Electronic Money Regulations 2011
What this means for your business
- Enforced by
- FCA
- Applies to
- United Kingdom
- On this page
- 22 compliance obligations, 1 practical guide
What you must do
22 compliance obligations under this legislation — 1 can result in imprisonment.
Insurance 1
Secure customer funds with insurance/guarantee and a designated safeguarding account
If your business is an electronic money institution and you choose safeguarding option 2, you must protect customers' prepaid money by obtaining an insurance policy or comparable guarantee from an authorised insurer or credit institution. The insurer’s payout (or guarantee) must be paid into a separate, clearly labelled account that can only hold those proceeds (and any other safeguarded assets). This ensures that customers’ funds are kept safe if your firm becomes insolvent.
Management duties 5
Clearly disclose redemption terms and fees to e‑money holders
If you issue electronic money, you must make sure the contract you give to customers spells out the redemption conditions and any fees in a clear, prominent way, and you must tell customers these terms before they agree to the contract. This means reviewing your terms and ensuring customers see the information upfront.
Issue electronic money promptly and redeem on demand at full value
If your business issues electronic money, you must give customers the e‑money instantly at the same value as the cash you receive. You also have to allow them to cash it back whenever they ask, giving back the exact monetary value. In practice this means you need systems that record receipts, create e‑money balances immediately, and process redemption requests without delay.
Maintain required capital (own funds) at all times
If your business is an authorised electronic money institution you must hold enough own funds (capital) to meet the regulatory minimum. You need at least €350,000 or the amount calculated under the detailed formula in Schedule 2 – whichever is higher. For small institutions whose e‑money outstanding reaches €500,000 or more, a higher capital calculation applies.
Meet conditions for authorisation as an electronic money institution
If you want to become an authorised electronic money institution, you must satisfy a range of conditions before the regulator can grant authorisation. This means having the required capital, being based in the UK, demonstrating robust governance and risk controls, proving that directors and major shareholders are fit and proper, providing a detailed business plan with forecasts, safeguarding customers' funds, holding professional indemnity insurance for certain services, complying with AML registration, and showing that any close links with other parties will not hinder supervision.
Safeguard customer funds received for electronic money
If your business is an authorised electronic money institution or a credit union, you must keep any money you receive in exchange for e‑money separate and protected. You can use either of the two prescribed safeguarding methods (or split the funds between them) and you must have the money safely held within five business days of issuing the e‑money.
Notifications 2
Notify FCA and manage outsourcing of key electronic money functions
Unlimited fineIf your business is an authorised electronic money institution and you want to outsource any part of issuing, distributing, redeeming e‑money or providing payment services, you must tell the FCA before you start. The outsourcing must not weaken your internal controls or your ability to meet regulatory requirements, and you must inform the FCA promptly if anything changes.
Notify the FCA of any material changes to your application
If you have given the FCA information for an electronic‑money licence and you discover a material change, an inaccuracy, or that the information is incomplete, you must tell the FCA straight away (or as soon as you become aware of a likely change) before they make a decision on your application. This keeps your licence application truthful and up‑to‑date.
Other requirements 1
Do not pay interest or time‑based benefits on electronic money
If your business issues electronic money, you must not give customers interest or any other benefit that depends on how long they keep the money on the e‑wallet. Treat the e‑money like cash – no extra earnings for holding it.
Payments and fees 1
Provide accounts and pay restitution if ordered by the court
If the court finds that your electronic‑money business has broken the regulations and has made a profit or caused a loss, it can order you to repay that profit or compensate the loss. You will have to supply the court with the relevant financial accounts and then pay the amount it specifies, passing the money on to the affected people as directed.
Offences and prohibitions 4
Be held personally liable for electronic money offences
If your company breaches the Electronic Money Regulations and the breach is committed with your consent, connivance or because you were negligent, you as an officer (director, manager, chief executive, etc.) can be prosecuted as well as the company. You would face the same punishment that applies to the corporate offence, which can include unlimited fines and/or imprisonment. The exact penalty depends on the underlying offence that was committed by the business.
Claim to be an electronic money issuer when not authorised
Unlimited fineIf you describe yourself or act as though you are an authorised electronic money issuer when you are not covered by regulation 63(1), you commit a criminal offence. The offence is dealt with in the magistrates' court and can result in an unlimited fine. No imprisonment is provided for this breach.
Issue electronic money without authorisation
2 years imprisonmentIf your business issues electronic money (e‑money) in the UK but is not an authorised electronic money institution, a small electronic money institution, a credit institution with the specific exemption, the Post Office, the Bank of England, a government department, local authority, credit union, municipal bank or the National Savings Bank, you are committing an offence. On conviction you could be sentenced to up to two years' imprisonment, an unlimited fine, or both.
Provide false or misleading information to the FCA
Unlimited fineIf you knowingly or recklessly give the FCA false or misleading information in order to appear compliant, or pass such information to someone else who will then give it to the FCA, you commit an offence. A conviction can lead to an unlimited fine – either a summary fine up to level 5 (unlimited) or a fine on indictment – and the case may be tried in either the Magistrates' Court or the Crown Court. No imprisonment is specified for this breach.
Record keeping 2
Keep compliance records for at least five years
If your business is an electronic money institution you must hold on to any documents that show you are meeting the EMR rules – for example policies, transaction logs, audit reports and correspondence. You must keep each record for a minimum of five years from the date it was created so the regulator can check your compliance.
Keep relevant records for at least five years
If you run an electronic money institution, you must retain any documents that show you are meeting the regulatory requirements (especially those that let the regulator check your compliance). Those records have to be kept for a minimum of five years from the date they are created.
Registration and licensing 3
Apply for authorisation if small e‑money conditions lapse
If your business is a small electronic money institution and you stop meeting any of the conditions in regulation 13(3), (4), (8) or (9), you must notify the regulator. Within 30 days of learning of the change you have to submit an application to become a fully authorised electronic money institution if you still intend to issue electronic money in the UK.
Ensure any agent you use is registered on the electronic money register
If your business provides electronic money services through a third‑party agent, you must make sure that agent is entered on the FCA’s electronic money register before they start working for you. You also need to keep the register up‑to‑date whenever the agent’s details change and tell your customers that the service is being provided by an agent.
Meet conditions to register as a small electronic money institution
If you want to become a small electronic‑money institution you must satisfy a list of requirements before the regulator will accept your registration. This includes limits on the size of money you hold and process, having the right amount of capital, robust governance and risk systems, a clean track‑record for senior staff, a UK head‑office and compliance with AML registers. You must demonstrate all of these before you can be registered.
Reporting and filing 3
Keep your authorisation valid and keep the regulator informed
If your company is authorised to issue electronic money or provide payment services under the Electronic Money Regulations, you must stay in compliance and let the regulator know about any major changes. Failure to do so can lead the regulator to change or even revoke your authorisation, which means you could no longer operate in that area.
Notify the FCA of significant changes to your electronic money business
If you run an electronic money institution and you become aware of a significant or likely change that could affect the conditions you must meet (for example, capital requirements or safeguarding arrangements), you must tell the FCA as soon as possible. For a substantial change that has not yet happened you must give the FCA notice in advance. You also need to inform the FCA of any material change to the systems you use to protect customers’ funds.
Provide separate audited accounts for e‑money issuance and payment services
If your business is an electronic money institution that does more than just issue e‑money or provide payment services, you must keep separate accounting records for the e‑money part and the payment‑service part and have those records audited. The auditor must also alert the regulator if they spot any material breaches or concerns.
Penalties for non-compliance
5 penalties under this legislation. 1 can result in imprisonment. 4 carry an unlimited fine.
Issue electronic money without authorisation
Unlimited fine and/or 2 years imprisonment
Notify FCA and manage outsourcing of key electronic money functions
Unlimited fine
Claim to be an electronic money issuer when not authorised
Unlimited fine
Provide false or misleading information to the FCA
Unlimited fine
Be held personally liable for electronic money offences
Penalty applies
Practical guidance
Our guides explain how to comply with the requirements above.
Sections and provisions
89 classified provisions from this legislation.
Duties 25
- s.6 Conditions for authorisation risks
- s.11 Variation of authorisation on Authority's own initiative
- s.13 Conditions for registration risks
- s.16 Application for authorisation if requirements cease to be met
- s.17 Duty to notify changes
- s.19 Capital requirements adjustments
- s.20 Safeguarding requirements
- s.22 Safeguarding option 2 An electronic money institution
- s.25 Accounting and statutory audit of the circumstances referred
- s.26 Outsourcing operational function relating
- s.27 Record keeping
- s.34 Requirement for agents to be registered representations made in response
- s.37 Duty to notify change in circumstance
- s.39 Issuance and redeemability
- s.40 Conditions of redemption fees relating
- s.45 Prohibition of interest other benefit related
- s.47 Functions of the Authority
- s.53 Proposal to take disciplinary measures representations made in response
- s.54 Injunctions other person who appears
- s.56 Proposal to require restitution representations made in response
- ... and 5 more duties
Offences and penalties 5
Powers 19
- s.5 Application to become an authorised electronic money institution or variation of an existing authorisation
- s.7 Imposition of requirements
- s.8 Variation etc at request of an authorised electronic money institution
- s.9 Determination of application for authorisation or variation of authorisation
- s.10 Cancellation of authorisation
- s.12 Application for registration as a small electronic money institution or variation of an existing registration
- s.15 Supplementary provisions
- s.32 Additional activities
- s.33 Use of distributors and agents
- s.35 Removal of agents from the register
- s.48 Monitoring and enforcement
- s.49 Reporting requirements
- s.50 Public censure
- s.51 Financial penalties
- s.52 Suspending authorisation etc
- s.55 Power of Authority to require restitution
- s.60 Guidance
- Notification of use of electronic communications e Notification of use of electronic communications exclusion
- Notification of use of limited network exclusion Notification of use of limited network exclusion