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Why Ireland for Fintech – Getting an E-Money Institution Authorisation in Ireland

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© Peter Oakes www.peteroakes.com. Version 1.1

Additional material with thanks to www.FintechIreland.com and www.FintechUK.com

Why Ireland for Fintech?

Congratulations. You have made a great decision: Ireland is fantastic place to obtain an e-

money authorisation.

You have found the right people to assist you obtain a presence in Ireland. Peter Oakes is

recognised by Chambers & Partners in its Fintech 2020 edition as one of Ireland’s leading

fintech experts. Peter is also a member of the Fintech 50 Panel.

As of 31 December 2019, Ireland has more than 30 e-money and payment services firms authorised by the Central Bank of Ireland1. Here is a Fintech Ireland Map of all these regulated firms at the end of 2019.

1 As at 18 March 2020, the number of regulated payment firms increased by 1 with the addition of a registered

AISP; bring the total number of emoney and payment services firms to 31.


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While it may be thought that the growth in the number of e-money and payment services firms

is driven by Brexit uncertainty, Ireland has more than 230 fintech and regtech companies

which have thrived in Ireland long before Brexit. This solid fintech and payments foundation

means that many more are now opting to join the Irish fintech ecosystem.

What does Ireland offer your e-money company?

• government support, including a range of services from IDA Ireland for international

companies setting up in Ireland and Enterprise Ireland for indigenous fintech

companies;

• an internationally recognised mature financial services industry supported by a highly

educated financial services workforce comprising of more than 45,000 such

professionals; 15%+ of which work in fintech;

• once authorised by the Central Bank of Ireland (“CBI”), your e-money firm will be able

to passport to other EEA member states. E-money firms may ‘passport’ on either a

freedom of establishment or a freedom of services. As you can see from the above

Map by Fintech Ireland, the CBI regulates many e-money firms, the first authorised in

2015, with ten e-money firms authorised in 2019 alone. This speaks to the depth of

experience the CBI and its staff have in authorising and supervising e-money firms;

• e-money companies in Ireland benefit from a competitive 12.5% corporate tax rate,

comprehensive double tax agreements and numerous research and development tax

breaks;

• the World Bank flagship Ease of Doing Business Report 2019 places Ireland at 23 of

190 countries based on efficiency of the business regulation and tax regime, as well

as ease of starting a business; and

• a stable and dynamic common law legal system that upholds contractual rights.

Why Peter Oakes ( www.peteroakes.com )

Peter is leading expert in fintech, including emoney, payments, crowdfunding, banking and

investment management specialising in startups, governance, risk and compliance. Peter is

a non-executive director of regulated emoney, payment services and investment services

firms (investment advice and options market making). He is a former senior regulator in

Australia (ASC/ASIC), the UK (FSA/FCA), Saudi Arabia (SAMA) and in Ireland (CBI).

Between 2010-2013, Peter served as Ireland’s first director of enforcement and financial crime

at the CBI. He was one of six individuals with an international background recruited into CBI

at that time to address the fallout from Ireland’s financial crisis.


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During his time at the CBI he was involved in the implementation of numerous financial laws

and regulations, including the European Communities (Electronic Money) Regulations 2011

(the “E-Money Regulations ”) which transposed the Directive 2009/110 into Ireland.

Since leaving the CBI in 2013, Peter has established the European services operations of

Bank of America Merchant Services (including its authorisation as a PSD 2 firm with the UK

FCA), led and supported numerous fintech authorisations with the UK FCA and the CBI. Peter

worked on the application for a company which successfully achieved authorisation as a

specialised bank with the Bank of Lithuania (“BoL ”), including engagements with the BoL’s

senior director. Peter is a leading fintech and regulatory expert and the Founder of both

Fintech Ireland and Fintech UK. Peter Oakes brings extensive practical experience and

operational know-how to client instructions as well as unrivalled executive director, non-

executive director and governance expertise, founded on a vast background of international

regulator and central bank experience.

Who is responsible for authorising e-money institut ions in Ireland?

The CBI in addition to being the competent authority for payment services, banking, insurance

and investment services, is also the body which authorises e-money institutions in Ireland.

Can I passport my authorised e-money institution’s services?

Yes, you can. Every authorised e-money institution (“EMI” ) is entitled to passport across the

EEA the ability to issue, redeem and distribute electronic money.

Whether you obtain an authorisation for your own company in Ireland, or acquire an EMI

company already authorised in Ireland, you will have the right to passport.

It is important to note that small e-money institutions (“SEMI” ) are not able to passport.

However, to date, the CBI has not permitted SEMIs to operate in Ireland.

How can my EMI passport? An EMI authorised in the EEA may passport in two ways:

• Freedom of Services – an EMI wishing to avail of the freedom to provide services on

a cross border basis in another EU member state must inform the CBI in advance


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through the RTS2. Once it is satisfied with the information provided by the EMI the

notification is transmitted to the competent authority in the member state(s) within one

month of its receipt from the EMI.

• Freedom of Establishment – another way an EMI authorised in Ireland may passport

is establishing a branch in another member state or appointing an agent to operate in

another member state. Again, the EMI must communicate certain information to the

CBI by way of the RTS.

• Use of agents – EMIs are now obliged to inform the CBI when its proposed agent has

commenced activities. Once the CBI is satisfied with the information provided, the

notification shall be transmitted to the relevant competent authority within one month

of receipt from the EMI.

Authorisation Requirements

We encourage every applicant for an EMI authorisation to familiarise itself with the information

on the CBI’s website. The CBI has a statutory duty to ensure that only those companies, their

management, board and shareholders which meet the requirements are authorised in Ireland.

The CBI refers to its process as being ‘robust, structured and risk-based’. We would add, to

the foregoing, the words ‘rigorous’ and ‘probing’; in a ‘fair and transparent environment’ which

ensures that the CBI can meet its ‘gatekeeper’ function.

In summary there are several steps every applicant must adhered to in order to demonstrate

that it can meet the regulatory requirements. These include demonstrating that the applicant:

• has a clear, meaningful and articulated understanding of the proposed business

model;

• will have sufficient substance in Ireland (i.e. the traditionally named ‘heart and mind’

requirement in regulatory speak). However, in the context of the E-Money Regulations

and the regulations for payment services, the term used is “mind and management”.

The CBI use this phrase to interpret what is meant by a firm’s “head office”;

• be financially sound, or in regulatory speak adequately capitalised;

• have appropriate arrangements in place to run an EMI;

2 Regulatory Technical Standards on the framework for co-operation and exchange of information between

competent authorities for passport notifications under the Directive (EU) 2015/2366 (‘RTS’)


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• will be capable of complying with, and adhering to, the authorisation and on-going

supervisory requirements that each EMI must satisfied on an on-going basis; and

• its employees, management and board will meet the thresholds of, and on an on-going

basis, comply with fitness and probity requirements.

How does an applicant demonstrate the ‘substance tes t’?

Bad practice:

If an applicant’s approach to its EMI application appears to the CBI as being ‘I need a brass

plate authorisation and I will outsource everything overseas’ then you are best utilising your

resources elsewhere. However, no member state can afford to adopt such an approach given

that they themselves are subject to oversight by the European Banking Authority. Poor

conduct by a competent authority can result in infringement proceedings as well as associated

reputational damage. Why would any self-respecting EU competent authority lower the

relatively high but fair bar established by the European Commission and Parliament?

Good Practice:

The “heart and mind” requirement referenced above is essential to a successful application.

Another phrase used is “mind and management”. Both phrases are used by CBI as

interpretative tools because neither the E-Money Regulations nor the regulations for payment

services define what is meant by “head office”. The way of demonstrating this is via good

practice, meaning that you must run your EMI from within Ireland in such a manner that the

CBI, as the competent authority can effectively oversee and supervise it. We advise every

applicant to actively consider the following:

• “head office” – in general, the CBI interprets “head office” to mean the location of the

mind and management of the applicant and the place where the day-to-day decisions

about the direction of the applicant’s business are taken. The onus of meeting the

statutory requirements and satisfying the CBI that adequate and effective control of an

entity rests in Ireland (not abroad) lies with the applicant. The CBI has issued some

guidance on what it expect to see, as follows3:

o decision-making at Board and Committee level to take place within the

Republic of Ireland,

o ensure central management is located within the “head office”,

3 This is not intended to be a ‘formula’ for meeting the “head office” requirement, rather to provide an

indication of what the CBI will expect to see in this regard.


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o the functions within the head office would normally include as a minimum,

Financial Control;

Legal and Compliance; and

Risk Management.

• a significant senior management presence (within the applicant4) in the Republic of

Ireland to ensure that full authority and effective control of the applicant rests within the

“head office”.5

• a senior management team – your management team must have sufficient operational

expertise, strength and depth to demonstrate that they can run the business in a

manner which the CBI can effectively supervise. There is no regulatory requirement

that each or all persons concerned in the management of the EMI must permanently

reside in Ireland. The degree to which any person must reside in Ireland will be driven

by the nature, scale and complexity of the business model, the time required in Ireland

for him/her to discharge core functional operations together with satisfying the CBI that

the proposed arrangements do not negatively impact its ability to effectively supervise

the EMI;

• board of directors – the board too must have the knowledge, skills and experience to

oversee the management team which runs the business on a day to day basis.

Although not a written regulatory requirement, the CBI is likely to require that each

applicant appoint at least one non-executive director (‘NED’) to the board, and more

than likely that such person will need to be an independent NED (‘INED’);

• organisation structure – together with clear reporting lines the applicant’s

organisational structure must be established in a manner that ensures appropriate

systems and controls are in place, that segregation of duties are sufficient to ensure

that there are no real or perceived conflicts of interest whilst ensuring that the

procedures and policies do not inhibit effective oversight of the applicant’s activities;

and

• shareholders – shareholders do not manage the operations of the applicant unless a

shareholder is a member of management or the board. A shareholder, acting in the

capacity of a shareholder, must not involve itself in the management or oversight of

4 This must be someone who is familiar with the applicant’s business model and its application submission and

must be someone who works for/will work for the applicant if and when authorised, and not a professional

advisor to the applicant 5 It should be noted that in order to meet the requirements of Regulation 21 of the Payment Services

Regulations, an applicant payment institution must carry out at least part of its payment services business in

Ireland.


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the regulated EMI or otherwise seek to inappropriately influence the management or

board of the EMI.

How does outsourcing impact the substance test?:

Outsourcing is a legitimate and operationally effective way for any business, regulated or not,

to remain a sustainable, prudent and consumer protectionist operation. When it comes to

regulated fintech, such as EMIs, they must remain aware of both the CBI’s and the EBA’s

requirements and guidelines on outsourcing.

In this regard, Ireland adopts the ‘you may outsource the function, but you cannot outsource

the responsibility’. Therefore, in circumstances where an EMI wishes to outsource to a third

party either within Ireland or overseas it must be able to demonstrate to the CBI that it can

comply with its regulatory obligations. When completing an application, the applicant provides

details to the CBI about how outsourced functions will be monitored and controlled on a day-

to-day basis. The description must include: details of on-going reporting; details of how service

levels are monitored; and details of oversight meetings held with the outsource service

provider.

The CBI views outsourcing as a considerable risk and issued a discussion paper on the topic

in November 2018 which every applicant should read6. Accordingly, EMIs need to be aware

that the CBI must be notified of the outsourcing of critical or important functions, including

where the EMI seeks to materially alter existing outsourcing arrangements. In addition to the

E-Money Regulations which set out the outsourcing requirements, EMIs must also adhere to

the separate EBA’s Guidelines on Outsourcing.

6 Outsourcing – Findings and Issues for Discussion (November 2018) https://centralbank.ie/news-media/press-

releases/outsourcing-activities-in-financial-service-providers


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Are the capital requirements different in Ireland t han elsewhere?

No matter which EU member state in which you establish your authorised EMI, the institution

must (without exception) hold initial capital of at least €350,000. The actual amount required

for each individual institution, referred to as ‘own funds’ calculation will be notified to the

applicant as a part of the authorisation process.7 If you have not been involved with the

calculation of capital requirements previously, you should take advice and we are happy to

help in this regard.

Arrangements

When getting ready to start preparation work on your EMI application, an important document

to read is the Guidance Note8. If you are not familiar with the process, you run the real risk of

creating an impression within the CBI that your application is overly complex, lacks awareness

of the requirements and may be difficult to supervise. The CBI will assess the following areas

when considering an application for authorisation as an EMI: business plan; programme of

operations; structural organisation; measures to safeguard the funds of payment services

users; governance arrangements and internal controls; security policy document; control

mechanisms for anti-money laundering and counter terrorist financing; identity and suitability

assessment of persons with qualifying holdings; identity and suitability assessment of directors

and persons responsible for managing the firm; and business continuity arrangements.

What is Fitness and Probity?

All individuals proposed to hold a pre-approval controlled function (“PCF”) role must complete

a fitness and probity individual questionnaire (“IQ”). IQs are submitted electronically via the

CBI’s Online Reporting System which only becomes available after an application has been

deemed to contain all the key information needed to progress to the assessment phase of the

application process (see below).

7 Guidance Note for the E-Money Institution Supplementary Return (May 2019)

https://www.centralbank.ie/docs/default-source/regulation/industry-market-sectors/electronic-money-

institutions/reporting-requirements/guidance-note---emi-supplementary-return.pdf?sfvrsn=2 8 Guidance Note on Completing an Application for Electronic Money Institution (April 2018)

https://www.centralbank.ie/docs/default-source/Regulation/industry-market-sectors/Electronic-Money-

Institutions/Authorisation-Process/psd2-guidance-note.pdf?sfvrsn=3


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An applicant must not permit any person to perform a controlled function, including a PCF,

unless it is satisfied on reasonable grounds that the person complies with the standard of

fitness and probity issued by the CBI. The Guidance on Fitness and Probity Standards

provides further information.9

Examples of the type of roles at an EMI that will require a person to complete an IQ includes

the senior management, such as the chief executive/manging director, chief financial

officer/financial controller; persons with head of function responsibility for compliance, risk and

anti-financial crime and members of the board of directors.

Like outsourcing, the EBA has also issued guidelines on fitness and probity which supplement

those issued by CBI relating to the identity and suitability assessment of directors and persons

responsible for the management of the payment institution or electronic money institution.

What is the Authorisation Process?

The CBI’s website is quite good in this area and its practical approach breaking down the

process into its constituent elements is very useful. You can read all the relevant information

on its website. Application Process for Electronic Money Institutions10

[Note: Although the CBI’s website references the registration of small EMIs, the CBI has not

registered any small EMIs to date.]

Each applicant seeking authorisation/registration must satisfy the CBI that it can meet the

authorisation/registration standards set out in the E-Money Regulations. The CBI intends to

process each application as expeditiously as possible while meeting its obligation to operate a

rigorous and effective gatekeeper function. It aims to ensure that the application process is

facilitative and accessible from the perspective of applicants and, importantly, that applicants have

clarity regarding the process, its requirements and timelines.

The Application Process as set out on the CBI’s website includes details of:

• Things To Do Before Applying for Authorisation.

9 Guidance on Fitness and Probity Standards - https://www.centralbank.ie/docs/default-

source/Regulation/how-we-regulate/authorisation/authorisation/fitness-probity/regulated-financial-service-

providers/ongoing-compliance/guidance-on-fitness-and-probity-standards-2017---final.pdf?sfvrsn=7 10 Application Process for Electronic Money Institutions - https://www.centralbank.ie/regulation/industry-

market-sectors/electronic-money-institutions/authorisation-process


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• Summary of the Key Stages in the Application Process.

• Documentation Required to Make an Application for Authorisation/Registration.

It is important to note applicants must complete an Anti-Money Laundering, Counter-Terrorist

Financing and Financial Sanctions Pre Authorisation Risk Evaluation. This takes the form of

a Questionnaire (“AML/CTF & FS Questionnaire ”). Furthermore, Qualifying Shareholder

Application Forms must also be completed. There are different forms for different types of

Qualifying Shareholders, such as legal persons with a qualifying holding, natural persons with

a qualifying shareholding and for directors with qualifying holdings. See the CBI’s website for

further details on both AML/CTF & FS Questionnaire and Qualifying Shareholder Application

Forms11.

Key Stages in the Application Process

There are five stages to the authorisation process for an EMI authorisation; however, the CBI’s

approach is flexible in terms of applicants which take their application seriously. Although the CBI

will reserve the right to follow its procedures to the letter, where such adherence might cause

unfairness to an applicant, we have always found the CBI to being open to practical discussions

about advancing applications in the spirit of the regulations and guidelines.

The diagram appearing on the next page is a high-level representation of an application passing

through the process with relative speed.

[turn to page 10 to continue]

11 https://www.centralbank.ie/regulation/industry-market-sectors/electronic-money-institutions


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Stage 5 - Notification of Decision

Within 10 working days of the CBI receiving a satisfactory response to issues identified at Stage 4 relating to a favourable assessment, the applicant will be notified of a decision to

authorise/register with or without conditions.

Stage 4 - Notification of Assessment

The applicant will be notified by the CBI if there is a favourable assesment and that it proposes to authorise/register the applicant.

Stage 3 - Assessment Phase

Following a review against the relevant authorisation/registration requirements, a 'Notice of Assessment' letter will issue within 90 working days, provided all the information submitted is

sufficient.

Stage 2 - Key Information Check

Within 10 working days - CBI checks application contains all key information & documentation required to proceed to asssesment stage. If the application fails the Key Information Check it will

not proceed to Stage 3.

Stage 1 - Acknowledgement

Within 3 working days - CBI will acknowledge receipt of application.


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Some important information about each stage of the Authorisation Process:

Stage 1: straight-forward.

Stage 2: if an application is lacking the necessary information to allow it to move to Stage 3,

the CBI will identify the omitted information in a statement to assist the applicant should it wish

to file another application.

Stage 3: it should be noted that in the event of further and/or subsequent information being

sought, the 90 day ‘clock’ is paused until such information is received by the CBI from the

applicant. The CBI can disband its 90-working day service standard in certain circumstances.

Should an applicant not respond to a request from the CBI for further and/or subsequent

information, within 60 working days , the CBI is at liberty not to consider the applicant any

further.

Stage 4: where the notification is favourable, the CBI may specify any specific conditions it

proposes to impose on the authorisation/registration once granted. The CBI will explain the

reasons for proposed conditions and the applicant is able to make representations before the

CBI makes any decision on the application. Should the CBI be not satisfied following the

Assessment Phase it will inform the applicant. The CBI will set out the areas to be addressed

and afford the applicant the opportunity to do so and to make any submissions in respect of

these matters.

Stage 5: should the CBI propose to refuse an application it will notify the applicant of the

grounds for the proposed refusal. The applicant then has the opportunity to make submissions

in response to the proposed refusal. These submissions are considered by the CBI following

which a decision is taken to grant or refuse the authorisation/registration. The CBI must inform

a firm whether its application has been granted or refused within three months of receiving all

the information required to make a decision.

Next Steps? Like what you have read? Contact Peter Oakes at [email protected] to discuss

how establishing an authorised EMI in Ireland is the wise choice and why Peter Oakes

is the wise choice to assist.

This document is general guidance and information. It is not legal or other professional advice. Such advice should always be taken before acting on any of the matters discussed. If you need legal advice we can help with referral to a leading international law firm with operations in Dublin. This document draws upon information from Fintech Ireland, Fintech UK and CompliReg.

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