LITHUANIA: THE EU GATEWAY FOR YOUR FINTECH Recht effizient www.ecovis.com LITHUANIA: THE EU GATEWAY FOR YOUR FINTECH Inga KARULAITYTĖ, Loreta ANDZIULYTĖ, ECOVIS ProventusLaw 2017-05-20

Speakers: Inga Karulaitytė, Loreta Andziulytė INTRODUCTION ECOVIS ProventusLaw is a part of ECOVIS global consulting network with over 4 500 professionals operating in over 65 countries. Our Law firm main focus area is Financial services (FinTech). The FinTech team consist of 7 members. www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

Speakers: Inga Karulaitytė, Loreta Andziulytė WHY LITHUANIA? (1) Strategy of Lithuanian Government to make Lithuania a FinTech Hub in a region Central Bank acts as a partner for FinTech companies Central Bank has a Newcomer program - ,,one stop shop” for FinTech Companies Pre-application period: pre – assessment of the business model, consultations, meetings Smooth and predictable licensing process Fast licensing process (3 months for EMI and PI) Licensing documentation can be submitted in English www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

Speakers: Inga Karulaitytė, Loreta Andziulytė WHY LITHUANIA? (2) Possibility to get own sorting codes for IBAN accounts for the clients, non- banks have access to SEPA through SEPA MMS system Innovative “know your customer” processes for remote client verification Easy and fast license passporting to other EU/EEA jurisdictions 1 year sandbox regime – no sanctions from the regulator for the first year for minor infringements Start-up visa. Special visas for the citizens of non-EU/EEA countries Favorable tax and fees. Turnover taxes and fee for the issuance of a license and annual licence state fees for FinTech companies are among the lowest in the EU region. 3 times R&D deduction www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

Speakers: Inga Karulaitytė, Loreta Andziulytė WHY LITHUANIA? (3) What else is planned to do for improving of FinTech sector: To review supervisory requirements in order to reduce administrative barriers 2. Increase efficiency of the licensing process 3. Analyze possibilities to apply regulatory technologies Goals of the Bank of Lithuania: 1. To accelerate of innovative solutions in the market 2. To create competitive and innovative payment market in Lithuania www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

Speakers: Inga Karulaitytė, Loreta Andziulytė SEPA MMS SYSTEM A new-generation retail payment system, created in Lithuania and managed by the Bank of Lithuania, that allows customers of banks and financial institutions to execute payments in euro quickly and at low cost Service fees applied in the system: for each credit payment order (up to the first million) submitted to and executed in the system - EUR 0.03 for each credit payment order (exceeding the first million) submitted to and executed in the system - EUR 0.01 for each credit payment order received from the system and executed – EUR 0.01 www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

FINTECH AND FINANCIAL INSTITUTIONS Electronic Money Institution Payment Institution Specialised Bank Securities Broker Investment Management Investment Fund Crowdfunding Platform Peer to Peer Lending Platform www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

COMPARISON OF SERVICES Type of PSPs Services Bank Special purpose bank Electronic money institution Payment institution Payment services + Money exchange Issuance of electronic money - Lending Receipt of deposits Investment services, clearing, services related to securities emissions www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

Speakers: Inga Karulaitytė, Loreta Andziulytė PAYMENT INSTITUTION Main features: Licensing time – 3 months Equity capital – from EUR 20 000 to EUR 125 000 No particular requirements for company management to reside in Lithuania License application can be submitted without establishing a company www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

SERVICES ACCORDING TO THE EQUITY CAPITAL www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

ELECTRONIC MONEY INSTITUTION Main features: Licensing time – 3 months Equity capital – from EUR 350 000 No particular requirements for company management to reside in Lithuania License application can be submitted without establishing a company www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

MINIMUM MANAGEMENT REQUIREMENTS The management of both the Electronic money institution and the Payment institutions must consists of at least six people: General manager/CEO; 3 Management Board members (General manager may be a part of the board); 3 Supervisory Board members. www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

PROCESS OF LICENSING AND INCORPORATION OF PI AND EMI Preparation of the package of the documents for submission for the license. The length of the process depends on the cooperation of the shareholders and related parties Selection of the management board, manager, other key personnel to inform the Central Bank on selected candidates. Submitting prepared documents of activities, business, strategic plans and other related to submission documents together with the information about the managers and shareholders. License is to be granted within 3 months after the submission of all required documents, extensions are possible. After getting the license, the Institusion is incorporated and it is registered within the Register of Legal Entities. The management shall be appointed after the Central Bank approves their candidacies during the licensing process. Registration of the company and getting a number of license should normally take 3 days after the decision of the board of the Central bank www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

Speakers: Inga Karulaitytė, Loreta Andziulytė SPECIALISED BANK From the 1st of January, 2017 EU member state Lithuania introduces a new type of credit institution – Specialised Bank Main features: Licensing time – 6 months (may be extended up to 12 months) Equity capital – from EUR 1 000 000 License is issued in cooperation between the Bank of Lithuania and the European Central Bank. Main advantage: All of the deposits are ensured under EU regulation. Lithuanian Specialised Bank opens a large European banking market at significantly lower cost and enables new players to challenge traditional banks in their large national markets. www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

SERVICES OF SPECIALIZED BANK Specialised Bank enables provision of almost all traditional banking services in EU/EEA markets, including acceptance of deposits and lending. Specialised banks will not be able only to render the following banking services: provide investment services; manage investment, pension funds; be active by providing other services related to security emissions. www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

PROCESS OF LICENSING AND INCORPORATION Strategic Commission formed within the Lithuanian Government needs to approve the incorporators as being compliant with the national security interests. Process takes up to 1 month and may be handled in parallel with the licensing Preparation of the package of the documents for submission for the specialized bank license. The process can take 1-4 months or more depending on the cooperation of the shareholders and related parties. Selection of the management board, general manager, supervisory board, internal auditor, compliance manager, managers of the branches, other key personnel to inform the Central Bank on selected candidates. Submitting prepared documents of activities, business, strategic plans and other related to submission documents together with the information about the managers and shareholders of the specialized bank to the Central Bank. License is to be granted within 6 months after the submission of all required documents, extensions are possible. European Central Bank reviews documents and gives approval to issue a license. After getting a license, the Specialized bank is incorporated, the Bank is registered within the Register of Legal Entities. The management shall be appointed after the Central Bank approves their candidacies during the licensing process. Registration of the company and getting a number of license should normally take 1-2 weeks after the decision of the board of the Central bank www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

ORGANIZATIONAL STRUCTURE (EXAMPLE) Risk Committee Credit Committee Deputy General Manager Compliance officer Management Board (minimum 3 persons) Internal audit Supervisory Board (minimum 3 persons) General Manager AML Officer General meeting of the shareholders Audit Committee www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė

Speakers: Inga Karulaitytė, Loreta Andziulytė Recht effizient www.ecovis.com MANY THANKS! ECOVIS ProventusLaw Mėsinių 5, 01133 Vilnius Tel.: +370 5 212 4084 E-Mail: vilnius@ecovis.lt Internet: www.ecovis.lt www.ecovis.lt/fintech/ Speakers: Inga Karulaitytė, Loreta Andziulytė