NBB_2015_11 - Exemption Policy of the National Bank of Belgium under Article 105 of the Law of 21 December 2009 (Electronic Money)

NBB_2015_11 – 2 March 2015 Circular – Page 1/4 boulevard de Berlaimont 14 – BE-1000 Brussels tel. +32 2 221 38 12 – fax +32 2 221 31 04 company number: 0203.201.340 RPM Brussels www.bnb.be

Circular
Brussels, 2 March 2015
Reference: NBB_2015_11 your contact:
Kurt Van Raemdonck tel. +32 2 221 53 39 – fax +32 2 221 31 04 kurt.vanraemdonck@nbb.be

Exemption Policy of the Bank based on Article 105 of the Law of 21 December 2009 (electronic money)

Scope
Legal persons exempted based on Article 105 of the Law of 21 December 2009 concerning the status of payment institutions and electronic money institutions, access to the activity of payment service providers, the activity of issuing electronic money, and access to payment systems (hereinafter "the Law").

Summary/Objectives
This circular aims to clarify the framework governing the exemption policy of the National Bank of Belgium (hereinafter "the Bank") based on Article 105 of the Law.

Structure

1. Introduction of an exemption file
2. Scope of the exemption
3. Consequences of the exemption
4. Role of the approved auditor

Madam,
Sir,

Based on Article 105 of the Law, legal persons issuing electronic money may be exempted from the application of all or part of the provisions of Book 3 of the Law and its implementing decrees.

Under Article 105 of the Law, the exemption may indeed be granted to legal persons:
1° whose commercial activities as a whole generate an average of electronic money in circulation that does not exceed 5,000,000 euros; and 2° whose persons responsible for the management or exercise of the activity have not been convicted of offences related to money laundering, terrorist financing, or referred to in Article 20, § 1, 1°, 2° and 3° of the Banking Law.

Circular – Page 2/4 NBB_2015_11 – 2 March 2015 This circular aims to clarify the framework governing the exemption policy of the Bank based on Article 105 of the Law.

1. Introduction of the exemption file
   The following information must be provided by the applicant to allow the NBB to form an opinion on the applicant and to verify that the two legal conditions for exemption are met:
   1) a programme of envisaged activities;
   2) a business plan, including a financial plan for the first three financial years;
   3) proof that the applicant has the required initial capital (cf. infra, point 2. "Scope of the exemption", second bullet);
   4) a description of the measures for the protection of funds received in exchange for the issued electronic money;
   5) a description of the internal control mechanisms adopted to comply with the obligations set out in Regulation (EC) No 1781/2006¹ and the Law of 11 January 1993;
   6) a description of the organisational structure of the applicant;
   7) the identity of the shareholders;
   8) the identity of the persons participating in the administration or management of the applicant, as well as of the persons who participate in the effective management of the electronic money issuing activity, and where applicable, payment services;
   9) the identity of the auditor(s);
   10) the legal form and statutes of the applicant;
   11) the registered office address of the applicant.

2. Scope of the exemption
   Subject to the acceptance of the exemption file, the Bank grants an exemption from all provisions of Book 3 of the Law, with the exception of the following provisions:

• Article 65, which requires that the exempted legal person be constituted as a commercial company, with the exception of the form of private limited liability company constituted by a single person;
• Article 68, §§ 1 and 3, which concern requirements of professional integrity and adequate expertise. Exempted legal persons are required to comply with Circular NBB_2013_02 in this regard. This circular specifies how the Bank proceeds with "fit & proper" assessments, regarding both the content and the process of the assessments;
• Article 71bis, which concerns the information obligation that exempted legal persons must respect towards the Bank in the context of "fit & proper" assessments, as well as the prior approval of the Bank in case of appointment. The circular mentioned in the previous point also applies;
• Article 72, § 2, which concerns solvency obligations to be respected by the exempted legal person². The provisions of the Bank's Regulation of 18 June 2013 apply only on condition that the articles of the Law referred to in said regulation are applicable to exempted legal persons. Thus, the own funds mentioned in Article 5 of said regulation must, for exempted legal persons, amount to at least 2% of the average of electronic money in circulation³ at all times. When an exempted legal person has not completed a sufficient period of activity, this requirement is assessed based on the estimate of electronic money in circulation resulting from its business plan;
• Article 77, relating to the exercise of activities other than the issuing of electronic money, where applicable subject to prior authorisation from the Bank;
• Article 78, which imposes on the exempted legal person to take measures to protect the funds received from holders of electronic money in exchange for the issued electronic money;
• Title 2, Chapter 1, Sections 4 and 5 (Articles 81 to 90), which concern control and exceptional measures and sanctions regarding exempted legal persons.

By way of derogation from Article 84 of the Law, insofar as it declares applicable Article 28, first paragraph, of the Law, the exempted legal person which mainly exercises commercial activities unrelated to the issuing of electronic money may, subject to prior approval by the Bank, entrust the functions of auditor to one or more auditors who have not been approved for this purpose by the Bank in accordance with Article 222 of the Banking Law⁴. This auditor is required to comply with the obligations imposed by the Law and by this circular on the approved auditor towards the Bank (cf. in particular infra, point 4. "Role of the approved auditor").

3. Consequences of the exemption
   Exempted legal persons are included on a list kept for this purpose by the NBB. The website indicates that these legal persons are exempted.

Furthermore, Article 105, § 3, of the Law provides that legal persons:
1° have their registered office in Belgium, and effectively exercise their electronic money issuing activities on Belgian territory; 2° do not benefit from the mutual recognition regime provided for in Article 91 of the Law (no European passport); 3° must provide, in the contract governing the issuing of electronic money, that the amount loaded on the electronic medium storing the electronic money cannot exceed 150 euros; 4° cannot provide payment services unrelated to electronic money unless the conditions set out in Article 48 are met (exemption in matter of payment services); 5° inform the NBB of any change in their situation having an impact on the conditions set out in § 1 and report periodically to the NBB on the average of electronic money in circulation; 6° apply the provisions of the Law of 11 January 1993 concerning the prevention of the use of the financial system for the purposes of money laundering and terrorist financing that are applicable to electronic money institutions, and the decrees and regulations adopted for its implementation.

Periodic reports to be made by exempted legal persons Regarding point 5° above, the legal person reports every six months to the NBB on the average of electronic money in circulation.

¹ Regulation (EC) No 1781/2006 of the European Parliament and of the Council of 15 November 2006 on information on the payer accompanying transfers of funds.
² Regulation of the National Bank of Belgium of 18 June 2013 concerning the own funds of electronic money institutions and the placement of funds received in exchange for the issued electronic money.

NBB_2015_11 – 2 March 2015 Circular – Page 3/4 Own funds, as mentioned in Article 5 of said regulation, must, for exempted legal persons, amount to at least 2% of the average of electronic money in circulation³ at all times. When an exempted legal person has not completed a sufficient period of activity, this requirement is assessed based on the estimate of electronic money in circulation resulting from its business plan;

³ Article 5 of the Regulation of 18 June 2013 refers to Article 66 of the Law, which sets the minimum initial capital at 350,000 euros. However, Article 66 does not apply to exempted legal persons.

In order to meet the statistical requirements of the European Central Bank (ECB), exempted legal persons must also communicate annually to the NBB their year-end total balance sheet, as well as the electronic money in circulation on the same date.

The above reports must be made by sending an Excel file via the application made available for this purpose by the Bank. The data must be communicated to the NBB no later than the first business day of the second calendar month following the end of the financial year. The (semi-annual) report relating to the average of electronic money in circulation is repeated on the first business day of the second calendar month following the six calendar months covered by said report.

Regarding point 6° above, the exempted legal person is required to complete annually the abbreviated periodic questionnaire relating to the fight against money laundering and terrorist financing, in accordance with the procedures specified in Circular NBB_2014_12⁵.

Furthermore, the persons in charge of effective management are required, in accordance with Article 78, § 6, third paragraph, of the Law, to submit annually a report to the Bank, notably on the measures taken in execution of Article 78, §§ 1 and 2, of the Law, in order to protect the funds received in exchange for the electronic money, via the application made available for this purpose by the Bank.

4. Role of the approved auditor
   Based on Article 84 of the Law, the exempted legal person must appoint an auditor approved by the NBB.⁶

The approved auditor must respect its legal obligations regarding control, insofar as they are applicable based on the NBB's exemption policy⁷.

In addition to its usual mission of verifying annual accounts, it must also, by virtue of Article 85, 5°, of the Law, report at least once a year to the NBB on the adequacy of the measures taken by the exempted legal person to preserve the funds received from holders of electronic money, in application of Article 78, §§ 1 and 2.

Finally, the NBB additionally requires that the approved auditor declares every six months that the average of electronic money in circulation of the exempted legal person does not exceed the ceiling of 5,000,000 euros. This is intended to guarantee the accuracy and authenticity of the declaration of the exempted legal person regarding non-exceedance of this ceiling.

A copy of this circular is sent to the auditor(s), reviewer(s) (approved), of the exempted legal person.

Please accept, Madam, Sir, the expression of my distinguished sentiments.

Mathias Dewatripont
Vice-Governor

⁵ Circular NBB_2014_12 of 22 October 2014 concerning the abbreviated periodic questionnaire relating to the fight against money laundering and terrorist financing.
⁶ Cf. nevertheless supra, point 2. "Scope of the exemption", fifth bullet, for the exception to this principle.
⁷ It should not, for example, evaluate internal control measures, given the exemption provided for in Article 69 of the Law, which imposes adequate internal control.