Thinking of launching a fintech in Europe and wondering why Latvia has become a hub for money transfer companies? Find out how to get a money transfer licence in Latvia, its unique advantages, and why it attracts so many entrepreneurs.
PSP or EMI Licence: Two Paths for a Fintech
Latvia, with its favourable regulatory framework and advanced tech environment, has established itself as a preferred choice for fintechs looking to operate in Europe. Two main types of licence are available: the Payment Service Provider (PSP) Licence and the Electronic Money Institution (EMI) Licence. These licences are essential for any fintech looking to offer payment or money transfer services within the European Union.
Getting a licence in Latvia offers several advantages, including access to a wider European market and favourable regulatory conditions. What's more, setting up an SIA is renowned for being relatively simple and fast.
Requirements and Minimum Capital for a Licence in Latvia
To get a money transfer licence in Latvia, it's essential to understand the requirements set by the FKTK (Financial and Capital Market Commission).
- Minimum capital required: For a PSP licence, the minimum capital is €125,000, while for an EMI licence it's €350,000.
- Compliance requirements: Companies must demonstrate their ability to meet AML/KYC regulations and protect client funds.
- Other requirements: Proof of technical and management expertise, as well as a solid business plan.
The initial cost of setting up your company, including licence fees and legal services, can range between €20,000 and €50,000, depending on how complex your project is.
Timelines and Costs to Get the Licence
The process of getting a licence in Latvia is relatively fast compared with other European jurisdictions. Generally, the average timeline is between 3 and 6 months.
Here's a simplified timeline of the approval process:
- Month 1: Preparing the required documents and submitting them to the FKTK.
- Months 2-3: Initial review by the FKTK and clarification requests.
- Months 4-5: Finalising terms and final approval.
- Month 6: Getting the licence and launching operations.
Good to know
Licence costs can vary depending on additional services required, such as compliance or building out technology infrastructure.
AML/KYC Compliance Obligations
AML (Anti-Money Laundering) and KYC (Know Your Customer) compliance rules are strict in Latvia, but they're designed to ensure transparency and security in financial transactions.
- Client identification: Collecting and verifying clients' identity information before any transaction.
- Transaction monitoring: Setting up systems to detect suspicious activity.
- Regular reporting: An obligation to report any suspicious activity to the relevant authorities.
Good to know
Adopting good practices from the start helps maintain compliance and avoid costly penalties. Working with compliance experts is strongly recommended.
Why Does Latvia Attract European Fintechs?
Latvia offers several tax and regulatory advantages that appeal to fintechs.
- Tax advantages: A competitive tax regime with incentives for innovation.
- Tech infrastructure: An advanced ecosystem with robust technology support.
- Government support: Initiatives to encourage foreign investment in the fintech sector.
"Latvian regulation, combined with a solid tech ecosystem, makes it a credible gateway to the European market for a fintech going through licensing." – Société Lettonie
Comparison With Other European Jurisdictions
Let's compare Latvia with other European jurisdictions popular with fintechs, such as Lithuania and Malta.
| Country | Advantages | Drawbacks |
|---|---|---|
| Latvia | Tax advantages, tech support | Limited domestic market |
| Lithuania | Fast licensing process | Higher competition |
| Malta | Attractive tax climate | Less developed tech infrastructure |
For entrepreneurs looking for tax optimisation and strong tech support, Latvia remains a very attractive option.
How to Start Your Fintech in Latvia
Here are the practical steps to launch your fintech in Latvia:
- Step 1: Research and develop a solid business plan.
- Step 2: Set up a Latvian company (SIA) and open a local bank account.
- Step 3: Prepare the documents needed for the licence application.
- Step 4: Submit the application to the FKTK and follow up on the approval process.
- Step 5: Put AML/KYC compliance systems in place.
To succeed, it's crucial to surround yourself with experienced professionals and stay informed about regulatory developments. Our experts can support you both in setting up your SIA and in putting together your licence application.
For more information on getting your money transfer licence in Latvia, contact us today for personalised support.