Malta has recently seen an increase in the number of Electronic Money Institutions (EMIs) looking to set up their operations in Malta. This has been largely due to the growth in the e-commerce and the i-gaming industries. Such EMIs are regulated by the Financial Institutions Act and the EU Electronic Money Institutions Directive (‘the Directive’). Malta has transposed this directive into national legislation in 2011.
The applicable directive is Directive 2009/110/EEC of the European Parliament and of the Council of the 16th September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions.
In terms of Article 3(4) of the said Directive, Member States must allow electronic money institutions to distribute and redeem electronic money through agents which act on their behalf. If the electronic money institution wishes to distribute electronic money in another member state by engaging an agent, it must follow the procedure set out in Article 25 of the Directive 2007/64/EC i.e. the Directive of the European Parliament and of the Council of the 13th November 2007 on payment services in the internal market.
However, in terms of Article 3(5) of the Directive, electronic money institutions cannot issue electronic money through agents. The Directive only allows electronic money institutions to provide payment services referred to below through agents and only if certain conditions are satisfied.
- Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account.
- Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account.
- Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider:
- Execution of direct debits, including one-off direct debits,
- Execution of payment transactions through a payment card or a similar device,
- Execution of credit transfers, including standing orders.
- Execution of payment transactions where the funds are covered by a credit line for a payment service user:
- Execution of direct debits, including one-off direct debits,
- Execution of payment transactions through a payment card or a similar device,
- Execution of credit transfers, including standing orders.
- Issuing and/or acquiring of payment instruments.
- Money remittance.
- Execution of payment transactions where the consent of the payer to execute a payment transaction is given by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting only as an intermediary between the payment service user and the supplier of the goods and services.
The conditions which Electronic Money Institutions must satisfy to provide the above-mentioned services through an agent are found in Article 17 of Directive 2007/64/EC. In summary these are:
- When an electronic money institution intends to provide payment services through an agent, it shall inform the Competent Authorities in its Member State and shall communicate with them the following information:
The name and address of the agent;
A description of the internal control mechanisms that will be used by agents in order to comply with the obligations in relation to money laundering and terrorist financing; and
The identity of the directors and persons responsible for the management of the agent to be used in the provision of payment services and evidence that they are fit and proper persons.
- Outsourcing of important operational functions are not allowed if these are undertaken in such a way that the quality of the electronic money institution’s internal control and the ability of the competent authorities to monitor the payment institution’s compliance with the Directive is materially impaired.
- A person who is appointed to act as an agent of an electronic money institution can only act as an agent in respect of those activities for which the institution to which he will act as agent is licensed and to not more than one licensed institution.
- Electronic money institutions must ensure that agents or branches acting on their behalf must inform electronic money holders that they are acting as agents on behalf of the licensed electronic money institution.
- When important operational functions are outsourced, electronic money institutions must comply with the following conditions:
- The outsourcing shall not result in the delegation by senior management of its responsibility;
- The relations and obligations of the electronic money institution towards its electronic money holders shall not be altered; and
- The conditions with which the electronic money institution is to comply in order to be authorized to carry out its services shall not be undermined, removed or modified.
