EMI, AEMI, MSO and MSB: what are financial licenses and what do they allow?

EMI, AEMI, MSO and MSB are some of the most common designations of financial licenses and regulatory statuses that entrepreneurs encounter when starting a payment, fintech or money transfer business, but it is fundamentally important to understand: behind each of these abbreviations there is its own regulatory regime, list of permitted operations and requirements for the company.

Therefore, choosing a financial license only on the principle of “which one is easier to get” or “which one is cheaper” is the wrong approach. First, it is necessary to determine what financial services the business will provide: accept and transfer funds, issue electronic money, open payment accounts, work with electronic wallets, exchange currencies or provide other payment services.

It is the business model that determines which license the company will need and what operations it will be able to legally perform.

EMI – Electronic Money Institution, i.e. an electronic money institution. This status allows the company to carry out activities related to electronic money and certain payment services. EMI can be used by fintech companies that plan to create electronic wallets, payment accounts, issue electronic money, provide payment services and make money transfers. At the same time, EMI is not a banking license. A company with such status does not automatically receive the right to accept bank deposits, issue loans or provide a full range of banking services.

This is fundamentally important for an entrepreneur: if the business needs a payment or electronic money product, a full-fledged banking license may be redundant, but regular company registration will not be enough.

AEMI – Authorised Electronic Money Institution. This is an authorised electronic money institution that receives the right to carry out relevant regulated activities after passing the established licensing procedure. This model is suitable for companies that plan a large-scale payment business and want to independently provide regulated financial services, and not just work through a third-party licensed provider. Depending on the specific jurisdiction, AEMI may allow a company to issue electronic money, provide payment services, work with payment accounts and make certain types of transfers.

It is important to note that AEMI does not mean unlimited possibilities. The specific list of permitted operations is determined by the legislation of the relevant jurisdiction and the terms of authorization.

MSO – Money Service Operator. This status is used for companies that carry out certain operations with money, in particular money transfers and currency exchange. MSO may be relevant for a business that plans to work in the field of remittance, money changing or provide clients with money transfer services.

At the same time, MSO is not a banking license and not a universal permit for any financial activity. The company receives the right only to those operations that are provided for by the relevant regulatory regime.

Therefore, before obtaining an MSO, it is necessary to determine what services the company will provide to clients and in which countries it plans to work.

MSB – Money Services Business. This term usually refers to a business whose activities are related to certain monetary services: money transfers, currency exchange and other operations depending on the legislation of a particular country.

MSB may be relevant for companies that work with money transmission, transfer funds between clients or provide other financial services that are subject to appropriate regulation.

It is important to understand that MSB is not one universal international license. Requirements for registration, licensing, capital, AML/KYC and reporting depend on the specific jurisdiction.

Depending on the chosen regulatory regime, a company may obtain the right to carry out various types of activities. For example:

- make money transfers;

- open and maintain payment accounts;

- issue electronic money;

- create electronic wallets;

- make payments between individuals and legal entities;

- provide payment processing services;

- work with merchant acquiring;

- exchange currencies;

- provide international payment services;

- issue payment instruments and cards within the scope of the relevant permit.

However, there is a fundamental point here: one financial license does not necessarily allow you to carry out all the listed operations. That is why you cannot simply register a company and indicate the widest possible list of financial services. First, the actual business model is determined, and only after that - the necessary regulatory status.

Company registration alone gives a business the legal opportunity to exist and carry out permitted commercial activities, but if the company actually starts providing regulated financial services, a regular commercial license may not be enough. For example, a company can create an IT platform for payments, register a legal entity and open a corporate bank account, but if the company starts accepting customer funds through this platform, carries out, you make transfers between users or store client funds, such activities may require a separate financial permit.

Therefore, one of the main mistakes of entrepreneurs is to first launch the product, and only then find out whether it requires a license. In the financial sector, it is more correct to do the opposite.

First, the business model is analyzed, then the regulatory status is determined, and only then the legal structure of the project is formed.

What should be considered before obtaining a financial license?

Obtaining a license is not only about submitting documents and paying a state fee. The regulator assesses how ready the company is to carry out financial activities and control the risks associated with it. Depending on the jurisdiction, confirmation of the origin of capital, a certain minimum capital, a business plan, financial forecasts, AML/KYC policies, risk management procedures, information about directors and beneficiaries, IT infrastructure and an internal control system may be required.

The requirements also do not end after obtaining a license. A licensed company must comply with ongoing regulatory requirements, submit reports, monitor client transactions and maintain the necessary compliance procedures. Therefore, a financial license is not just a document that allows you to start a business. It is a whole system of requirements that a company must adhere to throughout its activities.

Which financial license should you choose for your business? In short, the choice depends on what exactly the company plans to do.

EMI and AEMI may be relevant for businesses related to electronic money and payment services. MSO can be used for activities related to money transfers and currency exchange.

MSB applies to certain types of money services business, including money transmission and other regulated financial transactions in the relevant jurisdiction. An incorrectly selected license may result in the company being unable to implement the planned business model or being forced to change its structure after the project is launched.

Therefore, financial licensing requires a comprehensive approach: it is necessary to simultaneously take into account the business model, jurisdiction, planned operations, regulatory requirements and further scaling of the business.

The Antwort Law team helps entrepreneurs and fintech companies determine the appropriate regulatory regime, choose a jurisdiction and financial license, prepare the necessary structure and go through the licensing procedure. If you are planning to launch a payment service, fintech platform, electronic wallet, money transfer business or other financial project, contact Antwort Law for a consultation. We will analyze your business model and help you determine which license is needed for your business.

Lidia Ivanova

International lawyer
Antwort Law