Electronic Money Institutions

Luxembourg created a legal framework for electronic payment establishments when the relevant EU Directive was transposed into law on 20th May 2011.

"Electronic money" is defined by this law as a monetary value representing a claim against the issuer which is:

• stored in electronic format, including on magnetic media, and
• issued against the remittance of funds with the goal of making payments, and
• accepted by an individual or organisation other than the issuer of the electronic money.

In addition to issuing electronic money, these establishments are also permitted to supply payment services, to grant loans (under certain conditions) linked to payment services, to supply operational services and other services closely linked to the issuing of electronic money or to the supply of payment services, to manage payment systems and to undertake commercial activity.

An electronic Payment establishment under Luxembourg law is subject to authorisation by the Minister in charge of the financial centre and prudential supervision by the Commission de surveillance du secteur financier (CSSF), the financial services supervisory authority. The establishment’s head office and central administration must be in Luxembourg.

The regulator pays particular attention to ensuring that the electronic payment establishment has a solid internal corporate governance framework, adequate processes for detecting, managing, controlling and reporting potential risks and has control and security mechanisms for its IT systems.