1. EMA copyright 2002 E-money in the UK: The Electronic Money Association overview and suggestions 11 June 2002 Dr Thaer Sabri Chief Executive Electronic Money Association

2. EMA copyright 2002 Background Early 2001, interested parties comprised: Bank owned issuers Independent issuers Telecom sector Transport sector March 2001, initial FSA consultative meeting A number of common interests & various degrees of involvement in issues Formed a regulatory Working Group August 2001 wider role of group required formalisation September 2001 formed the EMA

3. EMA copyright 2002 The EMA’s Objectives EMA Objectives: Represent the joint interests of industry Pursue such interests Develop minimum standards wherever required Vehicle for communication within industry and with third parties Sharing of information Includes issuers, prospective issuers and small issuers (Mondex, Mastercard, Paypal, Travelex)

4. EMA copyright 2002 Learnings Iterative process of cooperation within industry Gradual sharing of information Mutual support also for single party issues Healthy but competitive relationship Openness and discussion fosters a better relationship with regulators Better understanding of issues at stake Education process regarding commercial reality and regulatory requirements makes compromise more likely Longer term view of regulatory framework Influence of industry with other parties also greater

5. EMA copyright 2002 The UK Consultation Process The financial services industry is regulated by the FSA The FSA is required to consult stakeholders on rules and guidance that it issues The Directive was implemented in two stages: Introduction of ELMI’s and e-money into law by amending statutory instruments – carried out by Treasury Putting in place the regulatory framework – prudential rules & guidance – carried out by the FSA HM Treasury consulted on the scope of regulation & definition of e-money October 2001 to January 2002 The FSA consulted Dec 2001 to Feb 2002

6. EMA copyright 2002 Issues at stake – HM Treasury HM Treasury Definition of e-money Issuing at a discount Compensation & Ombudsman schemes Criteria for waived institutions Transitional arrangements & time available Outcome E-money definition amended Marketing promotions not opposed Compensation scheme disapplied, FSA to decide on Omb. Sch. Waived criteria unchanged Transitional provisions issues noted, to be addressed by FSA

7. EMA copyright 2002 Issues at stake – FSA FSA Interpretation of definition of e-money Immediate issuance & deposit taking Issuing at a discount & marketing promotions Proposed purse limit and conditions for exceeding it The cost of participation in the Financial Ombudsman scheme Criteria for waived institutions Transitional arrangements & time available

8. EMA copyright 2002 Issues at stake – FSA Outcome E-money definition to include all technologies & designs Immediate issuance: allowance for settlement & operational delays Extensive allowance for marketing promotions, provided float is topped up to full value Purse limit increased to £1000 and conditions made more reasonable Participation in the Ombudsman scheme reduced substantially Criteria for waived institutions; unchanged no virtual equivalence Transitional arrangements, allowance for FSA delays

9. EMA copyright 2002 Current Items Application of Money laundering legislation Know your customer requirements Possibility of an anonymous product Record keeping requirements, scope FATF Special Recommendation VII Review of the FATF Forty Recommendations - consultation Industry best practice, voluntary, addressing: IT and non IT related risk Legal, Reputational, Cross border, and Operational risk

10. EMA copyright 2002 Some future Items Some of the issues are: Passporting Privacy The business barrier - creating a marketplace for products & services

11. EMA copyright 2002 Cooperation Common regulatory objectives Common framework based on EU Directive, therefore: Greater influence on EU interpretation if consensus shown Common representations for review of Directive in 2005; Common anti Money Laundering challenges Greater influence with third parties; ECB, OECD etc. Best practice Protects industry from reputational risk Increases likelihood of creating an e-money marketplace Mitigates liability

12. EMA copyright 2002 Cooperation Passporting Practical means of enabling cross border products by: Sharing knowledge on local consumer law, and Money laundering compliance requirements Fostering communication and sharing of knowledge in areas of common interest: combating fraud, money laundering etc.

13. EMA copyright 2002 EMA Founding Members These included: American Express International Inc Association of Train Operating Companies British Telecommunications Plc Electronic Transaction Corporation (UK) Ltd Flawless Money Ltd Internet Bearer Underwriting Corporation Inc MasterCard International Mondex UK Oakington Ltd Orange UK PayPal Inc Splash Plastic Ltd T-Mobile The Post Office Transport for London Travelex Plc UK Smart Ltd Vodafone UK

14. EMA copyright 2002 Thank you Dr Thaer Sabri Chief Executive The Electronic Money Association Director Flawless Money LTD Thaer@flawlessmoney.com M 0797 111 2066