insufficient or lacking in information, the Supervision Service will provide feedback and suggest the necessary amendments.
- Tetra Consultants will amend the submitted documents accordingly, if necessary.
Step 3: Assessment and issuance of EMI License by the Board of the Bank of Lithuania
- After the Supervision Service has approved the submitted documents, they will summarize the application information for the Board of the Bank of Lithuania. The Board will review the summarized information and make the final decision on whether to issue the EMI license.
- The shortest possible time that the Bank of Lithuania can issue an EMI license is 3 months for unrestricted activities and 2 months for restricted activities, provided that there are no amendments to be made to the submitted documents. Typically, the expected time to procure a Lithuania EMI license is around 3-6 months due to the amendments needed.
- All electronic money institutions must submit reports and documents to the Bank of Lithuania regularly.
- At the end of each quarter, they must submit financial reports and quarterly reports for supervision of implementation of money laundering and/or terrorist financing prevention measures.
- Financial reports include all financial statements, measure of performance through performance indicators, report on the institution funds, etc.
- At the end of the year, an EMI must submit reports on granted loans, deposited funds, number of employees and received complaints.
- The institution must also submit a set of audited financial statements, together with the auditor’s report.
- In addition, a report detailing the operational and security risks, as well as the annual report for supervision of implementation of money laundering and/or terrorist financing prevention measures must be submitted.
- The Bank of Lithuania has the right to request for additional documents and reports, when it deems fit.
Difference between EMI license and PI license in Lithuania
- Both the Electronic Money Institution (EMI) license and Payment Institution (PI) license issued by the Bank of Lithuania allow credit institutions to provide electronic payment services to clients.
- However, in addition, an EMI License also allows credit institutions to issue electronic money. This means that clients’ fund can be stored for a longer period of time in payment accounts in an electronic money institution as compared to in a payment institution.
- In an EMI, payment accounts are also known as e-wallets. Electronic money can be kept in a client’s e-wallet for a substantial amount of time before the client chooses to retrieve the electronic funds to make payment. In contrast, funds in a payment account set up by Payment Institution must be credited to the payee’s payment service provider as soon as possible.
Contact us to find out more about how to secure Lithuania EMI license to conduct electronic money services. Our team of experts will revert within the next 24 hours.
What is an EMI license?
- An EMI license is required for an electronic money institution to issue e-money. The e-money can be stored in the client’s e-wallet, prepaid card or payment account. Depending on the license obtained, the e-money issued can be used within a region or country to pay for goods and services and converted to other currencies. A Lithuania EMI license for unrestricted activities allow the company to issue electronic currency throughout Europe.
Is an electronic money institution a bank?
- An electronic money institution is not a bank. However, a bank can act as an electronic money institution if it procures an EMI license. This will allow the bank to issue e-money to clients and provide other e-money related services.
- Unlike banks, EMIs are not allowed to lend money to clients or issue credit cards. The traditional role of the bank is to lend money, and this includes providing credit products such as mortgages, bonds, business loans, etc. These services cannot be provided by an EMI.
What services can you provide with a Lithuania EMI license?
- A Lithuania EMI license allows you to issue e-money, provide payment services and other supporting services such as storage of funds and currency exchange. While there is no limit on the transaction amount for a Lithuania EMI license for unrestricted activities, a Lithuania EMI license for restricted activities only allows an electronic money institution to hold an average outstanding electronic money of less than EUR 900,000 per month for the preceding 6 months. Additionally, an EMI that holds a license for restricted activities cannot provide more than EUR 3,000,000 worth of payment services unrelated to electronic money issuance per month.
What constitutes e-money?
- E-money is commonly defined as electronic money stored in a computer system or technical device that contains a monetary value. They are typically stored in a phone or card and are used to make payments during the purchase of goods and services. Since e-money is usually backed by fiat money, it is different from cryptocurrency that is based on blockchain technology. Common examples of e-money include electronic money issued by debit cards and PayPal payments.
What languages should the documents submitted to the Bank of Lithuania be in?
- All documents submitted to the Bank of Lithuania must be drafted either in Lithuanian or English. If the documents are drafted in a different language, they must be translated and signed by a translator. The seal of the translation agency should be attached to the documents.
When will the Bank of Lithuania refuse to issue a license?
- Once the applicant has submitted the license application, the Bank of Lithuania will revert back with comments if there are deficiencies found in the documents submitted. If the applicant fails to revise the documents before the stipulated deadline (within 3 months for EMI for unrestricted activities; 2 months for EMI for restricted activities) and does not request a deadline extension, the Bank of Lithuania will not issue an EMI license to the applicant.
- The Bank of Lithuania may also refuse to issue a license in the case when the information submitted do not comply with the laws and legal acts regulating the activities and authorisation of EMI.
What are payment initiation services and account information services?
- These are other types of financial services. Like EMI, they are governed under the Lithuania Law on Payments.