SEMI License: Important Points and Regulatory Requirements

E-money has simplified our lives. Since the fintech industry is constantly developing new technologies that make the purchase of goods and services accessible, people are often thinking about how to switch to online sales. When offering payment services as a small electronic money institution (SEMI), you must apply to the financial regulator to obtain approval. In this article we will try to understand the main nuances of regulating this area and SEMI licensing process.

Our company offers highly qualified services to institutions and official certification of companies. We are ready to offer you ready-made SEMI-licenses in Lithuania, Great Britain, France, Germany and other countries.

SEMI License: Important Points and Regulatory Requirements

Key Points in SEMI License Acquisition and Getting

SEMI is an institution that is responsible for the functioning of online payment systems. Electronic payments are made using debit cards, credit cards, direct bank deposits and electronic checks. Other alternative electronic payment methods: e-wallets, bitcoins, cryptocurrencies and bank transfers are gaining popularity. Although formally they are not licensed by SEMI. There is also a growing movement in cryptocurrencies, which are technically electronic money.

There is little in common between bitcoins and electronic money, except that both options operate in a digital format. While e-money is a mechanism for interacting with government and regulated currencies (fiat money) such as dollars and euros, Bitcoin is a virtual currency with no fiat currency equivalent. Bitcoin is based on a decentralized peer-to-peer network that can be transferred anonymously and can be very volatile in terms of value.

Bitcoin’s value is based on demand and trust. These characteristics of Bitcoin, while offering certain potential benefits not available to fiat currencies, can also create significant risks for their holders, as well as pose certain challenges to regulators who have no control over them.

Many countries face due diligence as a part of SEMI standards compliance when applying for a SEMI-license. SEMI has at least two managers from the EU who confirm their qualifications to manage firm. Each jurisdiction in the EU has rules in addition to the mandatory EU Directive 2015/2366.

Firm that applies for SEMI approval demonstrates a strong technological infrastructure as well as high-quality software. Companies establish internal controls: provide security measures, an operational risk management plan for payments while maintaining security and preventing fraud.

Candidate provides next-mentioned SEMI license documents.

  1. Business plan. Including financial forecasts for the activities of your system.
  2. Description of the organizational structure.
  3. Monitoring procedure. Taking action on security violations, processing customer complaints.
  4. Introduce internal protocols to combat money laundering and terrorist financing.

The above are SEMI requirements must be met to obtain permission. SEMI faces unique requirements depending on the country. To get SEMI-certification on your own without the help of specialists, it will take on average six months. Our experts will help shorten this path significantly.

What Services Can Companies with SEMI-license Provide?

SEMI-authorized companies have the same rights as regular payment institutions. They can carry out payment transactions both online and offline.

An institution can open sub-accounts for its clients within its bank account, giving it the ability to create electronic wallets. Clients, in turn, can exchange cash for the electronic equivalent of coins and banknotes issued by the company and store them in their e-wallet. With the help of such an asset, the company’s clients can make payment transactions.

Regulatory Requirements: SEMI License Getting

Thus, how to get SEMI license? The process of obtaining SEMI license is accompanied by a thorough check of the company’s management. In most EU-countries, the regulator inspects the entire top management of the enterprise. According to SEMI regulatory compliance, at least two heads of the organization must be residents of countries that are EU-members. However, there are countries where one of them may be a EU-resident and the other a resident of other jurisdictions. The company’s management must necessarily confirm their professional qualifications by providing relevant certificates or other documents. Their higher education cannot be technical, but only financial or economic.

Once a company receives SEMI license, each jurisdiction may set its own rules for businesses in addition to the generally accepted and required PSD2 Directive:

  • availability of appropriate software;
  • effective risk control procedures;
  • AML-policy;
  • secure client identification procedures;
  • strong technological base;
  • separate client account;
  • obligations for accounting and external audit;
  • clear requirements for shareholders;
  • regulation of operational risks;

Licensing procedure itself and the content of the applicant’s application are in most cases the same when obtaining a SEMI/EMI license.

E-money is increasingly being used for domestic and international transactions. Compared to any other forms of payment, they have several strengths:

  • there is no need to exchange such funds;
  • you can store several currencies in electronic wallets and accounts, which allows you to avoid unnecessary conversion procedures;
  • you can use the tools remotely;
  • money transfers are usually carried out instantly;
  • e-money is protected from counterfeiting, theft, changes in denomination, and so on.

All this makes e-money a convenient payment tool.

SEMI Compliance Standards Adherence

The process of getting a SEMI license is complex and may vary depending on the jurisdiction. In regard of SEMI licensing essentials, the list of mandatory documentation and requirements are determined on an individual basis.

  1. Shareholders of the company must be over 18 years of age.
  2. There should be no restrictions from the regulatory authorities of the country where licensing takes place.
  3. As a rule, the company must have a registered office in the territory of the state in which the EMI-license is issued.

Of course, specific regulatory parameters differ depending on the chosen market space, however, the general list looks like the above.

SEMI-authorization allows institutions to open sub-accounts for their clients. Thanks to this, it becomes possible to create special electronic wallets. Before opening a SEMI account, client verification is required, which includes the KYC procedure. This procedure is followed throughout the entire period of account servicing, until its closure. In some cases, additional verification methods may be introduced, for example, when certain limits are reached. If KYC information about the client is not enough, restrictions may be placed on the use of the account.

SEMI license price varies in every case because it’s based on plenty of nuances. The relevant legislation changes quite quickly, so we recommend that you contact our managers for more detailed advice.

Process and Documentation for SEMI-Licensing

Each licensing procedure is different, so not only may different requirements apply, but also different conditions. Many EU-regulators, for example, grant a license for electronic money only if the following conditions are met:

  1. Firms must have at least 3 directors on staff, who, together with the shareholders, must have experience in the financial sector.
  2. Availability of a comprehensive human resource management policy, as well as procedures that are necessary to ensure the business model.
  3. Payment of initial capital, the size of which depends on the company’s turnover, region of activity (in the country of registration or throughout the EU/world) and the nature of the proposed services. Nevertheless, SEMI share capital in min is not less than 80 thousand EUR.

As for SEMI limits, its turnover shouldn’t exceed 3 mln EUR per month.

In addition, a certain application fee is required. To renew your electronic money license, you need to pay an annual fee. Its size depends on the jurisdiction where licensing takes place.

PI-license is more limited than the SEMI/EMI-license. Payment institutions can provide services such as payment initiation, payment processing and remittances. But they are prohibited from releasing email. money or hold customer funds without an identifiable payment order. Notably, financial institutions issuing electronic money require higher initial capital and are more strictly regulated. However, some companies that start with PI approval may later apply for SEMI.

Our team is ready to provide you with highly qualified assistance and comprehensive support in obtaining and acquiring this type of permit. Contact us now and we will become your reliable allies on this path.

CEO in Eternity Law International, corporate lawyer practicing in the field of ICO and Blockchain, international financial and contract law, securities law, bankruptcy, formation of funds, acquiring, licensing and tax planning. Advising on the establishing of various types of legal entities around the world (EU, Asia, USA, offshores). Advising projects related to cryptocurrencies. Legal supporting of ICO from A to Z.