The law dated 20 May 2011 (hereafter the "Law") implements in Luxembourg the European Directive 2009/110/EC on the taking up, pursuit and prudential supervision of the business of electronic money institutions (hereafter the "Directive") into the title II of the law dated 10 November 2009 relating to payment services, electronic money institutions and settlement finality in payment and securities settlement systems.
The CSSF Circular 11/517 dated 5 July 2011 explains the content of the Law.
The purposes of the Directive and of the Law is to promote the use of electronic money as a credible alternative to cash, the emergence of a single market for electronic payments, the creation of new secure and innovative electronic money services as well as electronic money institutions and finally to ensure a high level of consumer protection.
In its circular, the CSSF summarised the most recent amendments of the Law as follows:
New definition of electronic money
First of all, the Law provides a new simplified and neutral definition of electronic money from a technical point of view, covering all situations in which an electronic money institution (or "EMI") issues a prepaid stored value in exchange for funds, as follows:
"a monetary value representing a claim on the issuer which is:
(i) stocked under electronically form, including magnetically, and
(ii) issued on receipt of funds for the purpose of making payment transactions, and
(iii) accepted by a natural or legal person other than the electronic money issuer."
This definition covers electronic money held on payment devices in the holder's possession (pre-paid cards, electronic purse) or stored on a remote server (network money or cyber money), as well as electronic money stored and used via mobile phones or internet payment accounts.
New prudential regime
EMIs constitute an independent category of financial services
providers. EMIs are now submitted to a prudential regime aligned
with the regime for payments institutions, subject to limited
divergences provided by the Law.
Indeed, the initial capital requirement has decreased from EUR 1
million to EUR 350.000. Furthermore, an exemption of certain
authorisation requirements is applicable for EMIs issuing a volume
of electronic money which does not exceed EUR 5 millions.
In addition, the Law provides a new simplified calculation method
of EMIs own funds, which shall amount at least 2% of electronic
money issued by such EMI.
All this new requirements should allow small-sized companies to access the market.
Compatibility of EMIs activities with commercial activities
Under the Law, EMIs will be entitled to conduct and develop e-money issuances and other commercial activities (such as transportation, telephony...), the Law allowing therefore the development of e-money innovative services by actors of the commercial markets.
Customers' reimbursement obligation
EMIs are under the obligation to refund to customers e- money
issued.
In order to protect consumers' interest, the sums received by
EMIs do shall not be considered as deposits (bank deposit
regime).
Furthermore, EMIs must repay upon customer's request, at par
value and free of charge (unless otherwise provided by Law) the
monetary value of e- money held by the customer.
Terms and conditions applicable between EMIs and e-money holders
shall clearly state the terms and conditions applicable governing
the reimbursement right of customers, including any fees relating
thereto and e-money holders shall be informed of these terms and
conditions before contracting.
Anti-money laundering exemption
Finally, the Law increases to EUR 250 (or EUR 500 for national transactions) the threshold under which EMIs can apply a simplified anti-money laundering process and carry out a simplified due diligence of their customers under the law of 12 November 2004 relating to the fight against money laundering and terrorism financing.
These simplified requirements will allow EMIs to limit the costs related to AML processes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
