The Irish government has recently enacted regulations to give effect to two EU directives: Directive 2000/28/EC relating to the taking up and pursuit of the business of credit institutions; and Directive 2000/46/EC relating to the taking up, pursuit of and prudential supervision of the business of electronic money institutions.
These regulations introduce a regulatory regime for entities issuing electronic money (e-money). The regime is based on the existing prudential supervisory regime applicable to credit institutions, but differs in that it responds to the specific risks associated with the issuance of e-money. E-money is defined as monetary value that is represented by a claim against the issuer, and has the following characteristics:
- it is stored on an electronic device;
- it is issued on receipt of funds of an amount not less in value than the monetary value issued; and
- it is accepted as a means of payment by undertakings other than the issuer of the e-money.
The Central Bank of Ireland is the competent authority in Ireland charged with the regulatory control of e-money issuers. All existing e-money institutions are obliged to submit the relevant information to the Central Bank by October 27 2002, so as to allow the Central Bank to assess whether the institution is in compliance with the requirements of the regulations for the issuance of an authorization.
The regulations provide for a pan-European passport system, whereby an Irish authorized e-money issuer can gain mutual recognition for the provision of such services in other EU member states, on receipt of certification from the Central Bank that the issuer is established and authorized to carry out such activities in Ireland. E-money institutions that hold an authorization in another member state and are supervised by the competent authority of that member state can carry out e-money activities in Ireland by establishing a branch, but the branch must comply fully with the requirements contained in the regulations. This facilitates a mutual recognition of member state authorizations with supervisory responsibility resting with the member state that has authorized the e-money institution.
Other provisions designed to protect consumers include the right of the consumer at all times to exchange their e-money into coins and bank notes of the same amount. The maximum amount that can be stored in each electronic device is €5,000 ($4,847). The business activities of e-money institutions are also restricted to services that are closely related to the administration of e-money. Evidence of each e-money transaction must also be provided in writing by contract, setting out the conditions under which the e-money can be redeemed.
The regulations contain financial and capital adequacy requirements that e-money institutions must satisfy. Authorizations will not be granted unless the e-money institution has an initial capital of at least €1 million and each e-money institution provides the Central Bank with a statement of compliance with capital adequacy provisions.
A person found guilty of contravening the regulations is liable, on summary conviction, to a fine of up to €3,000 or imprisonment for up to six months, or both. In addition, an officer of a corporate body, who has knowingly committed an offence under the regulations can be held personally accountable. The Central Bank is empowered to commence proceedings against anyone found to be in breach of the regulations.
Mark O'Sullivan and Simon Raftopoulos