Getting a license as an Electronic Money Institution (EMI) is a big deal. It is a process that is full of requirement forms, stringent needs, and lots of regulatory inspections. Regrettably, most companies stumble upon the same preventable pitfalls, either taking too long to be approved or, even worse, being declined altogether.
Let us take a closer look at the most frequent mistakes made during the process of getting an EMI license and how you can avoid them.
Filing an incomplete application
This may seem like common sense, but one of the primary causes of Returned Files by regulatory bodies is incomplete applications. Such signs of carelessness include missing documents, unsigned forms, or inconsistent information between sections.
How to prevent it: Build a checklist on the needs of your jurisdiction and go through everything twice before submitting. A fresh look by a second pair of eyes, preferably by a person versed in EMI applications, can identify exactly what you may miss.
Ignoring the role of a compliance professional
Some entrepreneurs believe that they can work without hiring a compliance expert and figure it out along the way. It is an expensive shortcut. An EMI license is not simply signing names on a sheet of paper. It is an agreement to work in a complex system of regulations that are in constant development.
Why this is important: A compliance expert is aware of the accurate policies, practices, and models required to get your EMI license. They can assist you with:
· Drafting your AML/KYC manuals to make them compliant
· Preparing your business plan
· Answering questions asked by the regulator.
Otherwise, you face the prospect of expensive delays or being rejected.
Generic or poor business plans
Your business plan should be your evidence to the regulator that you know your market, your risks, and how you are going to operate. Delivering a broad or copy-and-paste strategy sends them a message that you are not ready to operate a licensed financial institution.
What to do about it:
· Make your business plan specific to the jurisdiction you are in
· Provide a realistic forecast of the finances
· Describe your technology, risk controls, and your growth strategy.
Selecting the wrong jurisdiction
There are instances where applicants choose a jurisdiction recklessly, drawn by low costs or high speeds, only to realize they do not fit the business model or market objective.
How to avoid it: Consider, at its best, the weight of certain elements, including:
· Regulatory reputation
· The right to a passport
· Persistent reporting
· The necessity of local presence.
Underestimation of minimum capital requirements
Every regulator stipulates a minimum capital requirement for EMI licences. For example, you need between €350,000 and €500,000 within the EU. Additionally, regulators want evidence of the funds being available and accessible.
How to avoid it: Ensure that the capital is in a reputable financial institution, well-documented, and available when called upon. Do not expect that you can increase it after approval.
Concluding remarks
Obtaining an EMI license demands accuracy, preparation, and the right expertise. When you have a complete and well-documented application, a fitting jurisdiction that best suits your interests, and the counsel of a compliance expert, then there is a much better chance that you will receive the only word you want: approved.
