Getting an EMI Licence in Malta: MFSA Application and Compliance Overview

For fintech companies wishing to operate in the EU, an Electronic Money Institution (EMI) license from the Malta Financial Services Authority (MFSA) provides a strong and reputable framework.

A Maltese EMI license offers several benefits and is in compliance with the EU's Electronic Money Directive (EMD2) and operates under the Financial Institutions Act of Malta (Chapter 376 of the Laws of Malta). Among them is the highly sought-after capacity to provide passport services in every member state of the European Economic Area (EEA), which provides access to a market with more than 450 million prospective clients.

#The MFSA and Malta’s Financial Regulatory Landscape

#Malta's only financial services regulator is the MFSA. Its responsibilities with regard to EMIs include:

• assessing applications and awarding Malta EMI licenses.
• monitoring authorized EMIs to guarantee continued adherence to EU and Maltese laws.
• encouraging consumer protection and market stability in the banking industry.
• preventing financial crime by enforcing strict counter-financing of terrorism (CFT) and anti-money laundering (AML) regulations.

Activities Permitted for EMIs Holding a Malta Licence

After obtaining an EMI license in Malta and receiving prior approval from the MFSA, your organization is able to carry out a variety of financial operations.

#These include but are not restricted to:

• Issuing Electronic Money: The primary activity of an EMI, allowing the creation of digital alternatives to traditional cash.
• Providing Certain Payment Services: As defined under the Second Payment Services Directive (PSD2), including:
  • Services that allow cash to be deposited into a payment account and the operations required to maintain and manage that account.
  • Services enabling cash withdrawals from a payment account.
  • Execution of payment transactions, including transfers between payment accounts held with the same or different payment service providers. This includes direct debits (including one-off payments), card-based transactions, and credit transfers such as standing orders.
  • Issuing payment instruments and/or acquiring payment transactions.
  • Money remittance services.
  • Payment Initiation Services (PIS).
  • Account Information Services (AIS).
• Extending Credit: Permitted when directly connected to specific payment services, such as short-term credit linked to a payment transaction. Such activities must comply with strict safeguarding requirements to protect customer funds.
• Providing Operational and Ancillary Services: These services must be closely related to electronic money issuance or payment services, such as currency conversion or data protection and storage.
• Operating Payment Systems: Establishing and managing the technical infrastructure required to process and settle payment transactions.
• Engaging in Other Business Activities: EMIs may conduct additional activities beyond e-money issuance, provided they fully comply with Maltese and EU regulations and do not interfere with their regulated core operations.

#Key Requirements for a Malta EMI Licence Application

To obtain an Electronic Money Institution (EMI) licence in Malta, an applicant entity—typically incorporated locally as a Limited Liability Company—must satisfy a number of core regulatory requirements established by the Malta Financial Services Authority (MFSA).

Minimum Initial Capital:Applicants must maintain a fully paid-up initial capital of no less than €350,000. This capital requirement must be met at the time of authorisation and maintained on an ongoing basis.

#Prudent Management and Governance:

• Board of Directors:The governing body must consist of at least two executive directors, with the addition of a third non-executive director commonly recommended to strengthen oversight. All directors must demonstrate relevant expertise, industry experience, and meet the MFSA’s “fit and proper” standards relating to competence, integrity, and reputation.
• Key Personnel:Individuals holding key roles—including proposed Directors, qualifying shareholders (holding 10% or more), the Compliance Officer, and the Money Laundering Reporting Officer (MLRO)—are required to undergo the MFSA’s fit and proper assessment. This process involves comprehensive due diligence covering financial soundness, professional competence, and personal integrity, supported by documentation such as police conduct certificates, professional references, and statements of financial affairs.
• Local Presence:Although certain operational functions may be outsourced with MFSA approval, the institution is generally expected to maintain substance in Malta, including effective mind and management within the jurisdiction, often demonstrated through a resident director and locally based operational personnel.

#Robust Governance Framework:

Applicants must establish a strong governance structure, including clear organisational arrangements, defined responsibilities, effective risk management policies, and appropriate internal control systems.

Safeguarding of Client Funds:EMIs are required to implement effective safeguarding mechanisms for funds received from electronic money holders. This typically involves segregating client funds from the institution’s own funds, either by holding them in dedicated accounts with authorised credit institutions or by investing them in secure, liquid, low-risk assets.

Passporting your Malta EMI license throughout the EEA: the strategic advantage

Malta provides EMIs with a major advantage as a member of the European Union: passporting rights. With an EMI license from Malta, your organization is able to:

• Gain access to the whole European Economic Area (EEA) market, reaching clients and companies in many EU/EEA nations without requiring separate licenses in each.
• To facilitate smooth cross-border expansion and scalability, open branches in other EEA nations or offer services remotely (Freedom to Provide Services).

#A Comprehensive Guide to Malta's EMI Licensing Procedure

A comprehensive application and evaluation process with the Malta Financial Services Authority (MFSA) is required to obtain your EMI license in Malta. An indicative timescale is typically between 9 and 12 months after the filing of a complete application, though timetables can vary based on the application's complexity and the caliber of the supporting documents.

1. Preliminary Phase (Optional but Suggested): Hold a first meeting with the MFSA to go over the suggested business plan and make sure it complies with regulations.
2. Formally create your Maltese legal entity by incorporating your business.
3. Application Submission: The official application and all supporting materials must be sent straight to the MFSA.
4. Thorough Review of Documentation: Every document that is submitted will be thoroughly evaluated by the MFSA. Important documents consist of:

#An incredibly thorough business plan that outlines:

• the goals, approach, and market study of the EMI (including target audience)
• an explanation of the payment and e-money services that will be provided
• internal controls, governance frameworks, and organizational structure
• a strong framework for risk management that identifies financial, legal, security, and operational threats
• comprehensive AML/CFT guidelines and protocols
• an explanation of business continuity plans, security protocols, and IT systems
• the applicant institution's incorporation documents, such as the articles of association and memorandum.
• all potential directors, eligible shareholders, and important staff should complete Personal Questionnaires (PQs), which should be accompanied by the previously specified comprehensive due diligence paperwork.
• comprehensive three-year financial projections that include stress-testing scenarios for the P&L, balance sheet, and cash flow.
• own funds calculations that show adherence to initial and continuing capital needs.
• an IT infrastructure and security questionnaire for online and electronic banking.
• the official MFSA application form together with the necessary paperwork.

1. MFSA Review and Feedback: After carefully examining the application, the MFSA may ask for further details, explanations, or changes. The method is iterative.
2. In-Principle Approval: The MFSA may grant a "in-principle" approval, describing any pre-licensing requirements, if it is satisfied.
3. Licence Issuance: The EMI license will be formally granted after all requirements have been fulfilled, such as the completion of any outstanding points and the full payment of capital.
4. Starting Operations & Passporting: Your EMI can start operating as soon as your license is issued.

• After informing the MFSA and the appropriate host state authorities, remote passporting of services to other EU jurisdictions can start virtually instantly.
• Physical branch establishment in another EEA state usually necessitates further notification and can be approved following a period of stable operation (usually 6–12 months) by the EMI.

#Cost Considerations for a Malta EMI Licence

#Take into account the following while creating a budget for your Malta EMI license:

• MFSA Fees:
• €10,000 one-time, non-refundable application and processing cost (subject to MFSA revisions).
• The annual supervision fee, which currently has a minimum of €25,000, is assessed annually and varies depending on the circumstances. Depending on the EMI's risk profile, complexity, and turnover, this could go up.
• Additional Expenses:
• Costs of incorporating a business.
• Professional Fees: To prepare the application and guarantee compliance, legal, advisory, and consulting services are required.
• Capital Outlay: The initial capital requirement of €350,000.
• Operational expenses include personnel, IT systems, office space (if applicable), continuing compliance, and audit costs.

Disclaimer: The MFSA may alter the costs listed. For the most up-to-date and thorough cost evaluation, always engage with expert advisors and refer to the official MFSA recommendations.

#Post-Licensing Requirements for EMIs in Malta

The first step in the regulatory process is obtaining an EMI license in Malta. Continuous compliance is essential and consists of:

• Respect for EU Directives and MFSA Rules: Constantly fulfilling all relevant legal obligations.
• Regular Reporting: Sending the MFSA regulatory reports, AML/CFT reports, and financial statements.
• Maintaining Capital Adequacy: Making sure personal funds don't drop below the required amounts.
• Maintaining AML/CFT Compliance: Putting strong AML/CFT policies, processes, and customer due diligence mechanisms into place and keeping them up to date.
• Protection of Client Funds: Constantly following the stringent protecting regulations.
• Operational Resilience: Keeping up strong company continuity and IT security plans.
• Internal Audit and Compliance Monitoring: Consistent evaluations to guarantee the efficacy of internal controls.

#Why Get Your EMI License in Malta? The Wider Appeal

Obtaining an EMI license in Malta places your fintech business in a vibrant and encouraging environment in addition to providing regulatory approval:

• Pro-Business Environment: Malta has long been known for having approachable regulators and being a business-friendly country.
• Skilled Workforce: An educated and multilingual workforce, especially in the IT, legal, and finance industries.
• The use of English as an official language facilitates regulatory interactions and corporate operations.
• Competitive Tax System: When properly designed, Malta's corporate tax system can be quite effective.
• Fintech support from the government includes programs and a national policy to promote innovation in the field of digital finance.
• Strategic Location: Great access to the Middle East, North Africa, and Europe.
• Full access to the EU single market and the stability of the Euro currency are two benefits of EU membership and the Eurozone.

If you require legal assistance with obtaining a license in Malta, please do not hesitate to contact our team. Equilex provides professional support in regulatory structuring, licensing processes, and compliance advisory for fintech and regulated businesses. For inquiries, please reach us at contact@equilex.co or via WhatsApp: +44 73 5038 7544. Our specialists will be pleased to assist you.