Licensing of commercial activities is a complex process from an organizational and legal point of view, for the successful completion of which it is necessary to clearly understand not only the formal rules and conditions for obtaining a license, but also the actual law enforcement practice in this area for this particular jurisdiction. The main difficulty in licensing financial activities is that each country is unique in terms of regulating this type of procedure. The specifics of legislation, the features of the operation of by-laws and the principles of their application in practice in each jurisdiction are their own.
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What Is SPI Licensing: Main Regulations
There are huge opportunities for financial technology companies around the world. The global arena offers a wealth of qualified FinTech professionals. The vast and massive market creates favorable conditions for starting a business related to the financial sector. Obtaining an SPI-license provides an opportunity to become part of a thriving technological and financial community. Firms providing small-scale payment services are required to undergo a licensing process before starting their activities. Appropriate permits are issued by regulatory authorities of a particular jurisdiction.
Who shall get a financial license:
- startups launching a fintech project;
- entrepreneurs with their own payment system;
- representatives of the e-commerce sector.
Licensing of a company’s financial activities is necessary if the work is related to:
- conducting transactions for every jurisdiction’s resident and foreigner;
- exchanging one currency for another;
- cashing traveler’s checks in another currency;
- electronic money transfers;
- trade acquiring via POS terminal;
- transfers of digital currencies from the client to the recipient.
SPIs are entitled to the following.
- Account information services.
- Providing loans (with the condition that the loan is not issued from entrusted funds and the total amount of the loan provided does not exceed the equity capital of the payment organization). The loan must be repaid by the borrower within one calendar year.
- Issue and/or acquisition of payment instruments.
- Linking existing payment bank cards to client sub-accounts and issuing cards from major vendors (VISA, MC).
SPI-licenses are issued by national regulatory authorities in the country where the company is located. Each country has its own regulatory framework and requirements for obtaining an SPI license. For example, in the UK, SPI-licenses are issued by the Financial Conduct Authority (FCA), and in Germany they are issued by the Federal Financial Supervisory Authority (BaFin).
This category of permit is required for businesses processing transactions of low value, typically up to €3,000. A separate special permit from the regulator is required for brokerage and investment activities.
Very often, the activities of companies providing a wide range of financial service range fall under several categories of licenses. This means the need to obtain multiple licenses, which requires significantly more money and time.
Application Process: Documentation and Requirement List
Despite the variety of rules for licensing financial activities in different jurisdictions, most of them put forward a generally quite similar requirement list for licensees regarding the following aspects.
- Minimum amount of authorized capital.
- Mandatory staff positions.
- Personalities of managers and responsible employees. Rules for absence of criminal record and bankruptcy are often put forward.
- Payment of mandatory duties.
- Territory of the enterprise. A license is almost always issued with the condition that the enterprise’s activities will be carried out, including or primarily, in the territory of the jurisdiction.
- Residence. Some jurisdictions impose restrictions on the residency of an enterprise’s director (s).
- Organizational and legal form: LLC or LLP, etc.
- Selection and registration of the company’s central office within the chosen jurisdiction.
- When submitting an application, it is necessary to disclose to the regulator all information about the owners and co-owners of the company.
- The firm must employ specialists with an impeccable reputation and no criminal record.
There are also certain normative points for the size of the authorized capital, but the exact amount varies depending on the specifics of the enterprise’s activities and the chosen jurisdiction. The specific rules put forward within these criteria are unique to each country. You can go through the licensing procedure without unnecessary financial losses and delays by contacting our company for help.
The following general list of documentation must be submitted to the relevant regulatory authority:
- statement of desire to obtain an SPI-license;
- certificate of the institution’s activities;
- individual profiles of founders;
- agreements between the founders;
- certificate of contribution to the authorized capital from each founder;
- declaration of conformity.
Our lawyers are ready to professionally accompany you at every stage of this procedure.
Despite the similarity of the rules for licensing investment activities in different countries, it should be understood that the rules of each country differ in detail. The slightest mistake made during the preparation of documents or in the procedure for submitting them may serve as grounds for denial of a permit. In this case, the permission fee paid when submitting an application is not refundable in any case.
Getting SPI can be a complex and lengthy process. Some of the main difficulties include the following.
- Compliance with regulatory normative points set by the national authority.
- Providing evidence of sufficient financial resources and experience.
- Demonstrate that your firm has robust anti-money-money handling (AML) procedures and KYC mechanisms in place to fully and accurately identify customers.
- Preparing a comprehensive business-plan and demonstrating that the firm has a viable long-term strategy.
- The time required to obtain an SPI-license varies by country and the complexity of the project. On average, the procedure takes from three to six months.
Our specialists are ready to become your reliable allies on the licensing path. We will direct all our professional efforts to achieve the fastest and most effective results for your commercial project.
The article’s author is Denys Chernyshov – founder and CEO of globally-famous organization Eternity Law International.