More & more EMI's are popping up in Latvia, is it easy to open a financial company there?

[TurnedToRobot]

I read a few threads about all the new EMI's that are showing up every day, the latest I stumbled upon is this List of EMI and Digital Banks which I see is based in Latvia like many of them.

I see Wirexapp, Mistertango and Revolut have all Latvian people (or they have latvian look a like names) hired for support. Does that mean they have registered the company in one country but operate in Latvia?

If so, is it easy to get a financial service provider license in Latvia to run an EMI or is it necessary at all to obtain a license in Latvia?

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[Martin Everson]

kanakke said:
Does that mean they have registered the company in one country but operate in Latvia?
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Perhaps Latvia has cheaper labor cost than Lithuania. Or Latvian's operate in Lithuania to get access to direct SEPA clearing not offered to EMI's in other countries. However, recently Transferwise has become first non-bank to get a settlement account at the Bank of England for direct sterling clearing i.e TW can now process GBP payments without using a bank which is similar to direct SEPA clearing.

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[KJK]

They are neighbouring countries which are very similar in many aspects. Maybe Lithuania is more nationalistic and poorer, Latvia slightly richer and more influenced by Russia and Scandinavian countries.

In any case, Lithuania was very friendly towards EMIs and handing out banking licences. Latvia is well known for being "offshore" or "semi offshore" destination for rich Russians.

I don't think it's "easy" to get a license in Latvia but I noticed some setups such as:
- licence in Lithuania, additional accounts in Latvia and/or Estonia
- licence in Latvia, additional accounts in Estonia and/or Lithuania
It can work as a backup plan, especially when you have some bribed official inside of the central bank.

In the end, it's all closely connected and likely owned by some Russian guy anyways. Look at Estonia - half of the population there is actually Russian (almost the same in Latvia).

 

[Martin Everson]

KJK said:
In the end, it's all closely connected and likely owned by some Russian guy anyways.
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Agreed

That's the case with most EMI including founders of Revolut and Wirexapp in UK etc etc ns2. Basically all these EMI's are connected to Russians in some form or another....no offense intended.

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[JohnLocke]

One of the largest offshore company formation services in the Seychelles is owned by Russians. It seems they are all over the planet and have put their hands on all where money float from A to B to avoid the governments attention, which is cool, we need to have people around that can open doors 😉

When it comes to EMI's there are countries where you don't really need a license but just need to be approved by the financial authority to conduct money services, they don't even require a huge share capital (paid in) but of course all legal toducments to be in place and a real setup which they physically check.

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[PavelMSK]

kanakke said:
I read a few threads about all the new EMI's that are showing up every day, the latest I stumbled upon is this List of EMI and Digital Banks which I see is based in Latvia like many of them.

I see Wirexapp, Mistertango and Revolut have all Latvian people (or they have latvian look a like names) hired for support. Does that mean they have registered the company in one country but operate in Latvia?

If so, is it easy to get a financial service provider license in Latvia to run an EMI or is it necessary at all to obtain a license in Latvia?
Click to expand...

It depends on many factors. I.e. citizenship. For now if you'll get EMI or Crypto license in Latvia, Lithuania and Estonia you can't open local bank account if you are not operating in these countries. And if you're Russian for example.

If you need stable EMI/Crypto - UK company + license is the best choice for now on my opinion.
If you need cheap EMI/Crypto - Latvian, Lithuanian, Estonian or UAE(no license needed) company + Mistertango/LeoPay or Cyprus/Mongolian bank accounts.

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[TurnedToRobot]

Thanks to all of you replied. Think I got a picture.

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[blizz]

PavelMSK said:
If you need cheap EMI/Crypto - Latvian, Lithuanian, Estonian or UAE(no license needed) company + Mistertango/LeoPay or Cyprus/Mongolian bank accounts.
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false information! That's not true they still want you to have a license there!

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[PavelMSK]

blizz said:
false information! That's not true they still want you to have a license there!
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Who are you talking about? UAE - no license required. QIWI PSP - google it. No licence PSP.

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[negon]

A payment service provider that provides credit card processing or other payment processing facilities is different from a financial service that provide Crypto services or exchange crypto! You should know that as an so called professional!

 

[Sols]

There are no EMIs with direct connection to SEPA. ECB only gives access to SEPA to credit institutions (banks). All EMIs work with a partner bank to access SEPA. What's unique about Lithuania is that the Bank of Lithuania (their central bank) is allowing EMIs to piggyback on their SEPA access.

Mister Tango and all the other Lithuanian EMIs have indirect connection to SEPA, relying on the Bank of Lithuania.

If one of them is caught offering correspondent account to a Puerto Rico money laundering vehicle international bank, Bank of Lithuania would probably throw them out faster than the speed of light. It would not be compliant with the standard conditions under which Bank of Lithuania invites EMIs.

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[AND2]

I wonder if it's true what I read on google about how much does setting up an EMI cost. Like a few hundred K. So you could set up your own EMI? :thinking:

 

[Sols]

You need minimum 350,000 EUR share capital to apply for the license but this amount can and often is raised in line with the business risk. You need to present a management team with the right background and profiles, some of which plus ops need to sit physically in Lithuania. It's reasonably easy to satisfy the regulatory requirements, if you have an actual business and capital to back it up.

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[Sols]

Pedrosaro said:
Do you guys know what is the estimated cost of obtaining a banking license in UK ? and do you happen to know any lawyers that can take care of the application process..? Also is UK the best jurisdiction?

Regards
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The standard across EU/EEA for banking license is 5 million EUR minimum share capital. I believe in UK they set the minimum to 5 million GBP. Then it's up to you to figure out what the rest costs, which depends on salaries, office, marketing, software, security, audits, consultants, lawyers, and so on and so forth.

Whether UK is best or not depends on your business plan.

Are you quite sure you're equipped to run a bank?

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[Martin Everson]

Pedrosaro said:
Do you guys know what is the estimated cost of obtaining a banking license in UK ? and do you happen to know any lawyers that can take care of the application process..? Also is UK the best jurisdiction?

Regards
Click to expand...

Forget UK as not even Revolut (politics aside) could get a UK banking license and went to Lithuania and they are based out of London and pretty big. I would not even bother as salaries for the staff you would require will be very high compared to an eastern european country. This will cause you to burn through capital at an alarming rate and require several rounds of capital increases overtime.

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[Sols]

Pedrosaro said:
Yes we are already running a bank in Puerto Rico, so we have all tools and structure. We would just need to invest in the minimum structure FCA would require us locally... however 5 M Eur is quite a large amount. Does this minimum capital change in other Europearn countries?
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The 5 million EUR is the minimum across the EU/EEA; sometimes higher. There is a restricted banking license regime available in Lithuania for 1 million EUR, but only one has been issued so far and it's still under review (Revolut). In other European countries, it's the same or higher. Some places, such as Albania, Moldova, and Macedonia used to be lower but have recently changed to be closer aligned with the EU.

If you can't afford 5 million EUR, please don't start a bank.

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[Martin Everson]

As you are already a bank then you can apply to open a branch in the UK and avoid most of the capital requirements if you are already decently capitalized. Contact the Association of foreign banks in UK for some advice and pointers.

Branch info
https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/new-bank/internationalbanks
To give you an idea of cost the last time I spoke to a firm in UK capable of doing this back in 2011 for Southern African bank the price was £240k in fees alone. Todays requirements with regulation gone mad will cost more. But capital is not an issue if you are only forming a branch. The Estonian bank LHV for example opened its UK branch last year for same reason. It is quite common thing to do to get access to domestic payment network. However try a branch in a cheaper country and in Eurozone.

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[Sols]

The window of opportunity to open a branch in EU for an offshore shell bank has closed. Regulators will reject such applications, or daddy ECB will come in and do it for them. If we were talking about a real bank which could substantiate its wish to establish a branch, it's of course doable.

Opening of branches across reputable jurisdictions with the same or equivalent banking regulations is relatively easy (such as LHV opening in UK) and a sensible way to access the local currency. Very different story for a Puerto Rico bank, especially one that's presumably licensed under the international bank regime which only caters to non-residents of PR.

Also worth noting that branches and subsidiaries don't get automatic clearing/settlement access to the local currency clearing network. Even if FCA were to authorise the branch or subsidiary, they'd still have to convince the Bank of England to give you access to GBP clearing. Same with a local regulator and ECB.

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[Martin Everson]

Yes very true what you say.

@Pedrosaro Sorry if I missed your answer. However, what is the exact reason for wanting direct euro clearing (i.e TARGET2 access) as opposed to a multiple correspondence relationships?

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[Sols]

A huge factor of starting a bank today is getting direct access to at least one of the major currencies. This requires obtaining the banking license in a country or, in the case of EUR, the region which controls the currency. As you have noticed, a Puerto Rico banking license is effectively worthless because you end up relying on correspondent banks, which are all derisking and shutting out all but the most reputable and stable offshore banks.

All things considered, the 5 million EUR capital requirement in EU is quite modest. It is (much) higher in places like Singapore, Hong Kong, Switzerland, and even several smaller jurisdictions like Serbia and Mauritius.

If 5 million EUR plus operating and setup costs is too much, I don't understand what business you have being a bank and holding other people's money.

Maybe an EU E-Money Institution license is better for you? Capital requirements start at just 350,000 EUR for that. Or speak to Bank of Lithuania about obtaining a restricted banking license.

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