In recent years, there have been more and more variants of gift cards, from the plastic fashion check to a digital QR code. The rationale behind these is mostly the same, namely the gift of an amount of money to make a particular purchase or experience. However, which financial supervisory obligations apply to gift cards can vary and are not always clear in advance. In this news item, we draw your attention to the main features of the potentially applicable financial supervisory obligations.
The Financial Supervision Act ("Wft") applies to a variety of financial products, services and companies. In many cases, a company must have a license from De Nederlandsche Bank ("DNB") or the Authority for the Financial Markets ("AFM") in order to offer these products and services. One of the undertakings falling within the scope of the Wft is the electronic money institution.
An electronic money institution issues electronic money. Electronic money, in short, is a monetary value stored electronically or magnetically that can be used to make a payment to someone other than the issuer of the monetary value. To determine whether gift card issuing involves electronic money, it is necessary to determine where the gift card can be used. Roughly speaking, there are three possibilities: spending at the issuer (such as a department store), spending within a closed network (such as a cinema voucher or dinner voucher), or spending within an unlimited group of products or services. In the first possibility, the gift card does not qualify as electronic money. The second and third possibilities, on the other hand, do, noting that the third possibility is rare in practice.
It is important to know what legal obligations apply to issuers of gift cards that qualify as electronic money now that the consequences can have a major impact on the business. In short, there are two options for institutions issuing gift cards: a registration requirement as an electronic money institution or a licensing requirement as an electronic money institution.
A company has a registration requirement if it is exempt from the licensing requirement. This is the case when the spending limit of the gift card is a maximum of € 150, the enterprise does not issue electronic money in excess of € 5,000,000 per year, notifies DNB of the intention to issue electronic money and, finally, none of the (co-)policymakers has antecedents in the field of financial-economic crimes. If the company cannot use the exemption option, it must submit a license application to DNB. This license application is accompanied by various requirements, such as a minimum capital base and a policy on sound business practice. Issuing gift cards without the required license is prohibited. The basic amount of the administrative fine thereon is €2,500,000.
In order to prevent and combat money laundering and terrorist financing, various companies are required to investigate the intended purpose of the customer relationship and the origin of assets. This includes electronic money institutions that issue gift cards with a spending limit of more than €150 or if the spending on the Internet exceeds €50. It is irrelevant whether the electronic money institution is exempt or licensed. This may entail that customer research must be carried out, that transactions must be monitored and that Wwft training obligations apply to employees. One of the reasons for the Wwft obligations concerns the terrorist attacks in Paris in 2015 financed by means of (anonymous) gift cards.
