EMI Passporting Post-Brexit — Alternatives for UK Firms

The loss of EU passporting rights following Brexit has been one of the most significant operational challenges for UK-authorised EMIs with European customer bases. Firms that previously served customers across the EEA under a single UK licence must now navigate a more complex regulatory landscape. This guide explains the practical alternatives available and the key considerations for each approach.

What Passporting Rights Were Lost?

Under the pre-Brexit regime, a UK-authorised EMI could exercise its right to provide services across the EEA either on a cross-border basis (freedom of services) or by establishing branches in other member states (freedom of establishment). These rights were automatic — once notified through the FCA, the firm could operate in any EEA country without obtaining a separate local licence.

From 1 January 2021, these passporting rights ceased. UK EMIs became 'third-country' firms from the EU's perspective. Most EU member states provided limited transitional arrangements (the Temporary Permissions Regime in the UK did not help UK firms access EU markets — it only helped EU firms continue operating in the UK). The result is that UK EMIs cannot lawfully provide regulated payment services or issue electronic money to customers in EU/EEA countries without establishing a separate legal and regulatory presence.

Option 1: Establish an EU-Authorised Subsidiary

The most comprehensive solution is to incorporate a new entity in an EU member state and obtain EMI authorisation from the local regulator. This gives the firm full passporting rights across the EEA from the new jurisdiction. The key decisions are which jurisdiction to choose and how to structure the group.

Lithuania has become the most popular jurisdiction for UK firms seeking EU EMI authorisation. The Bank of Lithuania offers a streamlined digital application process, relatively fast processing times (typically 3–6 months for a well-prepared application), competitive initial capital requirements (€350,000 for an EMI), and an English-speaking regulatory team. Lithuania also offers a 'specialised bank' licence for firms that want to expand beyond payment services. Ireland is the second most popular choice, offering proximity to the UK, a common-law legal system, English as the primary language and a well-established regulatory framework under the Central Bank of Ireland. However, processing times tend to be longer (6–12 months) and the regulatory engagement more intensive.

Other jurisdictions — including the Netherlands, Luxembourg and Belgium — are viable alternatives depending on the firm's specific business model, customer base and operational preferences.

Option 2: Partner with an EU-Licensed Firm

For UK EMIs that do not want the cost and complexity of establishing and maintaining a separate EU entity, partnering with an existing EU-authorised EMI or PI is an alternative. Under this model, the EU-licensed partner provides the regulatory 'wrapper' for services to EU customers, while the UK firm provides the technology, operations or customer relationships.

Partnership structures include: agent arrangements where the UK firm acts as an agent of the EU-licensed entity for the provision of payment services in the EEA; white-label partnerships where the EU partner issues e-money or processes payments under its own licence but the service is branded and operated by the UK firm; and outsourcing arrangements where the EU partner outsources operational functions to the UK firm under a compliant outsourcing framework.

Each structure has regulatory, commercial and operational implications. Agent arrangements require notification to (and in some jurisdictions, approval by) the host state regulator. White-label partnerships require careful structuring to ensure the EU partner retains genuine regulatory control. Outsourcing arrangements must comply with the EU partner's regulatory obligations regarding oversight, business continuity and audit access.

Option 3: Reverse Solicitation

Some firms have attempted to rely on 'reverse solicitation' — the principle that regulatory restrictions on cross-border services do not apply where the customer initiates contact with the firm entirely at their own initiative. However, this is not a viable long-term strategy. EU regulators, including ESMA and the EBA, have issued guidance interpreting reverse solicitation narrowly. Active marketing, SEO targeting EU customers, referral arrangements or any form of solicitation directed at EU residents will generally negate a reverse solicitation claim.

Structuring the Group Post-Brexit

Firms that choose to establish an EU subsidiary must consider how to structure the group efficiently. Key considerations include: how customer funds flow between the UK and EU entities; data protection and cross-border data transfer arrangements (UK-EU adequacy decisions have time limits); shared technology infrastructure and the regulatory implications of intra-group outsourcing; capital allocation between the UK parent and EU subsidiary; and consolidated governance and risk management across both regulated entities.

The FCA and the EU subsidiary's home regulator will both expect to see clear corporate governance, independent boards and arms-length commercial arrangements between group entities. The EU regulator will scrutinise whether the subsidiary has genuine substance — adequate local staff, a resident director, independent decision-making capacity and local operational infrastructure — or whether it is merely a 'brass plate' designed to circumvent licensing requirements.

Regulatory Counsel advises UK EMIs on post-Brexit market access strategies, EU licensing applications and cross-border structuring. Contact us for a free initial consultation. See our EMI authorisation page and our Lithuania and Ireland jurisdiction guides for more.