Ever wondered what is the difference between an Authorized Delegate to an Electronic Money Distributor, or a Registered Agent?
The table below outlines the differences between the three classifications. Please note this table is valid for the European EMI licensing options only.
| Description | Authorized Delegate (AD) | Electronic Money Distributor (EMD) | Registered Agent (RA) |
|---|---|---|---|
| Classification | ISO (Independent Sales Organization) or Operator-Led Model | Distributor | Agent |
| Is regulatory approval required by the financial regulator? | No | Yes | Yes |
| Licensing Status | Not Licensed / Not Applicable | Sub-Licensing | Sub-Licensing |
| Is reporting required by the financial regulator? | No (not directly) | Yes | Yes |
| Would we be in-line in the flow of funds? | No | Yes | Yes |
| Can we have custody of client funds? | No | Yes, but the funds will be kept in the custodian accounts with the EMI, which has opened with particular banks. The EMD is not to hold the funds of their customers in different institutions.1 | Yes, but the funds will be kept in the custodian accounts with the EMI, which has opened with particular banks. The EMD is not to hold the funds of their customers in different institutions.1 |
| To whom does the client belong to? | Principal License Holder | Distributor (the client, when signing the agreement, is informed that the actual financial services are provided by the license holder and the Distributor is providing services as a registered intermediary).2 | Agent (the client, when signing the agreement, is informed that the actual financial services are provided by the license holder and the Agent is providing services as a registered intermediary).2 |
| Can sign-up customers directly, meaning, have access to PII (Personally Identifiable Information)? | No | Yes | Yes |
| Handle Customer KYC/KYB data? | No | Possible, determined on a case-by-case basis.3 | Possible, determined on a case-by-case basis.3 |
| Is a full-time compliance officer required? | No | Yes, can be provided by the license holder, based on who is handling the KYC/KYB processes.4 | Yes, can be provided by the license holder, based on who is handling the KYC/KYB processes.4 |
| Requires a compliance program? | No, uses the compliance manual of the Principal License Holder | Yes, but the compliance manual has to be approved by the Principal License Holder | Yes, but the compliance manual has to be approved by the Principal License Holder |
| Do we need Compliance Training? | Optional but not required | Required if the KYC/KYB is handled on the EMD’s side | Required if the KYC/KYB is handled on the Agent’s side |
| Can sign a correspondent tie-up agreement? | No | No | Yes, with the approval of the Principal License Holder.5 |
| Can we offer additional services not offered by the Principal License Holder? | No | No | Yes, with the approval of the Principal License Holder |
| Territories where we can operate | Limited to the geography as outlined by the Financial Regulator that issued the license to the Principal License Holder.6 | Limited to the geography as outlined by the Financial Regulator that issued the license to the Principal License Holder.6 | Limited to the geography as outlined by the Financial Regulator that issued the license to the Principal License Holder.6 |
| Can we further resell services or assign further agents? | No | No | No |
| Can we use our own payment processor? | No | Depends. Authorization and clearance are required from the Principal License Holder. In such a case, the Principal License Holder would have to be the party who signs the agreements with an additional processor, thus enabling it to be used by the EMD. | Yes. However, Authorization and clearance is required from the Principal License Holder.7 |
| Do we need our own banking arrangement? | No | Not mandatory. Principal License Holder will provide access to banking and custodial services. | Not mandatory. Principal License Holder will provide access to banking and custodial services. |
| Would we have access to client data? (for marketing purposes) | Very little access, as can be shared without violating any bank secrecy laws. | Yes | Yes |
| Tomorrow if we get our own license can we take our clients and their data with us? | No | Yes. Passporting of Client data is allowed.8 | Yes. Passporting of Client data is allowed.8 |
Footnotes
- Yes, but the funds will be kept in the custodian accounts with the EMI, which has opened with particular banks. The EMD is not to hold the funds of their customers in different institutions.
- Formally (in terms of providing financial services), the client belongs to EMI, i.e. if the client were to complain regarding the quality of the services provided, it would complain to the supervisor regarding EMI, whilst the Agent or the Distributor would be just additional attributes in the complaint.
- Possible after the audit of EMD/RA internal processes and procedures to comply with AMLD5 (Anti-Money Laundering 5th Directive) requirements. Independent annual audits or audits (not free of charge) by EMI will have to happen. This depends on the volumes, but realistically it can be handled decently with at least a team of 5–7 AML officers.
- As per the comment above, for the RA to act independently in this area, a single officer will not be sufficient. A dedicated officer (single) at principal might be enough (depending on the volumes) just because all the infrastructure and support staff (monitoring team, ODD team, etc.) is already there.
- Technically the EMI would still have to appear in the contracts as the core financial processing (and corresponding with another FI) will be done on EMI’s side.
- EEA – European Economic Area in most cases for the EU-based EMIs.
- Alignment of such agreements with EMI’s banking core would have to happen (reconciliation) as technically customer accounts have to be safeguarded and accounted for by the principal holder in any case.
- The process of migrating customers in such a case has to be agreed upon in the EMD/RA agreement (i.e. in some cases consent by the customer might be needed).
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This page was last updated on May 30, 2023.
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