2011 No. 99

Financial Services And Markets

The Electronic Money Regulations 2011

Made18th January 2011

Laid before Parliament19th January 2011

Coming into force in accordance with regulation 1(2)

The Treasury are a government department designated1 for the purposes of section 2(2) of the European Communities Act 19722 in relation to payment services and measures relating to payment systems;

The Treasury, in exercise of the powers conferred by section 2(2) of the European Communities Act 1972, make the following Regulations:

PART 1INTRODUCTORY PROVISIONS

Citation and commencement1

1

These Regulations may be cited as the Electronic Money Regulations 2011.

2

These Regulations come into force on—

a

9th February 2011 for the purposes of—

i

enabling applications to become an authorised electronic money institution and for the variation of an authorisation to be made under regulation 5 and the Authority to determine such applications in accordance with regulations 6 to 9;

ii

enabling applications for registration as a small electronic money institution and the variation of a registration to be made under regulation 12 and the Authority to determine such applications in accordance with regulation 13 and regulations 7 to 9 (as applied by regulation 15);

iii

enabling applications for an agent to be included on the register under regulation 34 and the Authority to determine such applications in accordance with that regulation;

iv

enabling the Authority to give directions as to the manner in which an application under regulation 5(1) or (2), 12(1) or (2) or 34(3) is to be made and enabling the Authority to require the applicant to provide further information in accordance with regulation 5(4), 12(4) or 34(3)(a)(iv), as the case may be;

v

enabling the Authority to cancel an authorisation or registration or vary an authorisation or registration on its own initiative in accordance with regulation 10 or 11 (as applied, in the case of registration, by regulation 15);

vi

requiring a person who has made an application under regulation 5(1) or (2) or 12(1) or (2) to provide information to the Authority in accordance with regulation 17 and enabling the Authority to give directions under that regulation;

vii

enabling a person to make a reference to the Upper Tribunal under regulation 9(8), 10(6), 11(5), 29(4) or 34(11);

viii

enabling an applicant for authorisation as an electronic money institution to give the Authority a notice of intention under regulation 28(2) and the Authority to give directions as to the manner in which such a notice is to be given and to inform the host state competent authority in accordance with regulation 28(3);

ix

enabling the Authority to decide whether to register an EEA branch or to cancel such a registration under regulation 29(1);

x

enabling the Authority to give directions under regulation 49 to a person whose application under regulation 5(1) or 12(1) has been granted before 30th April 2011 in respect of—

aa

its provision as from that date of electronic money issuance or payment services; and

bb

its compliance as from that date with requirements imposed by or under Parts 2 to 5 of these Regulations;

xi

enabling the Authority to give directions under paragraph 8, 10, 13(a), 15 or 16 of Schedule 2 to a person whose application under regulation 5(1) or 12(1) has been granted before 30th April 2011;

xii

requiring a person whose application under regulation 5(1), 12(1) or 34(3) has been granted before 30th April 2011 to provide information to the Authority in accordance with regulation 37 and enabling the Authority to give directions under that regulation;

xiii

regulations 30, 47, 59 to 61, 66 to 71, 74 and 78;

xiv

regulation 62 in respect of paragraphs 2, 6 and 8 to 11 of Schedule 3;

xv

regulation 79 in respect of paragraphs 2, 18 and 19(g) of Schedule 4; and

b

30th April 2011 for all other purposes.

Interpretation2

1

In these Regulations—

“the 2000 Act” means the Financial Services and Markets Act 20003;
“agent” means a person who provides payment services on behalf of an electronic money institution;
“authorised electronic money institution” means—
1. a
  a person included by the Authority in the register as an authorised electronic money institution pursuant to regulation 4(1)(a); or
2. b
  a person deemed to have been granted authorisation by the Authority by virtue of regulation 74;
“the Authority” means the Financial Services Authority;
“average outstanding electronic money” means the average total amount of financial liabilities related to electronic money in issue at the end of each calendar day over the preceding six calendar months, calculated on the first calendar day of each calendar month and applied for that calendar month;
“the banking consolidation directive” means Directive 2006/48/EC of the European Parliament and of the Council of 14th June 2006 relating to the taking up and pursuit of the business of credit institutions4;
“consumer” means an individual who is acting for purposes other than a trade, business or profession;
“credit institution” has the meaning given in Article 4(1) of the banking consolidation directive and includes a branch of the credit institution within the meaning of Article 4(3) of that directive which is situated within the EEA and which has its head office in a territory that is outside the EEA in accordance with Article 38 of that directive;
“credit union” means a credit union within the meaning of—
1. a
  the Credit Unions Act 19795; or
2. b
  the Credit Unions (Northern Ireland) Order 19856;
“decision notice” and “warning notice” have the same meaning as in the 2000 Act;
“distributor” means a person who distributes or redeems electronic money on behalf of an electronic money institution but who does not provide payment services on its behalf;
“the EEA” means the European Economic Area;
“EEA agent” means an agent through which an authorised electronic money institution, in exercise of its passport rights, provides payment services in an EEA state other than the United Kingdom;
“EEA authorised electronic money institution” means a person authorised in an EEA state other than the United Kingdom to issue electronic money and provide payment services in accordance with the electronic money directive;
“EEA branch” means a branch established by an authorised electronic money institution, in the exercise of its passport rights, to issue electronic money, provide payment services, distribute or redeem electronic money or carry out other activities in accordance with these Regulations in an EEA state other than the United Kingdom;
“electronic money” means electronically (including magnetically) stored monetary value as represented by a claim on the electronic money issuer which—
1. a
  is issued on receipt of funds for the purpose of making payment transactions;
2. b
  is accepted by a person other than the electronic money issuer; and
3. c
  is not excluded by regulation 3;
“the electronic money directive” means Directive 2009/110/EC7 of the European Parliament and of the Council of 16th September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC8 and 2006/48/EC and repealing Directive 2000/46/EC9;
“electronic money institution” means an authorised electronic money institution or a small electronic money institution;
“electronic money issuer” means any of the following persons when they issue electronic money—
1. a
  authorised electronic money institutions;
2. b
  small electronic money institutions;
3. c
  EEA authorised electronic money institutions;
4. d
  credit institutions;
5. e
  the Post Office Limited;
6. f
  the Bank of England, the European Central Bank and the national central banks of EEA states other than the United Kingdom, when not acting in their capacity as a monetary authority or other public authority;
7. g
  government departments and local authorities when acting in their capacity as public authorities;
8. h
  credit unions;
9. i
  municipal banks;
10. j
  the National Savings Bank;
“home state competent authority” means the competent authority designated in accordance with Article 3 of the electronic money directive as being responsible for the authorisation and prudential supervision of an EEA authorised electronic money institution which is exercising (or intends to exercise) its passport rights in the United Kingdom;
“host state competent authority” means the competent authority designated in accordance with Article 3 of the electronic money directive in an EEA state in which an authorised electronic money institution exercises (or intends to exercise) its passport rights;
“initial capital” has the meaning given by paragraph 1 of Schedule 2;
“the money laundering directive” means Directive 2005/60/EC of the European Parliament and of the Council of 26th October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing10;
“municipal bank” means a company which, immediately before 1st December 2001, fell within the definition in section 103 of the Banking Act 198711;
“own funds” has the meaning given by paragraph 4 of Schedule 2;
“parent undertaking” has the same meaning as in the Companies Acts (see section 1162 of, and Schedule 7 to, the Companies Act 200612);
“passport right” means the entitlement of a person to establish a branch or provide services in an EEA state other than that in which they are authorised to provide electronic money issuance services—
1. a
  in accordance with the Treaty on the Functioning of the European Union as applied in the EEA; and
2. b
  subject to the conditions of the electronic money directive;
“payment account” means an account held in the name of one or more payment service users which is used for the execution of payment transactions;
“payment instrument” means any—
1. a
  personalised device; or
2. b
  personalised set of procedures agreed between the payment service user and the payment service provider;
“payment services” has the same meaning as in the Payment Services Regulations 200913;
“payment service user” means a person when making use of a payment service in the capacity of a payer or payee, or both;
“the payment services directive” means Directive 2007/64/EC of the European Parliament and of the Council of 13th November 2007 on payment services in the internal market14;
“payment system” means a funds transfer system with formal and standardised arrangements and common rules for processing, clearing and settlement of payment transactions;
“payment transaction” has the meaning given in Article 4(5) of the payment services directive;
“qualifying holding” has the meaning given in Article 4(11) of the banking consolidation directive;
“the register” means the register maintained by the Authority under regulation 4;
“small electronic money institution” means a person included by the Authority in the register pursuant to regulation 4(1)(b);
“subsidiary undertaking” has the same meaning as in the Companies Acts (see section 1162 of, and Schedule 7 to, the Companies Act 2006).

2

In these Regulations references to amounts in euro include references to equivalent amounts in another currency.

3

Unless otherwise defined, expressions used in these Regulations which are also used in the electronic money directive have the same meaning as in that directive.

4

Expressions used in a modification to a provision in primary or secondary legislation applied by these Regulations have the same meaning as in these Regulations.

Electronic money: exclusions3

For the purposes of these Regulations electronic money does not include—

a

monetary value stored on instruments that can be used to acquire goods or services only—

i

in or on the electronic money issuer’s premises; or

ii

under a commercial agreement with the electronic money issuer, either within a limited network of service providers or for a limited range of goods or services;

b

monetary value that is used to make payment transactions executed by means of any telecommunication, digital or IT device, where the goods or services purchased are delivered to and are to be used through a telecommunication, digital or IT device, provided that the telecommunication, digital or IT operator does not act only as an intermediary between the payment service user and the supplier of the goods and services.

PART 2REGISTRATION

The register

The register of certain electronic money issuers4

1

The Authority must maintain a register of—

a

authorised electronic money institutions and their EEA branches;

b

small electronic money institutions;

c

agents of electronic money institutions required to be registered under regulation 34; and

d

the National Savings Bank where it issues electronic money.

2

The Authority may include on the register any of the persons mentioned in paragraphs (c), (e), (f) and (g) of the definition of electronic money issuer in regulation 2(1) where such persons issue electronic money.

3

Where a person mentioned in paragraph (e), (f), (g) or (j) of the definition of an electronic money issuer in regulation 2(1)—

a

is not included on the register; and

b

issues, or proposes to issue, electronic money,

e

CL owns or controls 20% or more of the voting rights or capital of the applicant; or

f

the applicant owns or controls 20% or more of the voting rights or capital of CL.

Imposition of requirements7

1

The Authority may include in an authorisation such requirements as it considers appropriate.

2

A requirement may, in particular, be imposed so as to require the person concerned to—

a

take a specified action;

b

refrain from taking a specified action.

3

A requirement may be imposed by reference to the person’s relationship with its group or other members of its group.

4

Where—

a

an applicant intends to carry on business activities other than the issuance of electronic money and provision of payment services; and

b

the Authority considers that the carrying on of such other business activities will impair, or is likely to impair—

i

the financial soundness of the applicant; or

ii

the Authority’s effective supervision of the applicant,

the Authority may require the applicant to establish a separate body corporate to carry on the issuance of electronic money and provision of payment services.

5

A requirement expires at the end of such period as the Authority may specify in the authorisation.

6

Paragraph (5) does not affect the Authority’s powers under regulation 8 or 11.

Variation etc at request of an authorised electronic money institution8

The Authority may, on the application of an authorised electronic money institution, vary the person’s authorisation by—

a

imposing a requirement such as may, under regulation 7, be included in an authorisation;

b

cancelling a requirement included in the authorisation or previously imposed under paragraph (a); or

c

varying such a requirement,

provided that the conditions set out in regulation 6(4) to (8), and the requirement in regulation 19(1) to maintain own funds, will continue to be met.

Determination of application for authorisation or variation of authorisation9

1

The Authority must determine an application for authorisation or for variation of an authorisation within three months beginning with the date on which it received the completed application.

2

The Authority may determine an incomplete application if it considers it appropriate to do so, and it must in any event determine any such application within 12 months beginning with the date on which it received the application.

3

The applicant may withdraw its application, by giving the Authority notice, at any time before the Authority determines it.

4

If the Authority decides to grant an application for authorisation, or for variation of an authorisation, it must give the applicant notice of its decision stating—

a

that authorisation has been granted to carry out electronic money issuance; or

b

that the variation has been granted,

described in such manner as the Authority considers appropriate.

5

The notice must state the date on which the authorisation or variation takes effect.

6

If the Authority proposes to refuse an application or to impose a requirement it must give the applicant a warning notice.

7

The Authority must, having considered any representations made in response to the warning notice—

a

if it decides to refuse the application or to impose a requirement, give the applicant a decision notice; or

b

if it grants the application without imposing a requirement, give the applicant notice of its decision, stating the date on which the authorisation or variation takes effect.

8

If the Authority decides to refuse the application or to impose a requirement the applicant may refer the matter to the Upper Tribunal.

9

If the Authority decides to authorise the applicant, or vary its authorisation, it must update the register as soon as practicable.

Cancellation of authorisation10

1

The Authority may cancel a person’s authorisation and remove the person from the register where—

a

the person does not issue electronic money within 12 months beginning with the date on which the authorisation took effect;

b

the person requests, or consents to, the cancellation of the authorisation;

c

the person ceases to engage in business activity for more than six months;

d

the person has obtained authorisation through false statements or any other irregular means;

e

the person no longer meets, or is unlikely to meet, any of the conditions set out in regulation 6(4) to (8) or the requirement in regulation 19(1) to maintain own funds;

f

the person has issued electronic money or provided payment services other than in accordance with the authorisation granted to it;

g

the person would constitute a threat to the stability of a payment system by continuing its electronic money or payment services business;

h

the cancellation is desirable in order to protect the interests of consumers; or

i

the person’s issuance of electronic money or provision of payment services is otherwise unlawful.

2

A request for cancellation of a person’s authorisation under paragraph (1)(b) must be made in such manner as the Authority may direct.

3

At any time after receiving a request under paragraph (1)(b) and before determining it, the Authority may require the person making the request to provide it with such further information as it reasonably considers necessary to enable it to determine the request.

4

Where the Authority proposes to cancel a person’s authorisation, other than at the person’s request, it must give the person a warning notice.

5

The Authority must, having considered any representations made in response to the warning notice—

a

if it decides to cancel the authorisation, give the person a decision notice; or

b

if it decides not to cancel the authorisation, give the person notice of its decision.

6

If the Authority decides to cancel the authorisation, other than at the person’s request, the person may refer the matter to the Upper Tribunal.

7

Where the period for a reference to the Upper Tribunal has expired without a reference being made, the Authority must as soon as practicable update the register accordingly.

if the authorisation has been varied, not to rescind the variation,

it must give the person notice.

10

If, having considered any representations made by the person, the Authority decides—

a

not to vary the authorisation in the way proposed;

b

to vary the authorisation in a different way; or

c

to rescind a variation which has taken effect,

it must give the person notice.

11

A notice given under paragraph (9) must inform the person of their right to refer the matter to the Upper Tribunal and the procedure for such a reference.

12

A notice under paragraph (10)(b) must comply with paragraph (7).

13

For the purposes of paragraph (2)(c), paragraphs (a) to (d) of section 391(8) of the 2000 Act (publication) apply to determine whether a matter is open to review.

Registration as a small electronic money institution

Application for registration as a small electronic money institution or variation of an existing registration12

1

An application for registration as a small electronic money institution must contain, or be accompanied by, such information as the Authority may reasonably require.

2

An application for the variation of a registration must—

a

contain a statement of the proposed variation;

b

contain a statement of the electronic money issuance and payment services business which the applicant proposes to carry on if the registration is varied; and

c

contain, or be accompanied by, such other information as the Authority may reasonably require.

3

An application under paragraph (1) or (2) must be made in such manner as the Authority may direct.

4

5

Different directions may be given, and different requirements imposed, in relation to different applications or categories of application.

Conditions for registration13

1

The Authority may refuse to register an applicant as a small electronic money institution only if any of the conditions set out in paragraphs (2) to (10) is not met.

2

The application must comply with the requirements of, and any requirements imposed under, regulation 12.

3

The total business activities of the applicant immediately before the time of registration must not generate average outstanding electronic money that exceeds 5,000,000 euro.

4

The monthly average over the period of 12 months preceding the application of the total amount of relevant payment transactions must not exceed 3,000,000 euro.

5

The applicant must immediately before the time of registration hold such amount, if any, of initial capital as is required in accordance with Part 1 of Schedule 2.

6

The applicant must satisfy the Authority that, taking into account the need to ensure the sound and prudent conduct of the affairs of the institution, it has—

a

robust governance arrangements for its electronic money and payment services business, including a clear organisational structure with well-defined, transparent and consistent lines of responsibility; and

b

effective procedures to identify, manage, monitor and report any risks to which it might be exposed,

b

for regulation 8 substitute—

8
1
The Authority may, on the application of a small electronic money institution, vary the person’s registration by—
a
imposing a requirement such as may, under regulation 7, be included in a registration;
b
cancelling a requirement included in the registration or previously imposed under paragraph (a); or
c
varying such a requirement,
provided that the conditions set out in paragraph (2) continue to be met.
2
The conditions that must continue to be met are—
a
the conditions in regulation 13(6) to (10);
b
where applicable, compliance with the requirement in regulation 19(2) to maintain own funds;
c
the condition that the total business activities of the applicant generate average outstanding electronic money that does not exceed 5,000,000 euro; and
d
the condition that the monthly average over any period of 12 months of the total amount of relevant payment transactions does not exceed 3,000,000 euro.
3
In paragraph (2)(d) “relevant payment transactions” has the same meaning as in regulation 13.

c

in regulation 10 for paragraph (1)(e) substitute—

e
the person no longer complies with, or is unlikely to continue to comply with, any of the conditions mentioned in regulation 8(2)(a), (b), (c) and (d);

d

in regulation 11 for paragraph (1)(a) substitute—

a
the person no longer complies with, or is unlikely to continue to comply with, any of the conditions mentioned in regulation 8(2)(a), (b), (c) and (d);

Application to become an authorised electronic money institution where a financial limit is exceeded16

Where a small electronic money institution ceases to comply with a condition referred to in regulation 8(2)(c) or (d) (as applied by regulation 15), the institution concerned must, within 30 days of becoming aware of the change in circumstances, apply to become an authorised electronic money institution under regulation 5 if it intends to continue issuing electronic money in the United Kingdom.

Common provisions

Duty to notify changes17

1

If at any time after an applicant has provided the Authority with any information under regulation 5(1), (2) or (4) or 12(1), (2) or (4) and before the Authority has determined the application—

a

there is, or is likely to be, a material change affecting any matter contained in that information; or

b

it becomes apparent to the applicant that the information is incomplete or contains a material inaccuracy,

the applicant must provide the Authority with details of the change, the complete information or a correction of the inaccuracy (as the case may be) without undue delay, or, in the case of a material change which has not yet taken place, the applicant must provide details of the likely change as soon as the applicant is aware of such change.

2

The obligation in paragraph (1) also applies to material changes or significant inaccuracies affecting any matter contained in any supplementary information provided pursuant to that paragraph.

3

Any information to be provided to the Authority under this regulation must be in such form or verified in such manner as it may direct.

Electronic money institutions acting without permission18

If an electronic money institution issues electronic money or carries on a payment service in the United Kingdom, or purports to do so, other than in accordance with an authorisation or registration granted to it by the Authority under these Regulations, or deemed to be so granted under regulation 74, it is to be taken to have contravened a requirement imposed on it under these Regulations.

PART 3PRUDENTIAL SUPERVISION AND PASSPORTING

Capital requirements

Capital requirements19

1

An authorised electronic money institution must maintain at all times own funds equal to or in excess of—

a

350,000 euro; or

b

the amount of the own funds requirement calculated in accordance with paragraph 13 of Schedule 2 subject to any adjustment directed by the Authority under paragraph 15 of that Schedule,

whichever is the greater.

2

Where the business activities of a small electronic money institution generate average outstanding electronic money of 500,000 euro or more, it must maintain at all times own funds equal to or in excess of the amount of the own funds requirement calculated in accordance with paragraph 14 of Schedule 2, subject to any adjustment directed by the Authority under paragraph 16 of that Schedule.

3

Where a small electronic money institution has not completed a sufficiently long period of business to calculate the amount of average outstanding electronic money for the purposes of paragraph (2), it must make an estimate on the basis of projected outstanding electronic money as evidenced by its business plan, subject to any adjustments to that plan which are, or have been, required by the Authority.

Safeguarding

Safeguarding requirements20

1

Electronic money institutions must safeguard funds that have been received in exchange for electronic money that has been issued (referred to in this regulation and regulations 21 and 22 as “relevant funds”).

references to an “authorised payment institution” are to be treated as references to an authorised electronic money institution;

b

references to a “small payment institution” are to be treated as references to—

i

a small electronic money institution; and

ii

a credit union; and

c

references to a “payment transaction” are to be treated as references to a payment transaction that is not related to the issuance of electronic money.

Safeguarding option 121

1

An electronic money institution must keep relevant funds segregated from any other funds that it holds.

2

Where the institution continues to hold the relevant funds at the end of the business day following the day on which they were received it must—

a

place them in a separate account that it holds with an authorised credit institution; or

b

In this regulation—

“authorised credit institution” has the same meaning as in regulation 21;
“authorised insurer” means a person authorised for the purposes of the 2000 Act to effect and carry out a contract of general insurance as principal or otherwise authorised in accordance with Article 6 of the First Council Directive 73/239/EEC of 24th July 1973 on the business of direct insurance other than life insurance22, other than a person in the same group as the electronic money institution;
“insolvency event” means any of the following procedures in relation to an electronic money institution—
1. a
  the making of a winding-up order;
2. b
  the passing of a resolution for voluntary winding-up;
3. c
  the entry of the institution into administration;
4. d
  the appointment of a receiver or manager of the institution’s property;
5. e
  the approval of a proposed voluntary arrangement (being a composition in satisfaction of debts or a scheme of arrangement);
6. f
  the making of a bankruptcy order;
7. g
  in Scotland, the award of sequestration;
8. h
  the making of any deed of arrangement for the benefit of creditors or, in Scotland, the execution of a trust deed for creditors;
9. i
  the conclusion of any composition contract with creditors;
10. j
  the making of an insolvency administration order or, in Scotland, the execution of a trust deed for creditors;
11. k
  the conclusion of any composition contract with creditors; or
12. l
  the making of an insolvency administration order or, in Scotland, sequestration, in respect of the estate of a deceased person.

Power of the Authority to exclude assets23

In exceptional circumstances the Authority may determine that an asset that would otherwise be secure and low-risk for the purposes of paragraph (2) of regulation 21 by virtue of paragraph (6) of that regulation is not such an asset provided that—

a

the determination is based on an evaluation of the risks associated with the asset, including any risk arising from the security, maturity or value of the asset; and

b

there is adequate justification for the determination.

Insolvency events24

1

Subject to paragraph (2), where there is an insolvency event—

a

the claims of electronic money holders are to be paid from the asset pool in priority to all other creditors; and

b

until all the claims of electronic money holders have been paid, no right of set-off or security right may be exercised in respect of the asset pool except to the extent that the right of set-off relates to fees and expenses in relation to operating an account held in accordance with regulation 21(2)(a) or (b) or 22(1)(b).

2

The claims referred to in paragraph (1)(a) shall not be subject to the priority of expenses of an insolvency proceeding except in respect of the costs of distributing the asset pool.

3

An electronic money institution must maintain organisational arrangements sufficient to minimise the risk of the loss or diminution of relevant funds or relevant assets through fraud, misuse, negligence or poor administration.

4

In this regulation—

“asset pool” means—
1. a
  any relevant funds segregated in accordance with regulation 21(1);
2. b
  any relevant funds held in an account accordance with regulation 21(2)(a);
3. c
  any relevant assets held in an account in accordance with regulation 21(2)(b);
4. d
  any proceeds of an insurance policy or guarantee held in an account in accordance with regulation 22(1)(b);
“insolvency event” has the same meaning as in regulation 22;
“insolvency proceeding” means—
1. a
  winding-up, administration, receivership, bankruptcy or, in Scotland, sequestration;
2. b
  a voluntary arrangement, deed of arrangement or trust deed for the benefit of creditors; or
3. c
  the administration of the insolvent estate of a deceased person;
“security right” means—
1. a
  security for a debt owed by an electronic money institution and includes any charge, lien, mortgage or other security over the asset pool or any part of the asset pool; and
2. b
  any charge arising in respect of the expenses of a voluntary arrangement.

a parent undertaking of A;

b

a subsidiary undertaking of A;

c

a parent undertaking of a subsidiary undertaking of A; or

d

a subsidiary undertaking of a parent undertaking of A.

Outsourcing26

1

An authorised electronic money institution must notify the Authority of its intention to enter into a contract with another person under which that person will carry out any operational function relating to the issuance, distribution or redemption of electronic money or the provision of payment services (“outsourcing”).

2

Where the institution intends to outsource any important operational function, all of the following conditions must be met—

a

the outsourcing is not undertaken in such a way as to impair—

i

the quality of the institution’s internal control; or

ii

the ability of the Authority to monitor the authorised electronic money institution’s compliance with these Regulations or the Payment Services Regulations 2009;

b

the outsourcing does not result in any delegation by the senior management of the institution of responsibility for complying with the requirements imposed by or under these Regulations or the Payment Services Regulations 2009;

c

the relationship and obligations of the institution towards its electronic money holders under these Regulations or the Payment Services Regulations 2009 is not substantially altered;

d

compliance with the conditions which the institution must observe in order to become an authorised electronic money institution and remain so is not adversely affected; and

e

none of the conditions of the institution’s authorisation requires removal or variation.

3

For the purposes of paragraph (2), an operational function is important if a defect or failure in its performance would materially impair—

a

compliance by the institution with these Regulations or the Payment Services Regulations 2009 and any requirement of its authorisation under these Regulations;

b

the financial performance of the institution; or

c

the soundness or continuity of the institution’s electronic money issuance or provision of payment services.

Record keeping27

1

Electronic money institutions must maintain relevant records and keep them for at least five years from the date on which the record was created.

2

For the purposes of paragraph (1), records are relevant where they relate to the institution’s compliance with this Part and, in particular, would enable the Authority to supervise effectively such compliance.

Exercise of passport rights

Notice of intention28

1

An authorised electronic money institution (other than an institution mentioned in regulation 6(4)(b)) may exercise passport rights.

2

Where an authorised electronic money institution intends to exercise its passport rights for the first time in a particular EEA state it must give the Authority, in such manner as the Authority may direct, notice of its intention to do so (“notice of intention”) which—

a

identifies the electronic money issuance, redemption, distribution or payment services which it seeks to carry on in exercise of those rights in that State;

b

gives the names of those responsible for the management of a proposed EEA branch, if any;

c

provides details of the organisational structure of a proposed EEA branch, if any; and

d

identifies the distributors, if any, whom the institution intends to engage to distribute or redeem electronic money in exercise of its passport rights in that State.

3

b

if it decides to register the branch, or not to cancel its registration, give the authorised electronic money institution notice of its decision.

4

If the Authority decides not to register the branch, or to cancel its registration, the authorised electronic money institution may refer the matter to the Upper Tribunal.

5

If the Authority decides to register, or cancel the registration of, an EEA branch, it must update the register as soon as practicable.

6

If the Authority decides to cancel the registration the Authority must, where the period for a reference to the Upper Tribunal has expired without a reference being made, update the register as soon as practicable.

Supervision of firms exercising passport rights30

1

Without prejudice to regulation 71, the Authority must co-operate with the relevant host state competent authority or home state competent authority, as the case may be, in relation to the exercise of passport rights by any authorised electronic money institution or EEA authorised electronic money institution.

2

The Authority must, in particular—

a

notify the host state competent authority, whenever it intends to carry out an on-site inspection in the host state competent authority’s territory; and

b

provide the host state competent authority or home state competent authority, as the case may be—

i

on request, with all relevant information; and

ii

on its own initiative with all essential information,

relating to the exercise of the passport rights by an authorised electronic money institution or EEA authorised electronic money institution, including where there is an infringement or suspected infringement of these Regulations, or of the provisions of the electronic money directive, by a distributor, agent, branch or any other entity carrying out activities on behalf of such an institution.

3

Where the Authority and the home state competent authority agree, the Authority may carry out on-site inspections on behalf of the home state competent authority in respect of electronic money issuance or payment services provided by an EEA authorised electronic money institution exercising passport rights.

4

If the Authority has reasonable grounds to suspect that, in connection with the proposed establishment of a branch or the proposed provision of services by an EEA authorised electronic money institution—

a

money laundering or terrorist financing within the meaning of the Money Laundering Regulations 2007 is taking place, has taken place, or has been attempted; or

b

the risk of such activities taking place would be increased,

it must inform the relevant home state competent authority of its grounds for suspicion.

Carrying on of Consumer Credit Act business by an EEA authorised electronic money institution31

1

Section 203 (power to prohibit the carrying on of Consumer Credit Act business)26 and 204 (power to restrict the carrying on of Consumer Credit Act business)27 of, and Schedule 16 (prohibitions and restrictions imposed by the Office of Fair Trading)28 to, the 2000 Act apply in relation to EEA authorised electronic money institutions exercising passport rights in the United Kingdom under these Regulations as they apply in relation to EEA firms exercising passport rights under Part 2 of Schedule 3 to the 2000 Act (EEA passport rights) with the following modifications—

a

in section 203(10)—

i

for the definition of “ a consumer credit EEA firm” substitute—

“a consumer credit EEA firm” means an EEA authorised electronic money institution (as defined in regulation 2(1) of the Electronic Money Regulations 2011) which is exercising passport rights in the United Kingdom and is carrying on any Consumer Credit Act business;

ii

for the definition of “listed activity” substitute—

“listed activity” means the issuance of electronic money and any activity carried on in accordance with Article 6 of the electronic money directive;

b

in paragraph 2(5)(b) of Schedule 16, for “the firm’s home state regulator” substitute “the home state competent authority (as defined by regulation 2(1) of the Electronic Money Regulations 2011)”.

2

Sections 21 (businesses needing a licence)29 and 39(1) (offences against Part 3)30 of the Consumer Credit Act 197431 do not apply in relation to the carrying on by an EEA authorised electronic money institution of electronic money issuance or a payment service which is Consumer Credit Act business, unless the Office of Fair Trading has exercised the power conferred on it by section 203 of the 2000 Act, as applied with modifications by paragraph (1), in relation to that institution.

3

In this regulation “Consumer Credit Act business” has the same meaning as in section 203 of the 2000 Act.

PART 4ADDITIONAL ACTIVITIES AND USE OF DISTRIBUTORS AND AGENTS

Additional activities32

1

Subject to paragraphs (2), (3) and (4), electronic money institutions may, in addition to issuing electronic money, engage in the following activities—

a

the provision of payment services;

b

the provision of operational and closely related ancillary services, including—

i

ensuring the execution of payment transactions;

ii

foreign exchange services;

iii

safe-keeping activities; and

iv

the storage and processing of data;

c

the operation of payment systems; and

d

a

contain, or be accompanied by, the following information—

i

the name and address of the agent;

ii

where relevant, a description of the internal control mechanisms that will be used by the agent—

aa

in the case of an agent in the United Kingdom, to comply with the Money Laundering Regulations 2007; and

bb

in the case of an EEA agent, to comply with provisions of the money laundering directive; and

iii

the identity of the directors and persons responsible for the management of the agent and evidence that they are fit and proper persons; and

iv

such other information as the Authority may reasonably require; and

b

be made in such manner as the Authority may direct.

4

Different directions may be given, and different requirements imposed, in relation to different applications or categories of application.

5

6

The Authority may refuse to include the agent on the register only if—

a

it has not received the information referred to in paragraph (3)(a), or is not satisfied that such information is correct;

b

it is not satisfied that the directors and persons responsible for the management of the agent are fit and proper persons;

c

it has reasonable grounds to suspect that, in connection with the provision of services through the agent—

i

money laundering or terrorist financing within the meaning of the money laundering directive (or, in the United Kingdom, the Money Laundering Regulations 2007) is taking place, has taken place, or has been attempted; or

ii

the risk of such activities taking place would be increased.

7

Where—

a

an authorised electronic money institution intends to provide payment services through an EEA agent; and

b

the Authority proposes to include the EEA agent on the register,

the Authority must inform the host state competent authority and take account of its opinion (if provided within such reasonable period as the Authority specifies) on any of the matters referred to in paragraph (6)(b) or (c).

8

The Authority must decide whether to include the agent on the register within a reasonable period of it having received a completed application.

9

If the Authority proposes to refuse to include the agent on the register, it must give the applicant a warning notice.

10

The Authority must, having considered any representations made in response to the warning notice—

a

if it decides not to include the agent on the register, give the applicant a decision notice; or

b

if it decides to include the agent on the register, give the applicant notice of its decision, stating the date on which the registration takes effect.

11

If the Authority decides not to include the agent on the register the applicant may refer the matter to the Upper Tribunal.

12

If the Authority decides to include the agent on the register, it must update the register as soon as practicable.

13

An application under paragraph (3) may be combined with an application under regulation 5 or 12, in which case the application must be determined in the manner set out in regulation 9 (if relevant, as applied by regulation 15).

14

An electronic money institution must ensure that an agent acting on its behalf informs payment service users of the agency arrangement.

Removal of agents from the register35

1

The Authority may remove an agent of an electronic money institution from the register where—

a

the institution requests, or consents to, the agent’s removal from the register;

b

the institution has obtained registration through false statements or any other irregular means;

c

regulation 34(6)(b) or (c) applies;

d

the removal is desirable in order to protect the interests of consumers; or

e

the agent’s provision of payment services is otherwise unlawful.

2

Where the Authority proposes to remove an agent from the register, other than at the request of the institution, it must give the institution a warning notice.

3

The Authority must, having considered any representations made in response to the warning notice—

a

if it decides to remove the agent, give the institution a decision notice; or

b

if it decides not to remove the agent, give the institution notice of its decision.

4

If the Authority decides to remove the agent, other than at the request of the institution, the institution may refer the matter to the Upper Tribunal.

5

Where the period for a reference to the Upper Tribunal has expired without a reference being made, the Authority must as soon as practicable update the register accordingly.

Reliance36

1

Where an electronic money institution relies on a third party for the performance of operational functions it must take all reasonable steps to ensure that these Regulations and the Payment Services Regulations 2009 are complied with.

2

Without prejudice to paragraph (1), an electronic money institution is responsible, to the same extent as if it had expressly permitted it, for anything done or omitted by any of its employees or by a distributor, agent, branch or any other entity issuing, distributing or redeeming electronic money, or providing payment services, on its behalf or to which activities are outsourced.

Duty to notify change in circumstance37

1

Where it becomes apparent to an electronic money institution that there is, or is likely to be, a significant change in circumstances which is relevant to—

a

in the case of an authorised electronic money institution—

i

its fulfilment of any of the conditions set out in regulation 6(4) to (8) or the requirement in regulation 19(1) to maintain own funds; or

ii

the issuance, distribution or redemption of electronic money, or the payment services, which it seeks to carry on in exercise of its passport rights;

b

in the case of a small electronic money institution, its fulfilment of any of the conditions set out in regulation 8(2) (as applied by regulation 15); or

c

in the case of the use of an agent to provide payment services, the matters referred to in regulation 34(6)(b) and (c),

it must provide the Authority with details of the change without undue delay, or, in the case of a substantial change in circumstance which has not yet taken place, details of the likely change a reasonable period before it takes place.

2

An electronic money institution must inform the Authority of any material change in the measures that it has taken in accordance with regulation 21 or 22 to safeguard funds that have been received in exchange for electronic money.

3

Any information to be provided to the Authority under this regulation must be in such form or verified in such manner as it may direct.

PART 5ISSUANCE AND REDEEMABILITY OF ELECTRONIC MONEY

Application of Part 538

This Part applies to the issuance and redemption of electronic money where the issuance or redemption is carried on from an establishment maintained by an electronic money issuer or its agent in the United Kingdom.

Any fees for redemption must be proportionate and commensurate with the costs actually incurred by the electronic money issuer.

Amount of redemption42

1

Where before the termination of the contract an electronic money holder makes a request for redemption, the electronic money holder may request redemption of the monetary value of the electronic money in whole or in part, and the electronic money issuer must redeem the amount so requested subject to any fee imposed in accordance with regulation 41.

2

Where an electronic money holder makes a request for redemption on, or up to one year after, the date of the termination of the contract, the electronic money issuer must redeem—

a

the total monetary value of the electronic money held; or

b

if the electronic money issuer carries out any business activities other than the issuance of electronic money and it is not known in advance what proportion of funds received by it is to be used for electronic money, all the funds requested by the electronic money holder.

Requests for redemption43

An electronic money issuer is not required under regulation 39(b) to redeem the monetary value of electronic money where the electronic money holder makes a request for redemption more than six years after the date of termination of the contract.

Redemption rights of persons other than consumers44

Regulations 41 and 42 shall not apply in the case of a person, other than a consumer, who accepts electronic money and, in such a case, the redemption rights of that person shall be subject to the contract between that person and the electronic money issuer.

Prohibition of interest45

An electronic money issuer must not award—

a

interest in respect of the holding of electronic money; or

b

any other benefit related to the length of time during which an electronic money holder holds electronic money.

Termination of a contract46

For the purposes of this Part a contract between an electronic money issuer and an electronic money holder terminates when the right to use electronic money for the purpose of making payment transactions ceases.

PART 6THE AUTHORITY

The functions of the Authority

Functions of the Authority47

1

The Authority is to have the functions conferred on it by these Regulations.

2

In discharging its function of determining the general policy and principles by reference to which it performs particular functions under these Regulations, the Authority must have regard to—

a

the need to use its resources in the most efficient and economic way;

b

the responsibilities of those who manage the affairs of electronic money issuers;

c

the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction;

d

the desirability of facilitating innovation in connection with the issuance of electronic money and the provision of payment services;

e

the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom;

f

the need to minimise the adverse effects on competition that may arise from anything done in the discharge of those functions;

g

the desirability of facilitating competition in relation to the issuance of electronic money and the provision of payment services; and

h

the desirability of enhancing the understanding and knowledge of members of the public of financial matters (including the United Kingdom financial system).

Supervision and enforcement

Monitoring and enforcement48

1

The Authority must maintain arrangements designed to enable it to determine whether—

a

persons on whom requirements are imposed by or under Part 2, 3 or 4 of these Regulations are complying with them;

b

there has been any contravention of regulation 63(1), 64(1) or 66(1) or (2).

2

The Authority may maintain arrangements designed to enable it to determine whether persons on whom requirements are imposed by or under Part 5 of these Regulations are complying with them.

3

The arrangements referred to in paragraphs (1) and (2) may provide for functions to be performed on behalf of the Authority by any body or person who is, in its opinion, competent to perform them.

4

The Authority must also maintain arrangements for enforcing the provisions of these Regulations.

5

Paragraph (3) does not affect the Authority’s duty under paragraph (1).

Reporting requirements49

1

An electronic money issuer must give the Authority such information in respect of its issuance of electronic money and provision of payment services and its compliance with requirements imposed by or under Parts 2 to 5 of these Regulations as the Authority may direct.

2

Information required under this regulation must be given at such times and in such form, and verified in such manner, as the Authority may direct.

Public censure50

If the Authority considers that an electronic money issuer has contravened a requirement imposed on it by or under these Regulations the Authority may publish a statement to that effect.

Financial penalties51

1

The Authority may impose a penalty of such amount as it considers appropriate on—

a

an electronic money issuer who has contravened a requirement imposed on it by or under these Regulations; or

b

a person who has contravened regulation 63(1), 64(1) or 66(1) or (2).

2

A penalty under this regulation is a debt due from that person to the Authority, and is recoverable accordingly.

Suspending authorisation etc52

1

to impose a penalty under regulation 51; or

c

to suspend an institution’s authorisation or registration or impose a restriction under regulation 52,

it must give the person concerned a warning notice.

2

The warning notice must set out the terms of the statement, the amount of the penalty or the period for which the suspension or restriction is to have effect, as the case may be.

3

If, having considered any representations made in response to the warning notice, the Authority decides to take any of the steps mentioned in paragraph (1), it must without delay give the person concerned a decision notice.

4

The decision notice must set out the terms of any statement, the amount of any penalty or the period for which any suspension or restriction is to have effect, as the case may be.

5

If the Authority decides to take any of the steps mentioned in paragraph (1) the person concerned may refer the matter to the Upper Tribunal.

6

Sections 21032 (statements of policy) and 211 (statements of policy: procedure) of the 2000 Act apply—

a

in respect of the imposition of penalties under regulation 51 as they apply in respect of the imposition of penalties under Part 14 of the 2000 Act (disciplinary measures); and

b

in respect of the imposition of a suspension or restriction under regulation 52 as they apply in respect of the imposition of a suspension or restriction under that Part of that Act.

7

After a statement under regulation 50 is published, the Authority must send a copy of it to the person concerned and to any person to whom a copy of the decision notice was given under section 393(4) of the 2000 Act (third party rights) (as applied by paragraph 8 of Schedule 3 to these Regulations).

Injunctions54

1

If, on the application of the Authority, the court is satisfied—

a

that there is a reasonable likelihood that any person will contravene a requirement imposed by or under these Regulations; or

b

that any person has contravened such a requirement and that there is a reasonable likelihood that the contravention will continue or be repeated,

the court may make an order restraining (or, in Scotland, an interdict prohibiting) the contravention.

2

If, on the application of the Authority, the court is satisfied—

a

that any person has contravened a requirement imposed by or under these Regulations; and

b

that there are steps which could be taken for remedying the contravention,

the court may make an order requiring that person, and any other person who appears to have been knowingly concerned in the contravention, to take such steps as the court may direct to remedy it.

3

If, on the application of the Authority, the court is satisfied that any person may have—

a

contravened a requirement imposed by or under these Regulations; or

b

been knowingly concerned in the contravention of such a requirement,

it may make an order restraining (or, in Scotland, an interdict prohibiting) them from disposing of, or otherwise dealing with, any assets of theirs which it is satisfied that they are reasonably likely to dispose of or otherwise deal with.

4

The jurisdiction conferred by this regulation is exercisable by the High Court and the Court of Session.

5

In paragraph (2), references to remedying a contravention include references to mitigating its effect.

to whom the profits mentioned in paragraph (1)(a) are attributable; or

b

who has suffered the loss or adverse effect mentioned in paragraph (1)(b).

Proposal to require restitution56

1

If the Authority proposes to exercise the power in regulation 55(2), it must give the person concerned a warning notice.

2

The warning notice must state the amount which the Authority proposes to require the person concerned to pay or distribute as mentioned in regulation 55(2).

3

If, having considered any representations made in response to the warning notice, the Authority decides to exercise the power in regulation 55(2), it must without delay give the person concerned a decision notice.

4

The decision notice must—

a

state the amount that the person concerned is to pay or distribute;

b

identify the person or persons to whom that amount is to be paid or among whom that amount is to be distributed; and

c

state the arrangements in accordance with which the payment or distribution is to be made.

5

If the Authority decides to exercise the power in regulation 55(2), the person concerned may refer the matter to the Upper Tribunal.

The court may require any accounts or other information supplied under paragraph (5) to be verified in such manner as it may direct.

7

The jurisdiction conferred by this regulation is exercisable by the High Court and the Court of Session.

8

Nothing in this regulation affects the right of any person other than the Authority to bring proceedings in respect of the matters to which this regulation applies.

Complaints58

1

The Authority must maintain arrangements designed to enable electronic money holders and other interested parties to submit complaints to it that a requirement imposed by or under Part 5 of these Regulations has been breached by an electronic money issuer.

2

Where it considers it appropriate, the Authority must include in any reply to a complaint under paragraph (1) details of the ombudsman scheme established under Part 16 of the 2000 Act (the ombudsman scheme).

Miscellaneous

Costs of supervision59

1

The functions of the Authority under these Regulations are to be treated for the purposes of paragraph 17 (fees) of Part 3 of Schedule 1 to the 2000 Act as functions conferred on the Authority under that Act with the following modifications—

a

section 2(3) of the 2000 Act (the Authority’s general duties) does not apply to the making of rules under paragraph 17 by virtue of this regulation;

b

rules made under paragraph 17 by virtue of this regulation are not to be treated as regulating provisions for the purposes of section 159(1) of the 2000 Act (competition scrutiny)33;

c

paragraph 17(2) and (3) does not apply.

2

The Authority must apply amounts paid to it by way of penalties imposed under regulation 51 towards expenses incurred in carrying out its functions under these Regulations or for any incidental purpose.

Guidance60

1

The Authority may give guidance consisting of such information and advice as it considers appropriate with respect to—

a

the operation of these Regulations;

b

any matters relating to the functions of the Authority under these Regulations;

c

any other matters about which it appears to the Authority to be desirable to give information or advice in connection with these Regulations.

2

The Authority may—

a

publish its guidance;

b

offer copies of its published guidance for sale at a reasonable price;

c

if it gives guidance in response to a request made by any person, make a reasonable charge for that guidance.

Authority’s exemption from liability in damages61

The functions of the Authority under these Regulations are to be treated for the purposes of paragraph 19 (exemption from liability in damages) of Part 4 of Schedule 1 to the 2000 Act as functions conferred on the Authority under that Act.

Application and modification of primary and secondary legislation62

The provisions of primary and secondary legislation specified in Schedule 3 apply in respect of the Authority’s functions under these Regulations with the modifications set out in that Schedule.

PART 7GENERAL

Offences

Prohibition on issuing electronic money by persons other than electronic money issuers63

1

A person may not issue electronic money in the United Kingdom, or purport to do so, unless the person is—

a

an authorised electronic money institution;

b

a small electronic money institution;

c

an EEA authorised electronic money institution exercising its passport rights;

d

a credit institution authorised in the UK or exercising an EEA right in accordance with Part 2 of Schedule 3 to the 2000 Act (exercise of passport rights by EEA firms)34;

e

the Post Office Limited;

f

the Bank of England, the European Central Bank or a national central bank of an EEA state other than the United Kingdom;

g

a government department or local authority;

h

a credit union;

i

a municipal bank; or

j

the National Savings Bank.

2

A person who contravenes paragraph (1) is guilty of an offence and is liable—

a

on summary conviction, to imprisonment for a term not exceeding three months or to a fine not exceeding level 5 on the standard scale, or both;

b

on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or both.

False claims to be an electronic money issuer64

1

A person who does not fall within any of sub-paragraphs (a) to (j) of regulation 63(1) may not—

a

describe themselves (in whatever terms) as a person falling within any of those sub-paragraphs; or

on conviction on indictment, to a fine.

Restriction on penalties67

A person who is convicted of an offence under these Regulations is not liable to a penalty under regulation 51 in respect of the same contravention of a requirement imposed by or under these Regulations.

Liability of officers of bodies corporate etc68

1

If an offence under these Regulations committed by a body corporate is shown—

a

to have been committed with the consent or connivance of an officer; or

b

to be attributable to any neglect on their part,

the officer as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.

2

If the affairs of a body corporate are managed by its members, paragraph (1) applies in relation to the acts and defaults of a member in connection with such member’s functions of management as if the member were a director of the body.

3

If an offence under these Regulations committed by a partnership is shown—

a

to have been committed with the consent or connivance of a partner; or

b

to be attributable to any neglect on their part,

the partner as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.

4

If an offence under these Regulations committed by an unincorporated association (other than a partnership) is shown—

a

to have been committed with the consent or connivance of an officer; or

b

to be attributable to any neglect of such officer,

the officer as well as the association is guilty of the offence and liable to be proceeded against and punished accordingly.

5

In this regulation—

“officer”—
1. a
  in relation to a body corporate, means a director, manager, secretary, chief executive, member of the committee of management, or a person purporting to act in that capacity; and
2. b
  in relation to an unincorporated association, means any officer of the association or any member of its governing body, or a person purporting to act in such capacity;
“partner” includes a person purporting to act as a partner.

Prosecution69

1

Proceedings for an offence under these Regulations may be instituted only—

a

by the Authority; or

b

by or with the consent of the Director of Public Prosecutions.

2

Paragraph (1) does not apply to proceedings in Scotland.

Proceedings against unincorporated bodies70

c

any other relevant competent authorities designated under European Union law or the law of the United Kingdom or any other EEA state which is applicable to electronic money issuers,

for the purposes of the exercise by those bodies of their functions under the electronic money directive and other relevant European Union or national legislation.

2

Subject to the requirements of the Data Protection Act 199840, sections 34841 and 34942 of the 2000 Act (as applied with modifications by paragraph 6 of Schedule 3 to these Regulations), regulation 49A of the Money Laundering Regulations 200743 and any other applicable restrictions on the disclosure of information, the Authority and the Commissioners may provide information to each other and—

a

the bodies mentioned in paragraph (1)(a) and (c);

b

the European Central Bank, the Bank of England and the national central banks of EEA states other than the United Kingdom when acting in their capacity as monetary and oversight authorities;

c

where relevant, other public authorities responsible for the oversight of payment and settlement systems,

b

12

In this regulation, “Part 4 permission” has the same meaning as in the 2000 Act44.

EEA firms75

1

Any person who—

a

immediately before 30th April 2011 is an electronic money institution;

b

is an EEA firm qualifying for authorisation under Schedule 3 to the 2000 Act45 in respect of the activity of issuing electronic money; and

c

before 30th April 2011 has carried on that activity,

may continue until 30th October 2011 to carry on that activity and engage in any related activity.

2

Parts 5 and 6 shall apply to a person falling within paragraph (1) as if the person were an EEA authorised electronic money institution.

3

In this regulation “electronic money institution” has the meaning given in Article 1(3)(a) of Directive 2000/46/EC of the European Parliament and of the Council of 18th September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (“the first electronic money directive”)46.

4

In this regulation and in regulation 76 “related activity” means an activity mentioned in Article 1(5) of the first electronic money directive.

Certified persons76

1

Any person who—

a

has a certificate (which has not been revoked) given by the Authority under article 9C of the Financial Services and Markets 2000 (Regulated Activities) Order 200147 (“the Order”); and

b

before 30th April 2011 has carried on the activity of issuing electronic money in accordance with that certificate,

may continue to carry on that activity in accordance with that certificate and engage in any related activity until 30th April 2012 or, if the person is included on the register as an electronic money institution before that date, until the time of such inclusion.

2

Parts 5 and 6 of these Regulations, and Part 16 of, and Schedule 17 to, the 2000 Act (the ombudsman scheme)48, shall apply to a person falling within paragraph (1) as if the person were an electronic money institution.

Existing fixed term contracts77

1

Part 5 shall not apply in respect of the redemption of electronic money that has been issued before 30th April 2011 where the contract—

a

provides for a termination date up to two years after the date on which the contract was entered into; and

b

does not provide that the means of storing electronic money can be recharged.

2

In paragraph (1) “termination date” has the same meaning as in Part 5.

Amendments to the banking consolidation directive78

1

For the purposes of the application of the 2000 Act or any provision made under or by virtue of it in relation to any person during the transitional period, paragraph 2 of Schedule 349 to that Act (definition of “Banking Consolidation Directive”) shall be read as if the amendments of the banking consolidation directive by the electronic money directive had not been made.

2

The “transitional period” means the period beginning when this regulation comes into force and ending with—

a

29th October 2011 in the case of a person falling within regulation 75(1);

b

29th April 2011 otherwise.

Amendments to legislation

Amendments to primary and secondary legislation79

Schedule 4, which contains amendments to primary and secondary legislation, has effect.

Angela WatkinsonMichael FabricantTwo of the Lords Commissioners of Her Majesty’s Treasury18th January 2011

SCHEDULE 1Information to be included in or with an application for authorisation

Regulation 5(1)

1

A programme of operations, setting out, in particular, the type of electronic money issuance and payment services which are envisaged.

2

A business plan including a forecast budget calculation for the first three financial years which demonstrates that the applicant is able to employ appropriate and proportionate systems, resources and procedures to operate soundly.

3

Evidence that the applicant holds initial capital for the purposes of regulation 6(3).

4

A description of the measures taken for safeguarding the electronic money holders’ and payment service users’ funds in accordance with regulation 20.

5

A description of the applicant’s governance arrangements and internal control mechanisms including administrative risk management and accounting procedures, which demonstrates that such arrangements, mechanisms and procedures are proportionate, appropriate, sound and adequate.

6

A description of the internal control mechanisms which the applicant has established in order to comply with the Money Laundering Regulations 2007 and Regulation (EC) No 1781/2006 of the European Parliament and of the Council of 15 November 2006 on information on the payer accompanying transfers of funds50.

7

A description of the applicant’s structural organisation, including, where applicable, a description of the intended use of agents and branches and a description of outsourcing arrangements, and of its participation in a national and international payment system.

8

In relation to each person holding, directly or indirectly, a qualifying holding in the applicant—

a

the size and nature of their qualifying holding; and

b

evidence of their suitability taking into account the need to ensure the sound and prudent management of an electronic money institution.

9

1

The identity of directors and persons who are or will be responsible for the management of the applicant and, where relevant, persons who are or will be responsible for the management of the electronic money issuance and payment services activities of the applicant.

2

Evidence that the persons described in sub-paragraph (1) are of good repute and that they possess appropriate knowledge and experience to issue electronic money and perform payment services.

10

The identity of the auditors of the applicant, if any.

11

1

The legal status of the applicant and, where the applicant is a limited company, its articles.

2

In this paragraph “articles” has the meaning given in section 18 of the Companies Act 2006 (articles of association).

12

The address of the head office of the applicant.

13

For the purposes of paragraphs 4, 5 and 7, a description of—

a

the audit arrangements of the applicant; and

b

the organisational arrangements that the applicant has set up,

with a view to the applicant taking all reasonable steps to protect the interests of its electronic money holders and payment service users and to ensuring continuity and reliability in the performance of the issuance of electronic money and payment services activities.

SCHEDULE 2Capital Requirements

Regulations 6, 13 and 19

PART 1Initial capital

1

For the purposes of these Regulations “initial capital” comprises the items specified in paragraph 4(a), (b) and (c) of this Schedule.

2

An applicant for authorisation as an electronic money institution must hold an amount of initial capital of at least 350,000 euro.

3

available to the electronic money institution for unrestricted and immediate use to cover risks or losses as soon as these occur; and

b

net of any foreseeable tax charge at the moment of their calculation or be suitably adjusted in so far as such tax charges reduce the amount up to which these items may be applied to cover risks or losses.

6

Own funds are not to include guarantees provided by the Crown or a local authority to an electronic money institution which is a public sector entity for the purposes of the banking consolidation directive.

Deductions from own funds

7

The deductions from own funds are—

a

own shares at book value held by the electronic money institution;

b

intangible assets;

c

material losses of the current financial year;

d

holdings of shares in credit institutions and financial institutions exceeding 10% of their capital;

e

if sub-paragraph (d) applies, the items specified in paragraph 4(f), (g) and (j) held in the relevant credit institution or financial institution;

f

holdings of shares or of the items specified in paragraph 4(f), (g) and (j) held in other credit institutions or financial institutions where—

i

the holding has not been deducted in accordance with sub-paragraph (d) or (e) of this paragraph; and

ii

the total amount of such holdings exceeds 10% of the electronic money institution’s own funds calculated before deduction of the items specified in this sub-paragraph and sub-paragraphs (d), (e), (g) and (h);

g

participations which the electronic money institution holds in an insurance undertaking, reinsurance undertaking or insurance holding company; and

h

the following instruments held in an insurance undertaking, reinsurance undertaking or insurance holding company in which the electronic money institution holds a participation—

i

instruments referred to in article 16(3) of Directive 73/239/EEC of the Council on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance52;

ii

instruments referred to in article 27(3) of Directive 2002/83/EC of the European Parliament and of the Council of 5th November 2002 concerning life assurance53.

8

Where shares in another credit institution, financial institution, insurance undertaking, reinsurance undertaking or insurance holding company are held temporarily for the purposes of a financial assistance operation designed to reorganise and save that entity, the Authority may direct that any or all of the items specified in paragraph 7(d) to (h) are not to be deducted from own funds.

Limits on qualifying items

Own funds requirement

13

An authorised electronic money institution must calculate its own funds requirement—

a

in accordance with such of Method A, Method B or Method C as the Authority may direct in respect of any activities carried on by the authorised electronic money institution consisting of payment services that are not related to the issuance of electronic money; and

b

in accordance with Method D in respect of any activities carried on by the authorised electronic money institution that consist of the issuance of electronic money and payment services that are related to the issuance of electronic money.

14

Where a small electronic money institution is required by regulation 19(2) to maintain own funds, it must calculate its own funds requirement as an amount equal to 2% of the average outstanding electronic money of the institution.

Adjustment by the Authority

15

The Authority may direct in respect of an authorised electronic money institution that—

a

an amount of own funds resulting from a calculation made in accordance with paragraph 13(a) is to be up to 20% higher or up to 20% lower;

b

an amount of own funds resulting from a calculation made in accordance with paragraph 13(b) is to be up to 20% higher or up to 20% lower; or

c

the sum of the amounts of own funds resulting from calculations made in accordance with paragraph 13(a) and (b) is to be up to 20% higher or up to 20% lower.

16

The Authority may direct in respect of a small electronic money institution that an amount of own funds resulting from a calculation made in accordance with paragraph 14 is to be up to 20% higher or up to 20% lower.

17

A direction made under paragraph 15 or 16 must be on the basis of an evaluation of the relevant electronic money institution including, if available, and where the Authority considers it appropriate, any risk-management processes, risk loss database or internal control mechanisms of the electronic money institution.

18

The Authority may make a reasonable charge for making an evaluation required under paragraph 17.

Provision for start-up electronic money institutions

19

If an electronic money institution has not completed a full financial year’s business, references to a figure for the preceding financial year are to be read as the equivalent figure projected in the business plan provided in the electronic money institution’s application for authorisation or registration, subject to any adjustment to that plan required by the Authority.

Method A

20

1

“Method A” means the calculation method set out in this paragraph.

2

The own funds requirement is 10% of the authorised electronic money institution’s fixed overheads for the preceding financial year.

3

If a material change has occurred in an authorised electronic money institution’s business since the preceding financial year, the Authority may direct that the own funds requirement is to be a higher or lower amount than that calculated in accordance with sub-paragraph (2).

Method B

21

1

“Method B” means the calculation method set out in this paragraph.

2

The own funds requirement is the sum of the following elements multiplied by the scaling factor—

a

4% of the first 5,000,000 euro of payment volume;

b

2.5% of the next 5,000,000 euro of payment volume;

c

1% of the next 90,000,000 euro of payment volume;

d

0.5% of the next 150,000,000 euro of payment volume; and

e

0.25% of any remaining payment volume.

3

“Payment volume” means the total amount of payment transactions that are not related to the issuance of electronic money executed by the authorised electronic money institution in the preceding financial year divided by the number of months in that year.

4

The “scaling factor” is—

a

0.5 for an authorised electronic money institution providing a payment service specified in paragraph 1(f) of Schedule 1 to the Payment Services Regulations 2009;

b

0.8 for an authorised electronic money institution providing the payment service specified in paragraph 1(g) of Schedule 1 to those Regulations; and

c

1 for an authorised electronic money institution providing any other payment service.

Method C

22

1

“Method C” means the calculation method set out in this paragraph.

2

The own funds requirement is the relevant indicator multiplied by—

a

the multiplication factor; and

b

e

1.5% of any remaining amount of the relevant indicator.

6

“Scaling factor” has the meaning given in paragraph 21(4).

7

The proviso is that the own funds requirement must not be less than 80% of the average of the previous three financial years for the relevant indicator.

23

1

“Method D” means the calculation method set out in this paragraph.

2

The own funds requirement in respect of the activity of issuing electronic money and providing payment services that are related to the issuance of electronic money is an amount equal to 2% of the average outstanding electronic money of the authorised electronic money institution.

24

1

Where—

a

an electronic money institution provides payment services that are not related to the issuance of electronic money or carries out any of the activities referred to in regulation 32(1)(b) to (d) and (2); and

b

the amount of outstanding electronic money is unknown in advance,

the institution may calculate its own funds requirement on the basis of a representative portion assumed to be used for the issuance of electronic money and payment services related to the issuance of electronic money, provided that such representative portion can be reasonably estimated on the basis of historical data and to the satisfaction of the Authority.

2

Where an electronic money institution has not completed a sufficiently long period of business to compile historical data adequate to make the calculation under sub-paragraph (1), it must make an estimate on the basis of projected outstanding electronic money as evidenced by its business plan, subject to any adjustments to that plan which are, or have been, required by the Authority.

Application of accounting standards

25

Except where this Schedule provides for a different method of recognition, measurement or valuation, whenever a provision in this Schedule refers to an asset, liability, equity or income statement item, an electronic money institution must, for the purpose of that provision, recognise the asset, liability, equity or income statement item and measure its value in accordance with whichever of the following are applicable for the purpose of the institution’s external financial reporting—

a

Financial Reporting Standards and Statements of Standard Accounting Practice issued or adopted by the Accounting Standards Board;

b

Statements of Recommended Practice, issued by industry or sectoral bodies recognised for this purpose by the Accounting Standards Board;

c

International Financial Reporting Standards and International Accounting Standards issued or adopted by the International Accounting Standards Board;

d

International Standards on Auditing (United Kingdom and Ireland) issued by the Auditing Practices Board; and

e

the Companies Act 2006.

SCHEDULE 3Application and modification of legislation

Regulation 62

PART 1Application and modification of the 2000 Act

Disciplinary powers1

Sections 6654 (disciplinary powers) to 70 (statements of policy: procedure) of the 2000 Act apply with the following modifications to section 66—

a

for subsection (2) substitute—

2
A person is guilty of misconduct if, while a relevant person, he had been knowingly concerned in a contravention of the Electronic Money Regulations 2011 by an electronic money issuer which is an electronic money institution, credit institution, credit union or municipal bank.

b

omit subsections (3)(aa) and (ab), (3A) to (3D), (5A) and (7) to (9); and

c

for subsection (6) substitute—

6
Relevant person” means any person responsible for the management of the electronic money issuer or, where relevant, any person responsible for the management of electronic money issuance by the electronic money issuer.

b
the ownership or control of a person who was formerly a person mentioned in paragraph (a), (b), (c), (d), (h) or (i) of the definition of “electronic money issuer” in regulation 2(1) of the Electronic Money Regulations 2011 at any time when it was such a person.

iii

in subsection (5) for “regulated activities” substitute “the activity of issuing electronic money”; and

iv

omit subsection (6)59;

d

in section 16860 (appointment of persons to carry out investigations in particular cases)—

i

in subsection (1)—

aa

in paragraph (a) for “any regulation made under section 142” substitute “any requirement of or imposed under the Electronic Money Regulations 2011”;

bb

in paragraph (b) for “, 191,” to the end substitute “or 191F or under regulation 63, 64 or 66 of the Electronic Money Regulations 2011.”;

ii

for subsection (2) substitute—

2
Subsection (3) also applies if it appears to an investigating authority that there are circumstances suggesting that a person may be guilty of an offence under, or has contravened a requirement of, the Money Laundering Regulations 2007.

iii

omit subsections (4) and (5); and

iv

in subsection (6) omit “or the Secretary of State”;

e

in section 169 (investigations etc in support of overseas regulator)—

i

in subsection (8) for “Part XXIII” substitute “sections 348, 349, 351 and 352, as applied with modifications by the Electronic Money Regulations 2011”; and

ii

in subsection (13) for “has the same meaning as in section 195” substitute “means a competent authority designated in accordance with Article 3 of the electronic money directive”;

f

in section 170 (investigations: general)—

i

in subsection (1) omit “or (5)”;

ii

in subsection (3)(a) omit “or (4)”; and

iii

for subsection (10) substitute—

10
“Investigating authority”, in relation to an investigator, means the Authority.

2A
In a restriction notice, the Authority must direct that voting power to which the notice relates is, until further notice, not to be exercisable.

ii

for subsection (3)(b) substitute—

b
voting power that has been exercised as a result of the acquisition is void;

d

after section 191E (requirements for notices under section 191D) insert—

Direction by the Authority191EA
The Authority may direct that this Part does not apply in respect of an electronic money institution which carries on business activities other than the issuance of electronic money and payment services.

e

in section 191F (offences) in subsections (8)(a) and (9)(a), for “the statutory maximum” substitute in each case “level 5 on the standard scale”;

f

in section 191G (interpretation), in subsection (1), omit the definition of “UK authorised person”; and

g

omit section 192 (power to change definitions of control etc.).

Auditors and actuaries5

Part 22 (auditors and actuaries) applies with the following modifications—

a

for references to “authorised person” substitute “electronic money institution”; and

b

in subsection (1)(a) of section 346 (provision of false or misleading information)—

i

for “six months” substitute “three months”; and

ii

for “the statutory maximum” substitute “level 5 on the standard scale”.

Restriction on disclosure of information6

Sections 348 (restrictions on disclosure of confidential information by Authority etc), 349 (exceptions from section 348), 35164 (competition information) and 35265 (offences) of the 2000 Act apply with the following modifications—

a

in section 348—

i

in subsection (2)(b) for the words from “, the competent authority” to the end substitute “under the Electronic Money Regulations 2011”;

ii

in subsection (3)(a) for “this Act” substitute “the Electronic Money Regulations 2011”;

iii

in subsection (5)—

aa

for “this Part”, substitute “the Electronic Money Regulations 2011”;

bb

omit paragraphs (b) and (c);

cc

in paragraph (e) for “a person mentioned in paragraphs (a) to (c)” substitute “the Authority”;

dd

in paragraph (f) for “a person mentioned in those paragraphs” substitute “the Authority”.

iv

in subsection (6)—

aa

omit paragraphs (a) and (b); and

bb

in paragraph (c) for “paragraph 6 of Schedule 1” substitute “regulation 48 of the Electronic Money Regulations 2011”; and

b

in section 34966 omit subsections (3A) and (3B).

Insolvency7

Sections 35967 (administration order), 367 (winding-up petitions) and 368 (winding-up petitions: EEA and Treaty firms) of the 2000 Act apply with the following modifications—

a

for references to “an authorised person” substitute “an electronic money institution or an EEA electronic money institution”;

b

in section 359—

i

omit subsections (1)(b), (3)(b) and (c)68 and (5);

ii

for subsection (1)(c) substitute—

c
is issuing or has issued electronic money in contravention of regulation 63(1) of the Electronic Money Regulations 2011.

iii

in subsection (3)(a) omit “or partnership” and for “an agreement” substitute “a contract for electronic issuance or payment services”; and

iv

in subsection (4) omit the definitions of “agreement”, “authorised deposit taker”, “authorised reclaim fund”69 and “relevant deposit”;

c

in section 367—

i

omit subsections (1)(b), (2), (5), (6) and (7);

ii

for subsection (1)(c) substitute—

c
is issuing or has issued electronic money in contravention of regulation 63(1) of the Electronic Money Regulations 2011.

iii

in subsection (4) for “an agreement” substitute “a contract for electronic money issuance or payment services”; and

d

in section 368 for the words from “winding up” to the end substitute “winding up of an EEA electronic money institution unless it has been asked to do so by the home state competent authority.”.

Warning notices and decision notices8

Part 26 of the 2000 Act (notices) applies with the following modifications—

a

in section 388 (decision notices), omit subsection (2);

b

in section 39070 (final notices)—

i

omit subsections (6) and (10); and

ii

in subsection (8) omit “or (6)(c)”;

c

in section 391 (publication)—

i

in subsection (10) for “has the same meaning as in section 395” substitute “means a notice given under regulation 11(6), (9) or (10)(b) (including as applied by regulation 15) of the Electronic Money Regulations 2011”; and

ii

omit subsection (11).

d

for section 39271 (application of sections 393 and 394) substitute—

392
Sections 393 and 394 apply to—
a
a warning notice given in accordance with regulations 10(4) (including as applied by regulation 15), 29(2) (in relation to the cancellation of a registration), 35(2), 53(1) or 56(1) of the Electronic Money Regulations 2011;
b
a decision notice given in accordance with regulations 10(5)(a) (including as applied by regulation 15), 29(3)(a) (in relation to the cancellation of a registration), 35(3)(a), 53(3) or 56(3) of the Electronic Money Regulations 2011.

e

in section 395 (the Authority’s procedures) in subsection (13) for “in accordance with” to the end substitute “under regulation 11(6), (9) or (10)(b) (including as applied by regulation 15) of the Electronic Money Regulations 2011.”.

Limitation on powers to require documents9

Section 413 of the 2000 Act (protected items) applies for the purposes of these Regulations as it applies for the purposes of that Act.

PART 2Application and modification of secondary legislation

The Financial Services and Markets Act 2000 (Service of Notices) Regulations 200110

The Financial Services and Markets Act 2000 (Service of Notices) Regulations 200172 apply to any notice, direction or document of any kind given by or to the Authority under these Regulations as they apply to any notice, direction or document of any kind under the 2000 Act.

The Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 200111

The Financial Services and Markets Act 2000 (Disclosure of Confidential Information Regulations 200173 apply with the following modifications—

a

in regulation 2—

i

in the definition of “directive restrictions” for “and article 9 of the insurance mediation directive” substitute “, article 9 of the insurance mediation directive and Article 3 of the electronic money directive insofar as it applies Article 22 of the payment services directive”;

ii

after the definition of “EEA regulatory authority” insert—

“electronic money directive” means Directive 2009/110/EC of the European Parliament and of the Council of 16th September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions;
“electronic money directive information” means confidential information received by the Authority in the course of discharging its functions as the competent authority under the electronic money directive;

iii

in paragraph (a) of the definition of “overseas regulatory authority” after “of the Act” insert “or any function conferred under national legislation in implementation of the electronic money directive”;

b

in regulation 5(4)(a) and (6)(d) and (e) for “an authorised person, former authorised person or former regulated person” substitute in each case “an electronic money institution or former electronic money institution”;

c

in regulation 8 after paragraph (b) insert—

c
electronic money directive information.

d

for regulation 9(4) substitute—

4
Paragraph (1) does not permit disclosure to the persons specified in the first column in Part 6 of Schedule 1 unless the disclosure is of electronic money directive information.

e

in regulation 11 after paragraph (d) insert—

e
electronic money directive information.

f

in the second column in Part 1 of Schedule 1, in the list of functions beside—

i

“An official receiver appointed under section 399 of the Insolvency Act 1986, or an official receiver for Northern Ireland appointed under article 355 of the Insolvency (Northern Ireland) Order 1989”, after paragraph (ii) insert—

or
i
electronic money issuers or former electronic money issuers

ii

“The Department of Enterprise, Trade and Investment in Northern Ireland”, after paragraph (c)(ii) insert—

or
i
electronic money issuers or former electronic money issuers

iii

“The Pensions Regulator”, after paragraph (ii) insert—

or
i
electronic money issuers or former electronic money issuers

iv

“The Charity Commissioners for England and Wales”, after paragraph (ii) insert—

or
i
electronic money issuers or former electronic money issuers

g

in Schedule 1, after Part 5 insert—

PART 6
Person
Functions
The Commissioners for Her Majesty’s Revenue and Customs
Their functions under the Money Laundering Regulations 2007

Person	Functions
The Commissioners for Her Majesty’s Revenue and Customs	Their functions under the Money Laundering Regulations 2007

SCHEDULE 4Amendments to primary and secondary legislation

Regulation 79

PART 1Amendments to primary legislation

Consumer Credit Act 19741

In section 25(1C)74 of the Consumer Credit Act 197475 (licensee to be a fit person), after “credit institutions” insert “(as that Annex was last amended by Directive 2009/111/EC)”.

The 2000 Act2

1

The 2000 Act is amended as follows.

2

In Part 14 (disciplinary measures), in section 206A(2) (suspending permission to carry on regulated activities etc) in the definition of “relevant requirement” omit the word “or” before paragraph (b) and after that paragraph insert—

c
by the Payment Services Regulations 2009; or
d
by the Electronic Money Regulations 2011.

3

In Part 16 (the ombudsman scheme)—

a

in section 226(2)(b)76 (compulsory jurisdiction), after “authorised person,” insert “or an electronic money issuer within the meaning of the Electronic Money Regulations 2011”; and

b

in section 234(1)77 (industry funding), after “class of authorised person” insert “, any electronic money issuer within the meaning of the Electronic Money Regulations 2011”.

4

In Part 28 (miscellaneous)—

a

in section 404(2) (consumer redress schemes)78, as substituted by section 14 of the Financial Services Act 2010, omit the word “or” before paragraph (b) and at the end of that paragraph insert—

or
a
electronic money issuers.

b

in section 404E (meaning of “consumers”)—

i

in subsection (2) omit the word “or” before paragraph (f) and at the end of that paragraph insert—

or
a
electronic money issuers in issuing electronic money.

ii

in subsection (6), after the definition of “engage in any investment activity” insert—

“electronic money” has the same meaning as in the Electronic Money Regulations 2011 and any reference to issuing electronic money must be read accordingly;

5

In section 404F (other definitions etc)—

i

after subsection (6) insert—

6A
References in sections 404 and 404E to an “electronic money issuer” are references to a person mentioned in paragraph (a), (b), (c), (d), (h) or (i) of the definition of “electronic money issuer” in regulation 2(1) of the Electronic Money Regulations 2011.

ii

in subsection (8), in paragraph (a) omit the word “or” before paragraph (b) and at the end of that paragraph insert—

or
a
the variation under regulation 8 or 11 of the Electronic Money Regulations 2011 of an authorisation under those regulations.

6

In paragraph 12 of Schedule 1A (further provision about the consumer financial education body)79—

a

in the cross heading preceding paragraph 12 for “or payment service providers” substitute—

, payment service providers or electronic money issuers

b

in sub-paragraph (1)(a) after “authorised persons” insert “, electronic money issuers”;

c

in sub-paragraph (1)(b) after “authorised person” insert “, electronic money issuer”; and

d

after sub-paragraph (4) insert—

4A
“Electronic money issuer” means a person who is an electronic money issuer for the purposes of the Electronic Money Regulations 2011 as a result of falling within any of paragraphs (a) to (e) and (h) to (j) of the definition in regulation 2(1).

7

In paragraph 8(6) of Schedule 11A (transferable securities)80 for “4(1)(a)” substitute “4(1)”.

8

In paragraph 13(4) of Schedule 17 (the ombudsman scheme)81, after “an authorised person,” insert “an electronic money issuer within the meaning of the Electronic Money Regulations 2011”.

The Terrorism Act 20003

In the Terrorism Act 200082—

a

in Part 1 of Schedule 3A (regulated sector)83 —

i

in paragraph 1(1)(b), for “and 14” substitute “, 14 and 15”;

ii

in paragraph 1(2)(a), for “Article 4(1)(a)” substitute “Article 4(1)”; and

iii

in paragraph 3(1), at the end of the definition of “Banking Consolidation Directive” insert “as last amended by Directive 2009/111/EC”;

b

in paragraph 6(1) of Schedule 6 (financial information)—

i

in sub-paragraph (g), after “credit institutions” insert “as last amended by Directive 2009/111/EC”;

ii

omit the word “and” at the end of sub-paragraph (h) and after that sub-paragraph insert—

ha
an electronic money institution within the meaning of Directive 2009/110/EC of the European Parliament and of the Council of 16th September 2009 relating to the taking up, pursuit and prudential supervision of the business of electronic money institutions, and

c

in paragraph 7, at the end of the definition of “the banking consolidation directive” insert “as last amended by Directive 2009/111/EC”.

PART 2Amendments to secondary legislation

The Rehabilitation of Offenders Act 1974 (Exceptions) Order 19757

The Rehabilitation of Offenders Act 1974 (Exceptions) Order 197587 is amended as follows—

a

in article 2(1), after the definition of “director” insert—

“electronic money institution” has the meaning given by regulation 2(1) of the Electronic Money Regulations 2011;

b

in article 3(g), in the table, at the end insert—

17
A director or manager responsible for the management of the electronic money or payment services business of an electronic money institution.
The Financial Services Authority.
18
A controller of an electronic money institution.
The Financial Services Authority.

c

omit the word “or” before sub-paragraph (xii) of article 4(d) and after that sub-paragraph insert—

xiii
to refuse an application for registration as an authorised electronic money institution or a small electronic money institution under the Electronic Money Regulations 2011, or
xiv
to vary or cancel such registration (or to refuse to vary or cancel such registration) or to impose a requirement under regulation 7 of those Regulations,

ii

for the definition of “electronic money” substitute—

“electronic money” has the meaning given by regulation 2(1) of the Electronic Money Regulations 2011;

b

in article 9AB—

i

in paragraph (1), for “or a small payment institution” substitute “, a small payment institution, an electronic money institution or an EEA authorised electronic money institution”; and

ii

in paragraph (2), at the end insert—

and “electronic money institution” and “EEA authorised electronic money institution” have the meanings given in the Electronic Money Regulations 2011.

c

in article 9B after “money” insert—

by—
a
a credit institution, a credit union or a municipal bank; or
b
a person who is deemed to have been granted authorisation under regulation 74 of the Electronic Money Regulations 2011 or who falls within regulation 76(1) of those Regulations,

d

after 9B insert—

9BA
Articles 9C to 9I and 9K apply only in the case of a person falling within regulation 76(1) of the Electronic Money Regulations 2011.

The Pension Protection Fund (Entry Rules) Regulations 200518

In regulation 1 of the Pension Protection Fund (Entry Rules) Regulations 200598, at the end insert—

6
Until 30th April 2011, amendments made to Directive 2006/48/EC of the European Parliament and of the Council by Directive 2009/110/EC of the European Parliament and of the Council shall be disregarded for the purposes of the definition of “EEA credit institution” in paragraph (3).

The Money Laundering Regulations 200719

The Money Laundering Regulations 2007 are amended as follows—

a

in regulation 2(1) for the definition of “the electronic money directive” substitute the following definitions—

“the electronic money directive” means Directive 2009/110/EC of the European Parliament and of the Council of 16th September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions;

“electronic money institution” has the meaning given by regulation 2(1) of the Electronic Money Regulations 2011;

b

in regulation 3—

i

in paragraph (2)(a) for “Article 4(1)(a)” substitute “Article 4(1)”; and

ii

in paragraph (3)(a) for “and 14” substitute “, 14 and 15”;

c

in regulation 13(7)(d)—

i

in the opening words for “Article 1(3)(b)” substitute “Article 2(2)”;

ii

in paragraph (i) for “150 euro” substitute “250 euro or, in the case of electronic money used to carry out payment transactions within the United Kingdom, 500 euro”; and

iii

in paragraph (ii) for “by the bearer” to the end substitute—

by the electronic money holder (within the meaning of Article 11 of the electronic money directive).

d

in regulation 17(5)99 after “those Regulations” insert—

; and
a
any electronic money institution or EEA authorised electronic money institution (within the meaning of the Electronic Money Regulations 2011) which provides payment services mainly falling within paragraph 1(f) of Schedule 1 to the Payment Services Regulations 2009

e

in regulation 20 after paragraph (5) insert—

5A
A relevant person who is an issuer of electronic money must appoint an individual to monitor and manage compliance with, and the internal communication of, the policies and procedures relating to the matters referred to in paragraph (1)(a) to (e), and in particular to—
a
identify any situations of higher risk of money laundering or terrorist financing;
b
maintain a record of its policies and procedures, risk assessment and risk management including the application of such policies and procedures;
c
apply measures to ensure that such policies and procedures are taken into account in all relevant functions including in the development of new products, dealing with new customers and in changes to business activities; and
d
provide information to senior management about the operation and effectiveness of such policies and procedures at least annually.

f

in regulation 23(1)(a) after paragraph (iii) insert—

iv
electronic money institutions;

g

in regulation 49A(1)100, after “Payment Services Regulations 2009” insert “or the Electronic Money Regulations 2011”; and

h

in Schedule 1—

i

in the heading, for “and 14” substitute “, 14 and 15”; and

ii

at the end insert—

15
Issuing electronic money.

Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 200820

In the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008101, in regulations 32 and 47, in the definitions of “e-money issuer” (in the modifications to the Companies Act 2006), after “a person” insert “who is registered as an authorised electronic money institution or a small electronic money institution within the meaning of the Electronic Money Regulations 2011 or”.

The Payment Services Regulations 200921

The Payment Services Regulations 2009102 are amended as follows—

a

in regulation 2(1)—

i

in the definition of “the banking consolidation directive”, at the end insert “as last amended by Directive 2009/111/EC”;

ii

in the definition of “credit institution”, for “Article 4(1)(a)” substitute “Article 4(1)”;

iii

for the definition of “the electronic money directive” substitute—

“the electronic money directive” means Directive 2009/110/EC of the European Parliament and of the Council of 16th September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions;

iv

in the definition of “electronic money institution”, for “Article 1(3)(a)” substitute “Article 2(1)”; and

v

in the definition of “funds”, for “Article 1(3)(b)” substitute “Article 2(2)”;

b

in regulation 13(4)(e), after “these Regulations” insert “or the Electronic Money Regulations 2011”;

c

in regulation 53(3), for “Article 1(3)(b)” substitute “Article 2(2)”; and

d

in regulation 110(1)103, for sub-paragraph (e) substitute—

e
an electronic money institution which for the purposes of the Electronic Money Regulations 2011 is—
i
registered in the United Kingdom as an authorised electronic money institution or a small electronic money institution; or
ii
an EEA authorised electronic money institution exercising passport rights in the United Kingdom or treated as such by virtue of regulation 75 of those Regulations;

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations implement Directive 2009/110/EC of the European Parliament and of the Council of 16th September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions (“the Directive”) (OJ No L 275, 27.10.2000, p.39).

Parts 2 to 4 of these Regulations establish a new authorisation regime for electronic money issuers. This replaces the regime applicable to electronic money institutions and small electronic money issuers which implemented Directive 2000/46/EC. The new regime does not apply to credit institutions such as banks and other categories of person described in regulation 2(1).

Part 2 of the Regulations requires the Financial Services Authority (“the FSA”) to establish a register of electronic money institutions and sets out the procedures and conditions for registration. It also sets out the circumstances in which registration may be varied or cancelled. Bodies requiring registration must be registered either as an authorised electronic money institution (regulations 5 to 11) or a small electronic money institution (regulations 12 to 15), depending on the value of electronic money that they issue, the value of payment transactions that they execute and whether they are seeking to establish a branch or provide services in another Member State.

Part 3 of the Regulations sets out the requirements to be met by electronic money institutions and stipulates the conditions for them to establish a branch or provide services in another Member State. These requirements include meeting capital requirements (regulation 19 and Schedule 2) and safeguarding electronic money holders’ and payment service users’ funds (regulation 20). Electronic money institutions must keep records and provide information to the FSA about accounts (regulations 25 and 27). Authorised electronic money institutions must comply with provisions about outsourcing (regulation 26). Regulations 28 to 30 make provision about the provision of services in another EEA state.

Part 4 of the Regulations sets out provisions about the activities that an electronic money institution may engage in. It sets out the business activities that an institution may undertake by virtue of being registered. It set out the conditions that apply to such activities including in respect of the grant of credit, the use of payment accounts, issuing electronic money and the provision of services through an agent (regulations 32 to 35). It permits the electronic money issuer to distribute and redeem electronic money through another person (regulation 33). Regulation 36 provides for the responsibilities of an institution that relies on a branch or a third party for operational functions such as issuance, redemption or payment services. Institutions have a duty to notify the FSA of any change in their circumstances relevant to the conditions of their registration (regulation 37).

Part 5 of the Regulations sets out the requirements to be met by all electronic money issuers when issuing and redeeming electronic money. Electronic money must be issued and redeemed at par value (regulation 39) and issuers are not permitted to award interest on the outstanding balances (regulation 45). Redemption must be provided at any time upon request for a period of six years from the end of the contract (regulations 39 and 43). Redemption may be subject to proportionate fees to cover actual costs in certain cases.

Part 6 of the Regulations makes provision in respect of the FSA. In particular, it confers on the FSA functions in relation to the supervision and enforcement of certain provisions of the Regulations (regulations 47 to 58). Regulation 62 and Schedule 3 apply provisions of primary and secondary legislation (with modifications) in respect of the FSA’s functions under the Regulations.

Part 7 of the Regulations provides for criminal offences. Regulation 63 makes it an offence for a person to issue electronic money in the United Kingdom unless it is an authorised or small electronic money institution or one of the other permitted categories of electronic money issuer. There are also offences relating to false claims to be an electronic money issuer and misleading the FSA. Regulations 74 to 78 make transitional provision for persons who have issued electronic money before 30th April 2011 to continue to do so for a limited time while they take steps to comply with these Regulations. All persons who continue to issue electronic money under the transitional provisions must comply with Parts 5 and 6 of these Regulations. Regulation 79 and Schedule 4 provide for amendments to primary and secondary legislation including provision for the Financial Ombudsman Service to apply.

A Transposition Note setting out how this Directive will be transposed into UK law is available from the Banking and Credit Team, HM Treasury, 1 Horse Guards Road, London SW1A 2HQ. A full regulatory impact assessment of the effect that this instrument will have on the costs to business and the voluntary sector has also been prepared. Copies of both documents have been placed in the library of each House of Parliament and are available on HM Treasury’s website (ww.hm-treasury.gov.uk). A copy of the regulatory impact assessment is also annexed to the Explanatory Memorandum which is available alongside the instrument on the legislation website (http://www.legislation.gov.uk/).

17	A director or manager responsible for the management of the electronic money or payment services business of an electronic money institution.	The Financial Services Authority.
18	A controller of an electronic money institution.	The Financial Services Authority.