Why Lithuania will become the key to financial institutions in Europe

Lithuania offers a unique opportunity for financial institutions. As a member of the European Union, it can enter the entire European market. Government policies that encourage digital entrepreneurship create a very welcoming environment in which companies do not have to establish physical locations in Lithuania but still have all the benefits of operating in Lithuania. This, together with many other innovation policies, has made Lithuania a forward position in the financial industry.

Fintech companies and financial institutions apply for a single European market license

Fintech companies in Europe, banks, electronic money agencies, payment service providers, insurance companies, investment managers and investment funds, foreign exchange dealers, securities brokers and other financial institutions are subject to more stringent supervision and higher risk management requirements. However, if a financial institution obtains a business license from any member of the European Economic Area (European Economic Area)/EU (EU), it can enter all other EEA/EU countries and can reach more than 500 million citizens, 2000 Million businesses.

FinTech has a huge competitive advantage over other financial institutions registered and licensed in Lithuania, allowing it to significantly reduce its set-up and operating costs when entering European financial markets. A good regulatory environment, good infrastructure, Europe’s fastest Internet and huge talent pool make Lithuania (mainly its capital Vilnius) attract many international financial institutions and FinTech start-up companies.

The official policies of the Bank of Lithuania (Lithuanian regulatory agency) and the Lithuanian government created a regulatory environment and ecosystem, enabling Fintech to attract foreign financial institutions and FinTech start-ups into Lithuania. Regulatory activities and significantly reduced financial institution setup time and licensing and maintenance costs make Lithuania the world’s first choice for financial companies seeking European business licenses.

Attracting international FinTech startups is an important part of Lithuanian government policy.

“We understand the dangers that a small foreign financial technology company may face, but precisely because of this, this process will not stop.”

The President of the Bank of Lithuania, Vitas Vasiliauskas, said in an interview with Verslo Zinios on December 9, 2016.

ECOVIS is a leading consulting firm that applies for financial institution licenses. Industry leader WireCard Bank AG recommended Lithuania and ECOVIS Proventus Law as gateways to European financial markets.

“From our perspective, they handle a variety of financial or corporate affairs through highly specialized professional teams. Their understanding of the local market financial services industry is supporting our efforts in Europe. I will not hesitate to recommend ECOVIS Proventus Law. As a strong and reliable law firm dealing with Lithuanian authorities, it also acts as a gateway to European international financial services companies. ”

Mr. Oliver Bellenhaus of WireCard Banking Ltd. said.

Payment method

Perfect pan-European payment processing solves the problem. Required capital: 20,000 EUR – 125,000 EUR.

Registration time: up to 3 months.

Licensing payment agencies are the perfect solution for Fintech and start-up companies to make personal payments or transfers, online payments and online store payments across Europe. The EU Payment Service Directive passed in 2007 provided a legal basis for the payment of a single European market.

License payment agencies can provide the following payment services:

• Deposit cash into the payment account (including all operations required to pay for the account).

• Services for withdrawing cash from payment accounts (including all operations required for payment accounts).

• Perform payment transactions, including transfer of funds on payment accounts opened by payment service providers or other payment service providers: Perform direct debits, including one-time direct debits, perform payment transactions and executions through payment cards or similar devices Credit transfers, including periodic payment instructions.

• Perform payment transactions in which funds are paid by the payment service user’s credit line: Perform direct debit (including one-time direct debit), perform payment transactions and credit transfers through payment cards or similar payment devices, including periodic payment instructions.

• Issuing and obtaining payment tickets.

• Transfer

• Perform a payment transaction where the payer agrees to execute a payment transaction through a telecommunications terminal, digital or IT equipment, and the payment is paid to the telecommunications network or IT system operator, but it acts only as a middleman for the goods or service provider and payment service users.

If you obtain a license from any member state of the European Union, this will open up the business opportunities and services for all other EU/EEA countries, while gaining unlimited access to the Common Market and the Single Euro Payment Area (SEPA). The Single Euro Payment Area (SEPA) allows electronic credit transfers and low-cost direct debits to be arranged in the euro zone as easily as in the country.

The reasons why Lithuania can be the first choice for EU/European economic zone applications for payment agency licenses are:

• There is no special requirement for company management to live in Lithuania.

• You can submit a permit application without setting up a company. Only after obtaining a license will the company begin to be established.

• Compete quickly. Payment agency licenses can be issued in 3 months or even faster.

• Documents can be submitted in English and modified “anytime, anywhere” and are not used to frustrating.

• It is possible to obtain the ordering code of the IBAN account for the customer. The infrastructure established by Lithuanian banks for immediate payments under the European instant payment initiative will ensure the coverage of the pan-European market.

• Non-banks have direct access to the Single Euro Payments Area (SEPA). SEPA-MMS is a pan-European retail payment system managed by the Bank of Lithuania.

• Remote client authentication. The innovative client-aware process of remote client authentication allows customers to open accounts without having to visit the site.

• Easy access to EU Financial Passports to other EU jurisdictions. It takes only 1 month to apply for the EU Financial Pass and it is free.

• No penalty in the first year. The Bank of Lithuania promised to support start-ups and not penalize minor violations that occurred during the first year of operation.

• Business visa. This is a special visa issued to citizens of non-European/European Economic Zone countries that have established innovative companies in Lithuania. In October 2016, the UK’s leading financial services provider REVOLUT and the Lithuanian Bank signed a memorandum of understanding. REVOLUT plans to establish a financial institution in Lithuania and obtain access to the SEPA MMS payment system managed by the Lithuanian bank to ensure cross-border payment of Euros. In March 2017, the Lithuanian bank issued a license to de Vere Group, a global financial group that operates in 60 countries around the world. deVere e-currency started its global business from the Vilnius office, also used the SEPA MMS system, and issued prepaid cards to its global customers. Throughout the license application process, ECOVIS provided de Vere Group with full legal advice. The Lithuanian bank has the functions of the Central Banking and Financial Supervisory Authority (regulatory agency). Regulatory activities and the significant reduction in the establishment, licensing and maintenance costs of financial institutions have made Lithuania the preferred location for financial business people around the world.

Electronic money agency

A wide range of pan-European payment services. Requires share capital: 350,000 euros. Completion time: up to 3 months.

E-money is defined by the European Central Bank as an electronic unit that can be widely used to attach monetary value to technology devices to entities other than electronic money issuers. The device acts as a prepaid bearer note but does not necessarily involve a bank account transaction. Issuing electronic money is a regulated activity. The 2009/110/EC Directive provides a legal basis for the issuance of electronic money in the European Union (EU).

The main difference between an E-money institution and a payment institution (PI) is that the E-money institution has the right to issue electronic money in addition to the services provided by the payment institution (PI). In practice, this means that the e-money institution can deposit customer funds for a long period of time and issue payment cards and other payment instruments to customers. E-banking licenses are the right decision for Fintech to plan more extensive services, not just payment processing.

The reasons why Lithuania can be the preferred place for the European Union/European Economic Area to apply for an e-money institution permit are:

• There is no special requirement for company management to live in Lithuania.

• Submit a permit application without setting up a company. Only after obtaining a license can you start setting up your company.

• Compete quickly. Electronic money agency permits are issued within 3 months or even faster.

• You can get your own IBAN account ordering code for your customers. The Lithuanian bank has established infrastructure for timely payment according to the European instant payment initiative, which will guarantee the coverage of the pan-European market.

• Easy access to EU Financial Passports to other EU jurisdictions. It takes only 1 month to apply for the EU Financial Pass and it is free.

Business visa. This is a special visa issued to citizens of non-European/European Economic Zone countries that have established innovative companies in Lithuania.

If any member of the European Union obtains an e-money agency license, it can obtain business opportunities in all other EU/EEA countries to carry out activities and provide services, enjoy unlimited benefits from the common market, and pay in single euros. District (SEPA) advantages.

The e-money institutions or other Fintech companies registered in Lithuania have a huge competitive advantage and can open European financial markets with greatly reduced set-up and operating costs.

In October 2016, the UK’s leading financial services provider REVOLUT and the Lithuanian Bank signed a memorandum of understanding. REVOLUT plans to establish a financial institution in Lithuania and obtain access to the SEPA MMS payment system managed by the Lithuanian bank to ensure cross-border payment of Euros.

In March 2017, the Lithuanian bank issued a license to the deVere Group, a global financial group with operations in 60 countries. deVere e-currency started its global operations from the Vilnius office, also used the SEPA MMS system, and issued pre-paid cards to customers worldwide. Throughout the license application process, ECOVIS provided de Vere Group with full legal advice.

Professional bank

You can also get a “well-known” banking license. The required share capital for a professional bank: 1 million euros – 5 million euros. Registration time: 6 months.

According to the banking regulations 575/2013, banks are regarded as credit institutions. Only banks (credit agencies) have exclusive rights to accept non-professional market participants and other deposits that can be repaid, and provide a full range of banking services. Lithuanian Licensing Banks can provide all banking services to 30 countries in a European financial market.

Since January 1, 2017, the Lithuanian EU member states have introduced new bank licenses. Professional banks are the only professional financial institutions under the jurisdiction of the European Union and the European Economic Area (EEA).

At the same time, after the Brexit, the discussion of the Swiss “light” bank license is in the planning phase, Lithuania provides Pan-European bank licenses and is preparing to start a six-month banking service in a European market. The minimum share capital is 1 million euros and the registration period is 6 months. Lithuanian professional banks do not have similar institutions in other parts of Europe.

Professional banks provide the following banking services in the European market:

•loan;

• Payment services;

• Receive deposits;

• Currency exchange;

• Issuing electronic money;

• provide guarantees;

• Fund management;

• Financial leasing;

• Financial intermediaries;

• Credit rating service;

• Safe rental.

…. and other banking services.

Professional banks are limited to providing investment or pension fund management, public offerings of securities and other similar services. You can easily resolve this restriction by signing up at http://ecovis.lt/fintech/securities-brokers-forex-dealers/. Sign up for an independent brokerage or investment management company at http://ecovis.lt/investment-funds/.

British giant Barclays Bank established the Barclays Technical Center in Vilnsto in 2009 to provide global services. Scandinavian rivals such as Swedish Scandinavian Bank (SEB), Swedish Bank (Swedbak), Danish Danish Bank (Danish Bank) and financial industry leader Western Union and the world’s largest stock exchange operator Nasdaq, are There is a service center in Vilnius.

Traditionally well-known jurisdictions are losing importance in our time. Due to factors such as automatic tax information exchange, account opening restrictions, and a single European market access restriction, off-shore jurisdictions are no longer considered attractive.

In today’s banking business, operating costs are crucial. Fintech is challenging traditional banking and cutting profits. Traditional banking institutions and Fintech startups are seeking jurisdictions to open large markets at low cost.

The Lithuanian “light” banking license of specialized banks is the future of finance. It can open all single EU/European economic zone banking markets at a lower cost, including markets such as France and Germany. Grade A office rents and labor costs are twice that of Vilnius in traditional jurisdictions, and even more.

Local service providers offer relatively inexpensive outsourcing prices and high-quality services, demonstrate a strong competitive advantage, and create a safe, efficient and cost-effective banking environment that they are prepared to face in the European Union/European Economic Area banking market. Intense competition.

Why Lithuania became one of the most important banking destinations in the EU/European Economic Area:

• Compete quickly. License is issued within 6 months.

• The share capital is 1 million euros, while the ordinary banks are 5 million euros.

• Direct access to the Single Euro Payments Area (SEPA).

• European Union regulations deposits up to 100,000 euros.

• Direct access to EU/European economic zone financial markets.

This is why industry leader WireCard Bank AG recommends Lithuania and ECOVIS ProventusLaw as portals to enter the European financial market:

From our point of view, they properly handle various financial or corporate affairs through a highly professional and professional team. Their understanding of the local market financial services industry is supporting our efforts in Europe. I did not hesitate to recommend ECOVIS ProventusLaw as a strong and reliable law firm dealing with Lithuanian regulatory authorities and as a gateway to Europe for international financial services companies.
Mr. Oliver Bellenhaus of WireCardBank AG said.

ECOVIS’s experience

ECOVIS International is a leading global consulting company with more than 4,500 professionals in 65 countries. ECOVIS ProventusLaw is a member company established by ECOVIS International in Lithuania. ECOVIS ProventusLaw has extensive experience in advising international clients and applying for financial institution licenses. Our experience began with the first establishment of the first modern NSEL 30 index fund in Lithuania and fund management companies 15 years ago. Recently, we issued a license to the European branch of Alternative Payments, a California-based electronic payment company that provides services to more than 100,000 websites around the world; helped the global financial giant deVere to obtain a Lithuanian e-currency license, and also served as a national postal operator. AB LietuvosPaštas and UAB Omnitel, a leading provider of mobile telecommunications services, are advised to obtain payment agency licenses. Currently, we are providing services to Fintech companies that are seeking European market licenses in European countries, the United States, Canada, China, Hong Kong, Israel, UAE, Singapore and the Philippines.

Crowdfunding

The platform helps lenders find companies that need financing. Permit (License) Approval Period – 1 Month. Share capital – starting from 40,000 euros.

Crowdfunding is booming in Europe. Banks and other traditional lenders are unable to finance all companies due to risks and other regulatory issues. The crowdfunding platform provides a market for other lenders, fills current gaps, and provides funding for existing and new companies. The interest rate paid by the crowdfunding platform to lenders is usually higher than that paid by traditional financial institutions.

Crowdfunding is an ideal financing tool for start-up financing, allowing lenders to acquire shares in start-ups and expect high returns. The recent implementation of the New Lithuanian Crowdfunding Act made Lithuania one of the few jurisdictions in Europe with modern, clear and transparent crowdfunding regulations. The securities issued by licensed crowdfunding platforms can be traded in all EEA/EU countries, making it possible to attract capital from all over Europe to meet crowdfunding needs.

The home of the crowdfunding platform operator must be in the territory of the Republic of Lithuania or other EU member states.

When applying to the supervisory authority for inclusion in the publicity list of crowdfunding platform operators, operators must submit information concerning the members and managers (responsible persons) of the platform operator, information on the prudential requirements of the platform, plans for continued attention, and Other files.

Lithuanian banks (regulators) make decisions on the listing (licensing) within 30 working days.

The capital requirement of the operator is 40,000 euros. However, the self-owned capital cannot be lower than the larger of the following amounts: 40,000 Euros or the required own capital must be at least 0.2% of the outstanding funds that are raised through the crowdfunding platform (rather than repaid to investors).

Crowdfunding activities

Licensed crowdfunding platform operators can use the following platforms to raise funds through crowdfunding platforms:

(i) Ordinary loan agreements; (ii) Issuance of debt securities (ie bonds); (iii) Issuance of equity securities (ie shares); (iv) Transfer of claim rights from credit agreements that have already been completed. However, private limited liability companies must not issue shares publicly.

Additional requirements depend on transaction value

There are no additional requirements for financing transactions that raise less than 100,000 euros in 12 months.

Crowdfunding project owners who wish to conduct €100,000 to €5 million in financing transactions within 12 months must draft a memorandum to disclose project owners and project basic information and submit it to crowdfunding platform operators.

Project owners wishing to conduct financing transactions of more than €5 million within 12 months can only execute projects by issuing and registering securities and compiling securities offering prospectuses.

Operators of licensed crowdfunding platforms are considered financial consulting companies and do not require additional licenses. A financial consulting firm can provide investment advisory services to investors, including: (i) execution of order services (ie receiving and transmission of orders) and (ii) provision of investment advice.

Peer loan platform

Peer-to-peer (P2P) platforms help lenders find consumers who need financing. Share capital: 40,000 euros. Licensing (certificate) time : 1 month.

The P2P lending platform allows lenders to avoid traditional banking institutions to find consumers. Consumers in Europe view P2P loans as a substitute for bank loans (especially small consumer credits).

The lender on the P2P platform may want higher interest than bank deposits and other traditional financial instruments. The newly revised Lithuanian consumer credit laws and regulations allow quick and easy licensing of certain P2P lending platforms, ie platforms ready to serve lenders looking for (financing) investment and retail customers.

According to the law on P2P lending activities, natural persons can provide or promise to provide consumer credit beneficiaries of consumer credit through the lending platform.

List of documents for applying for a P2P platform license from a Lithuanian bank (regulatory agency):

1. Written application.

2. The information of the applicant company in the public register. The Lithuanian bank may ask for additional information.

3. Information managers and shareholders.

4. Information on compliance with authorized capital.

5. Business Continuity Plan (Business Plan).

6. Consumer credit beneficiary credit assessment rules.

7. Information on the records and information systems used to determine credit ratings of credit beneficiaries.

8. If the company plans to use the services of a consumer credit intermediary, provide a list of agencies that represent the company.

The Business Continuity Plan (Business Plan) is the most complex part of the document to be prepared. The Business Continuity Plan should provide measures and procedures to ensure that the P2P lending platform operator’s activities continue uninterrupted, and ensure unrelented management of consumer credit contracts and ongoing contractual obligations. ECOVIS ProventusLaw can assist in the preparation of business plans and setting up P2P services.

Foto: ©CC0_lukasbieri

ECOVIS Beijing is a consultancy focusing on accounting, audit, tax, legal, and FDI advisory. For more information, please visit our website www.ecovis-beijing.com or contact service@ecovis-beijing.com

Richard Hoffmann

Richard Hoffmann is a partner at ECOVIS Beijing China. Richard obtained an honors degree in law and worked in Germany, the United States, and China for various prestigious law firms prior to joining ECOVIS. In addition to being a member of the board of ECOVIS International, he is Supervisor for the China business of a respected German company and shares his extensive knowledge to students by teaching commercial law in China at SRH Hochschule Heidelberg. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV stations. Contact: richard.hoffmann@ecovis-beijing.com.

Ecovis Beijing

Ecovis Beijing is the trusted tax and legal advisor to several embassies and official institutions in China. It specializes in mid-sized international companies and is focused on tax & legal advisory, accounting and auditing. If you’re interested in finding out more about tax and legal, don’t hesitate to sign up for our Newsletter, give us a call +86 10-65616609 or contact us directly via service@ecovis-beijing.com.