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Rockin’ E-Money on Gibraltar
Gibraltar’s Been Discovered
Establishing Gibraltar as an e-money hub isn’t theoretical. Already, four companies steeped in prepaid1,2 have set up shop there. Three have an e-money license (Payoneer, The Bancorp and Wave Crest) and one (IDT Financial Services) has a full banking license, which includes authority to conduct e-money activities. All the companies are currently doing business through- out the 31-country European Economic Area (EEA), and they’ve joined together to form GEMA, the Gibraltar E-Money Association.
Started in late 2012 by Daniel U. Spier and Peter Howitt, the group elected Spier, managing director
of IDT, as its chairman and Howitt, an attorney who founded Ramparts Law, as the association’s secretary. GEMA’s goal is to champion Gibral- tar as the location of choice for pay- ment service providers and to work with government and the Financial Services Commission (FSC), which regulates e-money in Gibraltar, for an efficient regulatory environment that complements innovation.
From GEMA’s perspective, the larger the number of reputable e-money issuers with Gibraltar licenses, the greater the jurisdiction’s attraction and the greater the association’s stature to work with stakeholders and the FSC to address key issues, such as best AML and antifraud practices. And although GEMA members are technically competi- tors, their approaches to e-money differ significantly, minimizing direct
business conflicts. Plus, their market isn’t Gibraltar per se, with only 30,000 residents; their market is the EEA and, for some, beyond European borders.
“Prepaid in Europe is in its in- fancy,” says Spier. “There’s so much potential, there’s no risk
What’s e-Money?
of major competitive issues among GEMA’s members.”
A Regulator with an Open Door Policy
Good relations with the FSC are a prime reason to consider Gibraltar, according to those who’ve received their licenses there. At the head of
E-money is value stored on an electronic device or a server linked to a user’s account that can be accepted by a person other than the issuer
of the e-money. In practice, e-money enables a wider range of businesses, in addition to banks, to offer products for storing and transferring funds for a wide range of uses. Three main ways of implementing e-money include prepaid cards, electronic prepaid accounts (e-wallets) for online use and electronic devices, such as mobile phones.
To promote innovation around e-money, the EU determined that entities other than banks and building societies may issue e-money, provided they obtain an e-money license from a European Economic Area (EEA) member state regulator. Getting a license involves conditions similar to those required of money services businesses in the U.S., such as maintaining minimum capital requirements, implementing AML policies and procedures, and safeguarding and segregating consumer funds from businesses’ operating funds.
E-money is largely regulated under the Payment Service Directive 2007 and 2nd E-Money Directive 2009. In Gibraltar the main implementing regulations are the Payment Services Regulations 2010 and the Electronic Money Regulations 2011.
What’s PassPorting?
Passporting is a concept aimed at enabling financial services businesses licensed in one jurisdiction (the home state) to conduct activities that are authorized in their home state in any of the EEA’s other 30 countries3 without obtaining additional local licenses.4 The idea behind passporting is “one Europe/one authorization.” Although European countries have made progress in acting like a unified body for financial services regulation,
the process isn’t perfect, largely because countries can interpret EU directives differently.