PRACTICE NOTE FOR MOBILE MONEY TRANSFER OPERATORS

Transcription

1 PRACTICE NOTE FOR MOBILE MONEY TRANSFER OPERATORS ISSUED 17 FEBRUARY 2015 MMT Practice Note Page 1

2 Nature of establishment The Central Bank of Swaziland (CBS) is a creature of statute in terms of the Central Bank of Swaziland Order 1974 (as amended). In terms of the Act, the objects of the CBS are to inter alia to promote, regulate and supervise the efficient and secure operation of payment systems with the prime aim of promoting a sound financial structure. MMT Practice Note Page 2

3 TABLE OF CONTENTS Chapter I: General Provisions... 6 Purpose... 6 Definitions... 6 Chapter II: Licensing Procedure Licensing Application for a license Other Documentation Requirement for supervised institutions by the Central Bank Capital Requirements Letter of Acknowledgement Central Bank s Decision on granting license Authorization or License fees Examinations Regulatory Fees Withdrawal or suspension of authorization or license Discontinuing payment service(s) Action of the Central Bank Return of the License Merger Chapter III - Miscellaneous Provision Outsourcing of activities Agency agreements Requirements for specific services Prohibition of exclusivity agreement Reports and Records Existing Providers MMT Practice Note Page 3

4 Sanctions Chapter IV: Final Provision Entry into force MMT Practice Note Page 4

5 PREFACE This guide shall be cited as the Central Bank of Swaziland (CBS) Mobile Money Transfer (MMT) Practice Note No. 1/2015/NPS and shall be applicable to financial institutions and non-financial institutions as defined by the Financial Institutions Act, 2005 and is effective from the 17th February This Practice Note provides minimum requirements to operate MMT systems within and/or from Swaziland after due authorization processes. This Practice Note mainly outlines authorization and/or the licensing procedures to aid application and consideration thereof regarding national provision of MMT services. Whereas adoption of international best practice should facilitate a consistent approach to risk management, MMT providers shall be expected to have an integrated approach to managing risk that adequately identifies, measures, monitors and controls risk. MMT Practice Note Page 5

6 Chapter I: General Provisions 1. Purpose The Practice Note sets forth the rules governing the authorization or licensing by the Central Bank of Swaziland, of Mobile Money Payment Service Providers and monitoring of their activities. 2. Definitions Terms and expressions used in this Practice Note have the following meaning: 2.1 Agency means a contract whereby one (1) person is authorized and usually required by another (the principal) to contract or to negotiate a contract on the latter s behalf with a third person. 2.2 Agency Agreement means a legal contract creating a fiduciary relationship whereby the the principal agrees that the agent acts for and on behalf of him or her. 2.3 Branchless banking means a distribution channel strategy used for delivering financial services without relying on bank branches. It entails substantially the use of technology means, such as electronic, digital or similar device, either remotely or through the use of third-parties outlets to offer at least basic cash deposit and withdrawal in addition to transactional or payment services; backing of a commercial bank; and customers can use these banking services on regular basis; 2.4 Supervised Institutions means a bank, a non-bank financial institution or a micro-finance institution within the meaning of the laws governing the financial sector MMT Practice Note Page 6

7 2.5 Issuer of Payment Instruments means any entity which provides payment instruments to users for the purpose of making payments; 2.6 Mobile Money also referred to as mobile payment or mobile money transfer, mobile wallet generally refer to payment services operated under financial regulation and performed from or via a mobile device as opposed to cash, paper based instruments and card based payments. 2.7 Money Remittance means a payment service where funds are received from an originator without any accounts being created in the name of the originator or the beneficiary, for the sole purpose of transferring a corresponding amount to a beneficiary or to another payment services provider acting on behalf of the beneficiary. 2.8 Payment Services The following activities are payment services: Services enabling cash to be placed on and/or withdrawn from a payment account in Supervised Institutions as well as all the operations required for operating a payment account Execution of payment transactions, including transfers of funds on a payment account in the Supervised Institutions with the user s payment service provider or with another payment service provider Execution of payment transactions on a payment account in the Supervised Institutions where the funds are covered by a credit line for payment service user; Issuing and/or acquiring of payment instruments; Money remittance; MMT Practice Note Page 7

8 2.8.6 Execution of payment transactions where the consent of the payer to execute a payment transaction is given by means of any telecommunication, digital or IT device and the payment is made to telecommunication, IT intermediary between the payment service user and the supplier of the goods and services. 3. Payment account means an account held in the name of one or more payment service users which is used for the execution of payment transactions. 4. Payment Services Provider means any entity providing services enabling cash deposits and withdrawals, execution of Payment Transaction, issuing and or acquisition of payment instruments, money remittances and any other services functional to of money. The term does not include solely those who provide online services or by telecommunication services or network access; 5. Payment instruments means an instrument enabling the holder/user to transfer funds such as cheques, electronic money, credit cards and debit cards or any other instrument through which persons can make payments, with the exception of banknotes and coins are payment instruments; 6. Payment Transaction means a transfer of funds between, or into or from accounts. A payment transaction may be either a credit or a debit transfer. It is initiated by means of a payment order, which may be written, electronic, digital or any other communication device, or by the use of a payment instrument. 7. Stored value devices are devices with data encoded in either a magnetic strip or a computer chip that are preloaded with a fixed amount of electronic currency or value. This can be redeemed or MMT Practice Note Page 8

9 transferred to individuals and/or merchants in a manner that is similar to spending physical currency; 8. Trust Account means a separate bank account segregated from a payment service provider s own funds, in which the payment service provider is required to deposit all funds collected for clients. MMT Practice Note Page 9

10 CHAPTER II: LICENSING PROCEDURE 3. Licensing No person or entity may act as a Mobile Money Payment Services Provider, unless they are in possession of a no objection letter or authorization or license for this purpose, obtained from the Central Bank. Supervised Financial Institutions providing payment services under the Financial Institutions Act are exempted from the requirement to obtain a license from the Central Bank under this guideline. However they are subject to any relevant monitoring requirements imposed by the Central Bank. 4. Application for a license In order to obtain a letter of no objection or authorization or license, an institution not supervised by the Central Bank will submit to the Central Bank an application letter accompanied by at least the following documentation: 4.1 Description of the nature and scope of the services to be offered and how these services fit in with its overall business strategy; 4.2 List of products and services to be provided with a breakdown of commissions/prices to be charged to the customer and/or consumer; 4.3 Description of governance structure of the scheme to provide the service, including legal definition of relationship with any supervised financial institution from which it clearly emerges how liabilities are shared and risks avoided or reduced; MMT Practice Note Page 10

11 4.5 Criteria for the selection of agents and/or the outsourcing of parts of the activities, where applicable; 4.6 Copy of any agency or outsourcing agreement, as appropriate, either individual or standard; 4.7 A signed document detailing the features and operational modalities of all IT interfaces including the operating systems and software explaining at a minimum the following: A description including diagrams of the configuration of the institutions electronic payment system and its capabilities showing: How the electronic payment system is linked to other host systems or the network infrastructure in the institution; How transaction and data flow through the network, settlement process and timing; What types of telecommunication channels and remote access capabilities exist such as direct modem dial-in, internet access, etc; and What security controls/measures are installed A list of software and hardware components indicating the purpose of the software and hardware in the electronic payment infrastructure How the system is interoperable with other existing electronic payment systems; 4.8 A signed document of the relevant portion(s) of the security policies and procedures manual containing at a minimum: A description of the institutions security organization; Definition of responsibilities for designing, implementing, monitoring and updating information security measures; and MMT Practice Note Page 11

12 4.8.3 Established procedures for evaluating policy compliance, enforcing disciplinary measures and reporting security violations; 4.9 A signed document describing the contingency and disaster recovery plans for electronic payment facilities and event scenario/problem management plan/program to resolve or address problems, such as complaints, errors and intrusions and the availability of back up facilities; 4.10 Proof of ability to comply with all applicable Anti Money laundering and combating of financing of Terrorism (AML/CFT) laws as enshrined in the Money Laundering/Terrorist Financing (Prevention) Act, 2011 and Suppression of Terrorism Act, 2009, standards and measures. An applicant should submit a Policies and Procedures manual outlining its proposed internal rules and systems for compliance with AML legislation; 4.11 Details of the customer protection measures, including consumer recourse mechanisms and consumer awareness program; 4.12 Details of data protection policy 4.13 Float management guidelines and measures; 4.14 Evidence that the regulator for the Telecommunications industry certified the technology infrastructure for payment service provider operating their own network The institution shall produce such other documents that the Central Bank may call for during the consideration of the application. MMT Practice Note Page 12

13 5. Other Documentation An institution not supervised by the Central Bank wishing to provide payment services shall further submit to the Central Bank for consideration to obtain a letter of no objection or authorization: 5.1 A trading license to operate in the home/base country, where applicable; 5.2 Certificate of business registration in Swaziland 5.3 Proof of existence of Trust Account with a licensed commercial bank in Swaziland, set up such that the account is not accessible to the institution for its non-payment services operations; 5.4 Evidence that the applicant holds initial capital as mentioned under this guideline; 5.5 The identity and qualifications of directors 6. Requirement for supervised institutions by the Central Bank Any institution supervised by the Central Bank wishing to provide new or additional payment services must provide to the Central Bank for approval, a detailed description of the payment services it intends to operate, at least thirty (30) working days before effecting operations, containing all documents listed in article Capital Requirements Where applicable, capital requirements for institutions supervised by the Central Bank shall be those established in terms of Section 20 of the Financial Institutions Act, MMT Practice Note Page 13

14 8. Letter of Acknowledgement 8.1 Upon receipt of an application letter together with the requisite license or authorization fee prescribed by the Central Bank under article 10 of this guideline and supporting documents in accordance with articles 4 and 5, the Central Bank shall, within seven (7) working days, send the applicant a formal letter of acknowledgement or letter of deficiency as the case may be. 8.2 A letter of acknowledgement shall constitute official notice that the documents submitted were received and that the processing or evaluation may commence thereof unless the submissions are found deficient. 8.3 A letter of deficiency shall outline deficiencies in the application; provide a deadline for rectification of the deficiencies. No further action shall be taken by the Central Bank unless the deficiencies are rectified within the period prescribed. 9. Central Bank s Decision on granting license and/or authorization 9.1 The Central Bank shall, within three (3) months after receipt of a complete application, investigate; prepare a response to the applicant; 9.2 The response shall indicate whether the application satisfies all requirements as provided by law and/or regulation, as well as whether the granting of the letter of no objection or authorization or license could be subject to the fulfillment of certain conditions that the Central Bank may deem necessary. 9.3 The investigation may require direct contacts and clarifications by the applicant, to be provided either in writing or verbally. In this MMT Practice Note Page 14

15 instance the Central Bank shall draft minutes of the meeting to be signed by the applicant. 9.4 The Central Bank shall inform the applicant, in writing, of its decision to grant or refusal to grant the letter of no objection or authorization or license. A notice communicating the refusal to grant a letter of no objection or authorization or license shall indicate the reasons for such refusal. 9.5 The granting of a letter of no objection or authorization or license to an applicant not being an Institution supervised by the Central Bank shall be conditional upon submission of an insurance policy in the sum to be prescribed by a licensing authority as security for the funds channeled through the system. 9.6 Any license or authorization shall be subject to annual renewal under request of the Payment Services Provider. 10. Authorization or License fees 10.1 A non-refundable license or authorization fee shall become due and payable when applying for a license and upon subsequent renewal of authorization For Institutions not supervised by the Central Bank desirous to offer mobile payment services, the license fee shall be determined by the licensing authority For Institutions not supervised by the Central Bank wishing to offer any other payment service, the license fee shall be determined by the designated licensing authority. MMT Practice Note Page 15

16 11. Examinations The Central Bank shall cause regular on-site and off-site examinations of the operations and affairs of every payment service provider The purpose of an examination under subsection (1) shall be to determine whether: a) the payment service provider concerned is in a sound financial condition, b) the provisions of this Practice Note are being adhered to by the payment service provider. And c) the business of a payment service provider is being operated in a lawful and prudent manner Every payment service provider and every agent of such an institution shall, pursuant to an examination conducted under this regulation, produce for the inspection of any examiner duly authorized by the Central Bank, at such times and in such places as the examiner may specify (being times and places which in the opinion of the examiner, are not detrimental to the conduct of the normal daily business of such institution), all books, minutes, accounts, cash securities documents and vouchers in its possession or custody, relating to the business and shall supply all information concerning the business as may reasonably be required by such examiner within such time as the examiner may specify As soon as possible after the conclusion of an examination, the Central Bank shall forward a summary of the examiner s report containing its salient points to the head office of the payment service provider concerned. MMT Practice Note Page 16

17 12. Regulatory Fees An annual regulatory fee for mobile money transfer service providers and for other relevant service providers shall be determined by the licensing authority. 13. Withdrawal or Suspension of Authorization or License 13.1 The Central Bank may decide to withdraw or suspend the authorization or license granted to a Payment Service Provider at any time if: The Payment Service Provider has not commenced operations within 12 months of the date on which the license was granted to it; The Payment Service Provider has ceased providing the service for a period of more than one month The Payment Service Provider has obtained the license of the Central Bank through incorrect statements or any other irregular means; The conditions or requirements described in these Practice Note are not met; In case the operations of Payment Service Provider endanger the stability of the financial system of Swaziland; The Payment Service Provider or a subsidiary of Payment Service Provider is insolvent without possibility of recovery; MMT Practice Note Page 17

18 The foreign Payment Service Provider is undergoing liquidation in its country of origin If in the opinion of the Central Bank, the service is no longer in the public interest or the service no longer represents the interest of the participants The Central Bank shall immediately after its decision on the withdrawal or suspension of the authorization or license, notify its decision to the Payment Service Provider The Central Bank shall, immediately after the withdrawal or suspension of the license, publish a public notice in such manner as it deems appropriate. 14. Discontinuing Payment Service(s) In the case where any service provider wishes to discontinue providing payment service or discontinue carrying on its business, such service provider shall notify in writing together with the report regarding the discontinuation of providing service or discontinuation of carrying on the business to the Central Bank of Swaziland sixty days before it discontinues the payment service(s). 15. Action of the Central Bank Upon receipt of the notification from the service provider as cited in article 13 of this Practice Note, the Central Bank of Swaziland shall have power to order the service provider to make specific performance as directed prior to discontinuation of providing service(s) or discontinue carrying on its business. 16. Return of the License Any service provider wishing to discontinue providing service or discontinue carrying on its business shall surrender its license where applicable to the Central Bank of Swaziland. MMT Practice Note Page 18

19 17. Merger In the case where the service provider wishes to merge with the other payment service providers, the provision of article 14, 15 and 16 shall be applied mutatis mutandis. MMT Practice Note Page 19

20 Chapter III - Miscellaneous Provision 18. Outsourcing of activities 18.1 Parties are free to outsource parts of their payment services activities, provided that this does not result in an increase in risk and a reduction in protection of customers Any outsourcing agreement shall be in writing and comprise at a minimum the following elements: Definition of the rights, responsibilities and apportioning of liabilities between parties, stating how the parties plan to manage the issue of any expected risk; Accurate definition of the activities to be outsourced; Mechanisms to ensure that the outsourced activities are subject to monitoring mechanisms by the institution and that regulatory review is permitted in order to grant to the Central Bank inspecting officers full and timely access to internal systems, documents, reports, and records Specify that the third party must ensure safe-keeping of all relevant records, data and documents/files for at least five (5) years; or alternately, such record is shifted to the institution at regular pre-specified intervals which will then ensure safe keeping of this record for at least five (5) years or longer if requested by CBS, FIU and Law Enforcement Agents State that all information/data that the third party collects in relation to payment services, whether from the customers or the institution or from other sources, is the property of the institution, and the institution will be provided with copies of related working papers/files it deems necessary, MMT Practice Note Page 20

21 and any information pertaining to the institution must be kept confidential Establish a protocol for changing the terms of the service contract and stipulations for default and termination of the contract; and State that staff of the third party is not considered staff of the institution Institutions Supervised by the Central Bank providing banking services may decide to outsource banking activities or use agents, in particular for the provision of branchless banking. In that case, the Institution Supervised by the Central Bank must communicate such intention to the Central Bank under the terms and conditions set forth in Article 6 of this Practice Note and will be permitted to operate only following approval of the Central Bank. 19. Agency agreements 19.1 Payment Services Providers and third-parties in charge of parts of the payment activities by way of outsourcing can use agents, provided that the customers are always fully aware of the existing agency relationship, of whether this depends from the Payment Services Provider or the relevant Third Party, and of consequences resulting from the use of agency networks Any agency agreement shall be in writing and provide at a minimum the following elements: Definition of the rights expectations, responsibilities and apportioning of liabilities between parties, stating how the parties plan to manage the issue of agent liquidity, and how MMT Practice Note Page 21

22 the institution plans to handle the uncovered liability of its agents; Indication of the work to be performed by the agent and the sharing of fees/revenues between the institution and the agent; Mechanisms to ensure that the activities performed by the institution and that regulatory review is permitted in order to grant to the Central Bank inspecting officers full and timely access to internal systems, documents, reports, and records; State that the agent will not perform management functions, make management decisions, or act or appear to act in a capacity equivalent to that of a member of management or an employee of the institution; Specify that the agent must ensure safe-keeping of all relevant records, data and documents/files for at least five (5) years; or alternately, such record is shifted to the institution at regular pre-specified intervals which will then ensure safekeeping of this record for at least five (5) years State that all information/data that the agent collects in relation to payment services, whether from the customers or the institution or from other sources, is the property of the institution and the institution will be provided with copies of related working papers/files it deems necessary, and any information pertaining to the institution must be kept confidential; Establish a protocol for changing the terms of the service contract and stipulations for default and termination of the contract; State that staff of the agent are not considered staff of the institution; and MMT Practice Note Page 22

23 Clarify that the Payment Service Provider (licensed institution) is ultimately liable to the clients. 20. Requirements for specific services 20.1 For domestic Money Remittances the maximum amount to be transferred per day and in total for each month shall be fixed by the licensing authority. For international Money Remittances the maximum amount to be transferred from Swaziland shall also be determined by the licensing authority, that is, for each day, for each month and for each year. 21. Prohibition of exclusivity agreement Contracts with exclusivity are not permitted by this Practice Note unless specifically authorized, in writing, by the Central Bank. 22. Reports and Records 22.1 Payment Service Providers are required to submit to the Central Bank on a monthly basis, within 10 working days of the end of each calendar month, a report of their transactions in terms of values and volumes, number of account subscribers or account holders, number of agents, material service interruptions and security breaches and any other information as may be required by the Central Bank from time to time Payment service providers are further required to report, within 48 hours, to the Financial Intelligence Unit about suspicious transactions in terms of the provisions of Anti-Money Laundering and Financing Terrorism Prevention Act MMT Practice Note Page 23

24 22.3 When a payment services provider intends to provide payment services through an agent it shall communicate to the Central Bank the name and address of the agent The service provider shall be expected to keep records showing the identity of directors and persons responsible for the management of the agencies The Central Bank may decide to list the agents into a registry in its website. However, if after taking action to verify the information, the Central Bank is not satisfied that the information provided is accurate, it shall refuse to list the agent in the above registry Any changes or enhancements that shall expand the scope or change the nature of payment services as originally provided shall be reported to the Central Bank and subject to prior approval of the Central Bank. These include but are not limited to: Additional capabilities of the branchless instrument, like access to new channels Change in technology of service providers and other major partners in the business; Other changes or enhancements (such as changes in commissions/prices structure or selection criteria for agents, etc). 23. Existing Providers Licensed non supervised Financial Institutions already authorized to provide payment at the time of the entry into force of this Practice Note, will be required to comply with the requirements contained herein within six (6) months of its entry into force failing which the license and/or authorization will be suspended or withdrawn. MMT Practice Note Page 24

25 24. Sanctions 24.1 Any entity engaging in payment services without the proper authorization of the Central Bank will be sanctioned in terms Section 16 of the National Clearing and Settlement System Act 2011 and shall be required to cease any relevant activities Any payment service provider that violates the provisions of Article 20 of this Practice Note shall be liable to pay a fine of 1/3 of transferred amount in favour of the Central Bank Any Payment service Provider that violates the provisions under Article 22 of this Practice Note shall be liable to pay a fine as stipulated in the Central Bank regulation(s) regarding penalties. MMT Practice Note Page 25

26 Chapter IV: Final Provision 25. Entry into force This Practice Note shall take effect on the day of its publication in the Central Bank of Swaziland s website. MMT Practice Note Page 26