UK EMIs working with EU customers

[spacely]

Hello guys!

It is late at night and I am surfing the net for the answers to my questions and it seems that I am either overthinking or lacking the fundamentals (or both)

The question is: how so many UK EMIs still work with EU clients without passporting in the EU? As I see, it was an issue for Wirex and they are using the "Banking as a Service (BaaS)" from one licensed Lithuanian company UAB Payrnet. Wise and Revolut switched the licenses right after BREXIT.
Bilderlings and some other companies are still on their UK license and work with EU customers and it does not make sense to me. Could you explain this one please?
AdvCash, for example, also freely works with the EU - is it only through the correspondent Banks?
And also how it is working with SEPA and SWIFT? AdvCash for example has a license in Belize and that means that they are granted access to connect directly to SWIFT?? and for SEPA they need to find the correspondent Bank? And Wise has the license granted in the EU, which grants them direct access to connect to SEPA to save on the fees, and for SWIFT they need to find a correspondent Bank outside of the EU?

*Please excuse me for stupidity, I am just really lost now at this sleepless night and really hope you can clarify this stuff for me and for anyone who is curious. Thanks in advance!

 

[Martin Everson]

The question is: how so many UK EMIs still work with EU clients without passporting in the EU?

Banks and EMI's can still provide financial services to EU residents on a reverse solicitation basis. The same way a Swiss bank cannot solicit its services in the EU but can accept business on a reverse solicitation basis i.e you approach them and they did not approach you.

So if an EU person approach a bank or maybe an EMI in UK then they are free to open an account. Same way any EU person can open an account anywhere outside the EU but those banks and financial service companies should not solicit their services in the EU. I also don't see Bilderlings licensed in EU but maybe they are via some thirdparty entity so worth investigating.

------ quote start

Reverse solicitation is defined in article 42 of MiFID II and article 46(5) of MiFIR. Its key components are that the third country firm:

• can evidence that the investment service is provided at the exclusive initiative of the EEA client (whether such client is a retail client or professional client);
• provides only categories of products and services requested by the EEA client; and
• does not solicit, promote or advertise, any new investment products or services (in any way) to the EEA client.

----- quote end

And also how it is working with SEPA and SWIFT? AdvCash for example has a license in Belize and that means that they are granted access to connect directly to SWIFT?? and for SEPA they need to find the correspondent Bank?

Not familiar with Advcash. But yes if your outside a SEPA country then you indeed can just use a correspondent bank to get access to it or some of these new intermediary type companies. For example Paxumbank does this to get access to SEPA and its based in Dominica.

And Wise has the license granted in the EU, which grants them direct access to connect to SEPA to save on the fees, and for SWIFT they need to find a correspondent Bank outside of the EU?

SWIFT access is not just available to banks btw. For Wise to hold different currencies outside GBP and EUR they need to have a correspondence banking relationship or use a third-party that does. They can access GBP directly via Wise UK operation and EUR via Wise Belgium operation. When they want SGD for example then they formed a relationship with DBS bank in Singapore or via an intermediary in worst case.

UK is still a member or SEPA even after brexit.

 

[spacely]

@Martin Everson I really appreciate such a detailed response from your end. Thank you for your time!

Banks and EMI's can still provide financial services to EU residents on a reverse solicitation basis.

does it mean that SEMIs and SPIs based in the UK still can provide the services to the EU on a solicitation basis? I guess it is obvious from your answer, but I would like to be sure

 

[Forester]

does it mean that SEMIs and SPIs based in the UK still can provide the services to the EU on a solicitation basis? I guess it is obvious from your answer, but I would like to be sure

I must admit I do not know the abbreviations SEMIs and SPIs; but yes: if you, being in EU, ask the bank/EMI in the UK to provide you some service, they can do it. Beware, only if you ask the bank from your own initiative, they cannot promote their services.

(Remark: The ban on promotions means i.a. that they cannot claim at their webpages “we are happy to welcome EU located clients”, they cannot offer to the existing EU clients any additional services, etc. So in many, maybe in the most, cases, if the bank/EMI decided to work with EU clients further, they established an EU incorporated company as the parents.)

 

[spacely]

thanks, @Forester !

I must admit I do not know the abbreviations SEMIs and SPIs

Small Electronic Money Institution and Small Payment Institution

(Remark: The ban on promotions means i.a. that they cannot claim at their webpages “we are happy to welcome EU located clients”, they cannot offer to the existing EU clients any additional services, etc. So in many, maybe in the most, cases, if the bank/EMI decided to work with EU clients further, they established an EU incorporated company as the parents.)

Interesting. If an EU client came for onboarding for a UK EMI and successfully registered and became their client officially, does it mean that further this UK EMI cannot even send the regular promotional/newsletter e-mails to the EU customers which use their services already? Or they can write a disclamer for that or something?

 

[Martin Everson]

Interesting. If an EU client came for onboarding for a UK EMI and successfully registered and became their client officially, does it mean that further this UK EMI cannot even send the regular promotional/newsletter e-mails to the EU customers which use their services already? Or they can write a disclamer for that or something?

They can if it is related to what client signed up for. i.e the client wanted to open an account and wanted info on that so you send them literature on accounts. You can't however start offering them stock trading services they did not request. It is one of the reason IBRK, Charles Schwab etc all have operations in EU. They cannot offer services from outside the EU.

------ quote start
Reverse solicitation is defined in article 42 of MiFID II and article 46(5) of MiFIR. Its key components are that the third country firm:

• can evidence that the investment service is provided at the exclusive initiative of the EEA client (whether such client is a retail client or professional client);
• provides only categories of products and services requested by the EEA client; and
• does not solicit, promote or advertise, any new investment products or services (in any way) to the EEA client.

----- quote end

 

[Forester]

thanks, @Forester !

You are welcome.

Small Electronic Money Institution and Small Payment Institution

Oh, well. Thanks.

Interesting. If an EU client came for onboarding for a UK EMI and successfully registered and became their client officially, does it mean that further this UK EMI cannot even send the regular promotional/newsletter e-mails to the EU customers which use their services already? Or they can write a disclamer for that or something?

It is exactly so as @Martin Everson have written. Nothing to add.