How to Obtain a Money Remittance Licence in the EU

Obtaining a money remittance licence in the European Union (EU) involves getting authorization as a Payment Institution (PI) under the Payment Services Directive 2 (PSD2), which governs payment services across EU member states. This allows your company to legally provide money remittance services throughout the EU under the "passporting" system, where authorization in one member state grants access to the entire EU market. Here's a step-by-step guide to the process:

1. Determine the Licence Type

In the EU, you generally apply for one of two types of licences depending on your business size and scope:

• Small Payment Institution (SPI): Suitable for small businesses with payment transactions below a certain threshold (e.g., €3 million annually). Each country may have specific caps for SPIs.
• Authorized Payment Institution (API): Required for larger companies exceeding the thresholds of an SPI or planning to offer more complex payment services.

2. Choose a Jurisdiction

Although the PSD2 framework is EU-wide, each country has its own financial regulatory authority responsible for issuing payment institution licences. Some popular jurisdictions for obtaining licences are:

• Lithuania: Fast processing and flexible regulatory environment.
• Malta: Tax advantages and strong financial services sector.
• Luxembourg: Established financial hub.
• Ireland: English-speaking and strong financial services regulations.

Research the benefits and drawbacks of each country before choosing where to apply.

3. Meet Eligibility Criteria

To obtain a money remittance licence, your company must meet specific requirements in line with PSD2, which may vary slightly depending on the member state. Common requirements include:

• Registered EU company: Your business must be incorporated in the country where you apply.
• Capital requirements

For SPI: Capital requirements are lower (usually between €20,000 to €50,000, depending on the country).

For API: The minimum initial capital is €20,000 for money remittance services. For more complex services, higher capital is required.

• Sound governance and management: The company must have qualified and experienced management, directors, and compliance officers.
• Anti-Money Laundering (AML) policies: A robust AML and Know Your Customer (KYC) compliance framework is essential.
• Risk management framework: The company must demonstrate how it will manage financial, operational, and fraud risks.

4. Prepare the Required Documents

You will need to prepare detailed documentation for submission to the regulatory authority. This typically includes:

• Business plan: Comprehensive description of your business model, target market, and service offerings.
• Financial forecasts: Projected income statements, balance sheets, and cash flow statements.
• Governance structure: Details of the board, management team, and compliance officers.
• Internal controls and risk management: Procedures for managing risks such as fraud, cybersecurity, and operational risks.
• AML/KYC policies: Clear policies that comply with the EU's anti-money laundering directive.
• Customer protection measures: How customer funds will be safeguarded, such as through insurance or segregation of accounts.

5. Submit the Application to the Regulatory Authority

Once your documentation is ready, you submit your application to the national financial regulatory authority of the chosen country. Examples of such authorities include:

• Bank of Lithuania
• Central Bank of Ireland
• Malta Financial Services Authority (MFSA)
• Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg

The application must be submitted according to the procedures of the national authority, which usually involves an online platform.

6. Application Review and Approval

The regulatory authority will review your application and may request additional information. The process takes 3 to 12 months, depending on the country and complexity of the application. During this time, the regulator may ask for clarifications or further documentation.

• For SPI applications: The process may be faster, around 3 to 6 months.
• For API applications: This may take up to a year due to more stringent checks and the need for capital adequacy assessments.

7. Passporting the Licence

Once your company is authorized as a Payment Institution in one EU country, you can passport your licence to operate across all EU member states and European Economic Area (EEA) countries without needing to reapply in each jurisdiction.

• This is done by notifying the regulator, who will inform regulators in other countries where you intend to operate.

8. Register with AML Authorities

In addition to obtaining the licence, you must comply with anti-money laundering laws by registering with the relevant national authority responsible for money laundering supervision. For example, in Lithuania, this would be the Financial Crime Investigation Service (FCIS).

9. Post-License Compliance

Once you have obtained the licence, ongoing compliance obligations include:

• Regular reporting: Financial reporting to the regulator.
• AML/KYC checks: Continuously apply your AML and customer verification procedures.
• Audit requirements: Financial and operational audits may be required by your regulator.
• Compliance with PSD2: Maintain compliance with all provisions of PSD2, including data protection, customer rights, and service transparency.

This process allows you to operate legally within the EU's financial services market while complying with the necessary regulations.