Overview of Latvian EMI Licensing
Latvia provides an EU-compliant pathway to electronic money institution licensing within the Baltic financial services market. Operating under European harmonized regulations, the Financial and Capital Market Commission (FKTK) serves as the primary regulatory authority, applying EU standards while fostering a competitive FinTech environment.
As a eurozone member and SEPA participant, Latvia offers licensed institutions direct access to European payment infrastructure alongside competitive operating costs compared to Western European alternatives.
Regulatory Framework
Latvian electronic money regulation derives from European Union harmonization requirements:
EU Directive 2009/110/EC: The Electronic Money Directive, implemented in Latvian law, establishes core requirements for EMI authorization and ongoing operation.
Payment Services Directive 2 (PSD2): Directive 2015/2366 governs payment services, including requirements for strong customer authentication and open banking provisions.
Law on Payment Services and Electronic Money: The primary domestic legislation implementing EU directives and establishing the FKTK's supervisory authority.
Anti-Money Laundering Law: Implements EU AML directives, establishing customer due diligence and suspicious activity reporting obligations.
License Categories
Latvia offers tiered authorization based on business scale:
Full EMI License
For institutions planning substantial operations:
- •Minimum Capital: €350,000
- •Scope: Unrestricted e-money issuance and payment services
- •Passporting: Full EU/EEA market access through establishment or services passport
Simplified Authorization
For smaller-scale operations meeting prescribed thresholds:
- •Eligibility: Annual turnover under €2 million
- •Requirements: Reduced documentation and capital requirements
- •Limitations: Geographic and volume restrictions may apply
Capital Requirements
Initial Capital
Full EMI authorization requires minimum €350,000 in authorized capital, deposited in a Latvian bank account before license application.
Ongoing Capital
Licensed EMIs must maintain own funds calculated according to prescribed methods, based on average outstanding electronic money and payment transaction volumes.
Proof of Funds
The FKTK requires documentation demonstrating legitimate origin of capital funds, including source of wealth verification for significant shareholders.
Eligibility Criteria
Management Requirements
Latvian regulations emphasize competent management:
Qualifications: Founders and senior managers must possess specialized education in finance, economics, law, or related fields, combined with minimum 3 years of relevant professional experience.
Local Presence: Management team should include locally qualified residents capable of ensuring effective oversight.
Fit and Proper Standards: All persons with significant influence must satisfy FKTK fitness criteria, including clean criminal records and demonstrated competence.
Corporate Requirements
- •Physical Presence: Real office premises with registered legal address in Latvia
- •Banking Relationships: Corporate bank account with a Latvian or EU credit institution
- •Operational Systems: Business software and IT infrastructure appropriate for proposed activities
Documentation Requirements
EMI applications require comprehensive documentation:
Corporate Documents
- •Company registration documents
- •Articles of association
- •Shareholder structure and beneficial ownership information
- •Office lease agreement or property documentation
Business Planning
- •Detailed business plan covering at least three years
- •Financial projections demonstrating viability
- •Description of proposed services and target markets
- •Fee structures and pricing policies
Governance Documentation
- •Organizational structure
- •CVs demonstrating qualifications and experience
- •Fit and proper declarations
- •Internal governance policies
Compliance Framework
- •AML/CFT policies and procedures
- •Customer due diligence protocols
- •Risk management framework
- •Internal control mechanisms
- •IT security and business continuity plans
The Authorization Process
Pre-Application Phase
- •Business model development and regulatory assessment
- •Corporate establishment (if not already formed)
- •FKTK pre-registration consultation recommended
- •Capital arrangement and banking relationships
Timeline: Minimum 1.5 months for complete preparation
Application Submission
- •Complete documentation package submitted to FKTK
- •Application fee payment
- •Formal acknowledgment of receipt
Regulatory Review
Timeline: Approximately 1 month for application review
FKTK evaluation covers:
- •Business plan viability
- •Capital adequacy
- •Management fitness and propriety
- •Governance and compliance frameworks
- •Operational readiness
Decision and Implementation
- •License granted (with or without conditions)
- •Or refusal with stated reasons
- •Post-authorization implementation and supervised commencement
Services Available Under Latvian EMI Authorization
Licensed institutions may provide:
Electronic Money Services
- •Issuance of electronic money against receipt of funds
- •Redemption of electronic money at par value
- •Distribution through agents and partners
Payment Services
- •Operation of payment accounts
- •Credit transfers and standing orders
- •Direct debit collections
- •Card issuance and processing
- •Money remittance services
- •Payment initiation services (with appropriate authorization)
Advantages of Latvian EMI Licensing
EU Market Access
Latvian EMI licenses enable passporting throughout the European Economic Area, providing market access from a single authorization.
Payment Infrastructure
- •SEPA membership for efficient euro payments
- •SWIFT connectivity for international transfers
- •Integration with Baltic and European payment systems
Cost Competitiveness
Latvia offers lower operating costs than Western European alternatives, including:
- •Office rental and premises costs
- •Professional services fees
- •Personnel costs
Regulatory Accessibility
The FKTK maintains dialogue with applicants and provides guidance on regulatory requirements, supporting efficient authorization processes.
Ongoing Compliance Obligations
Licensed Latvian EMIs must maintain:
Prudential Compliance
- •Capital adequacy at prescribed levels
- •Customer fund safeguarding
- •Liquidity management
Regulatory Reporting
- •Periodic financial returns
- •Operational reporting
- •Annual audited accounts
AML/CFT Compliance
- •Customer due diligence
- •Transaction monitoring
- •Suspicious activity reporting
Conduct Standards
- •Fair customer treatment
- •Transparent pricing
- •Complaint handling procedures
Practical Considerations
Timeline Expectations
- •Company formation: 2-3 weeks
- •Application preparation: 6-8 weeks
- •Regulatory review: Approximately 1 month
- •Total: 3-4 months for well-prepared applications
Professional Support
Most applicants engage:
- •Latvian legal counsel familiar with financial services regulation
- •Compliance specialists for policy development
- •Local accounting support
Banking Relationships
Early engagement with Latvian banks advisable, as corporate banking due diligence can extend timelines.
Conclusion
Latvian EMI licensing provides efficient access to European electronic money markets, combining EU-standard authorization with Baltic region cost advantages. The FKTK's accessible approach and Latvia's eurozone membership create favorable conditions for FinTech companies seeking EU market entry.
Success requires thorough preparation, including robust business planning, comprehensive compliance frameworks, and qualified management. Companies investing appropriately in these foundations can achieve authorization within competitive timeframes while building sustainable payment services businesses with pan-European reach.