MoneyGram. International

Transcription

1 MoneyGram. International July 8,2011 Franc;s Aaron Henry Senior Vice President. Associate General ounsel Global Regulatory and Chief Privacy Officer Me Louis Letellier, M. Fisc. Anatyste expert en n glementation Autorite des marches financiers Place de /a Cite, tour Cominar 2640, boulevard Laurier 3e etage Quebec G1V 5C1 Via Electronic Filing and Regular Mail Re: Comments on Draft Regulation ("Regulations") Under the Money-Services Business Act (the "Act") and Policy Statement to the Money-Services Business Act ("Policy Statement") Dear Me Letellier: The following comments are submitted by MoneyGram Payment Systems, Inc. ("MoneyGram US") on behalf of itself and its Canadian subsidiary, MoneyGram Payment Systems Canada, Inc. ISystemes de Paiement MoneyGram Canada, Inc. ("MoneyGram Canada"). MoneyGram US and MoneyGram Canada are collectively referred to herein as "MoneyGram." For ease of reference, we have quoted sections of the Regulations and the Policy Statement below and inserted our comments immediately after the relevant sections in bold text. I. REGULAliONS DIVISION /I LICENSE 3. The license application must be filed together with. in addition to the documents prescribed under the Act, the following documents: (2) a statement from each officer ofthe money-services business, its directors or partners, its branch managers, its employees whose functions are related to the money services offered, and the persons or entities who directly or indirectly own or conlrol the business, indicating whether or not they are in any of the situations described in paragraphs (1) and (6) of section 11, paragraph (1) of section 12 or section 14 of the Act, if applicable;

2 Page Two The term "employees whose functions are related to the money services offered" as used in the Regulations and in the Policy Statement, is overly broad, particularly when viewed with the requirement that all such employees must have a security clearance report issued on them. As described in the Policy Statement, all employees of a licensee would theoretically be subject to security clearance. This could represen hundreds or even thousands of employees, most of which would not be subject to such onerous background checks in other countries where money services businesses are licensed. Typically only directors or officers of licensees would be subject to security c earance; we recommend t at either the definition of "employees whose functions are related to the money services offered" be limited in scope, or that security clearance reports not be required for all individuajs who have the characteristics or responsibilities set forth in the Policy Statement The Policy Statement provides, in pertinent part, that with respect to the concepts of "direct or indirect control" of the money-services business, uthe information to be provided by the money-services business with regard to the persons or entitie who, directly or indirectly own or control the business is restricted to Canada." In addition, regarding "Corporate Structure", the Policy Statement provides that "The list conta ning the names of the persons or entities who directly or indirectly own or control the money-services business, the names of the subsidiaries of the money-services business, and the names of the parent company and its subsidiaries, may be in the form of an organizational chart, provided the chart contains all the information prescribed under the Act. This information is restricted to Canada." Based upon these statements, it is our understanding that reporting on individuals having direct or indirect control of a money-services business and on the corporate organization is limited only to Canadian individuals and organizations, and that the identities of Individ als of non-canadian individuals or organizations in the corporate structure outside of Canada is not required. Please confirm. DIVISION III GENERAL OBLIGA nons 6. The money-senices business must notify the Authority of any change in the information that it has filed with the Authority within 30 days of such change. Depending upon the scope of the definitions and requirements that come out of the final regulations, the proposed timing of the filings required may be difficult or impossible to meet. We suggest that the filing be required within 60 days of such change. However, the money-services business must notify the Authority no later than the last day of the month following the end of a calendar quarter of any addition or change during the quarter in respect of the name or domiciliary address or telephone number of 811 employee working in Quebec whose functions do not relate to the offer of money services.; It is unclear why any information related to employees whose functions do not relate to the offer of money services is required to be provided to the Authority. For example, the change of address of a janitor or a cook in a cafeteria employed by a money-services business should not have to be filed with the Authority; it creates needless additional work for money-services businesses and the Authority alike, which will increase costs to businesses, which will in turn pass these increases on to consumers. As such employees have no impact on the underlying safety and soundness of the money-services business and have no obligations related to money laundering, preve tion of fraud or consumer protection generally, there is no public policy served by requiring such information to be filed with the Authority.

3 Page Three DIVISION IV VERIFICA non OF IDENTITY 9. At the time of a transaction request. the money-services business must gather information on the customer's name, date of birth, if applicable, domiciliary address and telephone number and principal occupation or nature ofprofessional or business activities. Requiring information on the principal occupation or nature of professional or business activities of the customer is typically not required in other countries In which MoneyGram offers services for transactions of any amount. It is at times required for higher dollar transactions, after a compliance officer for a money-services business interviews a customer as part of a money laundering or know-your-customer review. We recommend that principal occupation only be required for transactions in exces of $3, To verify the identity of a customer who requests to carry out an off-site transaction, the moneyservices business must obtain the information prescribed in ection 9 using one of the (ollowing methods: (1) obtain the account or other document number that the money-services business has issued in connection with the customer and in respect of which the money-services business has verified the identity according to the method prescribed in section 11; (2) obtain confimjation from a financial institution at which the customer holds a deposit account and in respect of which the customer's identity was verified by that institution. These requirements would render it practically impossible for a non-account based financial institution such as MoneyGram to carry out off-site transactions (such as on-line or mobile wallet transactions). One alternative would require customers to visit a money-services business location and provide picture identification and register with the money-services business prior to attempting to perform off-site transactions. Our experience has been that consumers who wish to perform transactions via the telephone or internet do so out of convenience - they can initiate transactions from their home or elsewhere without having to make a trip to a physical locatio of a money-services business. To require them to register prior to initiating such a transacfon would significantly limit these methods of offering services, limiting consumer choice. A for the second alternative unless financial institutions at which customers hold deposit accounts are required by law to provide verification services to money-services businesses, they will not Willingly do so. As off-site ransactions are typically paid for via credit or debit card,there is no reason to interact with institutions which hold deposit accounts. 14. The money-services business must verify, in the same manner as for a customer, the identity of all co-contracting parties with which it has busines dealing as part ofits money-senices business activities, irrespective of the amount or nature of the contract. The money-services business must also gather, if applicable, the number and n ture of the operating licenses or other legal authorizations held by the co-contracting party to carry out its professional or business activities, as well as confirmation of their validity. The information and documents gathered must be recorded in the register ofco-contracting parties referred to in section 15.

4 Autorite des marche financiers Page Four 15. The money-services business must keep updated, in addition to the records and registers prescribed under section 29 of the Act, the following records and registers: (2) a register containing co-contracting party identification information; Establishment and maintenance of a register of all co-contracting parties, as such term is described in the Policy Statement, is unduly burdensome and does not serve any legitimate public purpose. If a "co-contracting party related to money-services activities" is deemed to include any entity which provides cleaning services for the establishments of the moneyservices businesses and any entity which provides professional services (presumably including legal, accounting and other similar professional services), it would seem that any entity which provides any servic to a money-service business would fall within the definition. Verifying the identity of all individuals who provide cleaning, gardening, facilities support, training and other services which are not materially related to core oney-services business functions will create significant additional costs for licensees as well as the Authority, which will likely be passed on to consumers. This requirement waul be the first of its kind in the world and, as noted above, does nothing to enhance the safety and soundness of the moneyservice businesses or enhance their ability to prevent money laundering, two of the core purposes of laws regulating money-service businesses globally. 16. The money-services business must include in the register of transactions, in addition to the information gathered under sections 9, 11, 12 and 13, a voucher that can be used for tracing transactions contaming the following information in particular: (1) the date, time, amount and nature of the transaction; (2) the customer's name, date of birth, if applicable, domiciliary address and telephone number and, if a third party requested the transaction on behalf of the customer, this same information concerning the third party,' (6) in the case of a funds transfer. the transfer instructions and the information identifying the recipient of the funds. It is unclear precisely what Information identifying the recipient of the funds requires. If it means details on the form of identification provided by the receiver of a transaction who does not live in Canada, this may violate the data protection laws of the receiver's country. The addition of the phrase "where allowed by law" to the end of subparagrap (6) would address this issue. Additionally, the level of detail required on both senders and receivers in the register of transactions poses some potential data security and identity theft risks, and appropriate measures should be taken to ens re the security of such information. II. POLICY STATEME T Where a money-services business seeks to add a money service to, or remove a money service from, its license, it must file a new applicauon with the Authority. The single license held by the moneyservices business will be amended accordingly. It is unclear whether this means that a money-services business is required to resubmit an entire application for an amended license, or simply to provide supplemental information related to the additional licensed ervice in which it wishes to engage.

5 Page Five The money-services business is required to provide a list of all its mandataries, their officers responsible for the money services and their establishments where the money services are offered. A security clearance report must be issued for each of these persons or enuties. As the term "officers responsible for the money services" is not defined in the Regulations or the Policy Statement, it is unclear which employees of mandataries would be required to be subject to a security clearance report. It is our view that this would be limited to a single individual employed by the mandatary who has responsibility for the relationship with the money-services business. For example, a mandatary may have dozens or hundreds of locations from which licensed activities are offered to the public. A single officer of the mandatary may have responsibility for oversight of the licensed services offered at the many locations; it would be this indi idual, and not necessarily the dozens or hundreds of employees who provide services to the public. who would be considered an officer responsible for the money services and their establishments. Lenders who are not financial institutions For purposes of the Act, the money-services business mu (provide the fist of its lenders, other than the financial institutions above, and, if applicable, the names of their officers, directors or partners. These lenders are persons who enter into a contract for the loan of money or property with a moneyservices business. There should be a ater ality standard related to which lenders must be listed and provided to the Authority. Mo eygram would appreciate greater clarification as to the types of lenders that would fall under this category. For example, would bondholders of a money-services business meet this definition? If so, it would be impractical if not impossible to list them all. Very truly yours, Francis Aaron He?~ ---- Senior Vice President and Associate General Counsel MoneyGram International, Inc.