LAW ON A NATIONAL PAYMENT SYSTEM PUBLISHED
Pepeliaev Group advises of the official publication of federal laws creating the legal basis on which a national payment system to function [1].
These laws introduce the legal regulation of contemporary non-bank payment instruments, such as electronic funds. They clarify the legal regulation of payment using terminals (the activity of payment agents engaged by banks and suppliers).
The laws come into force on 29 September 2011, with the exception of specific provisions where other dates are stipulated for them to enter into force. The newly adopted provisions will all be in force as of 1 January 2013.
The final text of the Federal Law On a national payment system does not contain the provisions previously discussed concerning the need to locate payment system infrastructure in Russia or to create a national system of payment cards. Thus, legislators have elected not to create barriers to the activity of international payment operators and not to restrict competition by giving preferential treatment to domestic payment operators. Previously, similar proposals made reference to protecting the national market and the convenience of state supervision.
The approach chosen by legislators is based on including the market for payment services in the area of banking regulation. They justify this approach by pointing to the desire to reduce risks and protect consumers’ rights. Implementing it may also result in an increase in the cost of payment services as well as a consolidation of the market in view of the fact that many who were involved in it may leave, unable to adapt to the new rules, and the fact that it will be difficult for new players to enter. Therefore, implementing this law will affect both those involved in the payment services market (banks, electronic payment systems operators, processing companies), and their clients (business people and consumers).
On the whole, legislators’ efforts to bring order to the market for payment services should be viewed in a positive light. However, the conceptual complexity of terminology and the fact that many issues have been left to be dealt with in administrative regulations means that it could be difficult to implement these legislative provisions.
Fundamentals of regulating payment services involving the transfer of cash
The main part of the Federal Law On a national payment system (the “Law”) is devoted to regulating services involving cash transfers without a bank account being opened.
It establishes the main functions which are performed when cash is transferred within the framework of a payment system, and defines those involved in payment systems who carry out such functions:
1. formulating rules for a payment system and supervising their performance – the payment system operator function;
2. ensuring access to services involving the transfer of funds and the exchange of electronic messages – the operating centre function;
3. ensuring that orders to transfer funds are accepted for performance – the payment clearing centre function; a payment clearing centre may be a central contracting party which both pays and receives funds for those involved in the payment system;
4. ensuring that funds are debited and credited in bank accounts, and also sending confirmations that transfer orders have been performed – the settlement centre function, which may be performed only by banks or non-bank credit organisations;
5. transferring funds – the transfer operator function, which may be performed only by banks or non-bank credit organisations;
6. accepting payments – the payment agents and bank payment agents (subagents) function, i.e. agents engaged by suppliers and credit organisations, and their subagents.
The Law contains mandatory requirements for payment systems, in particular concerning the information security of payment system consumers, the compiling and submission to the Bank of Russia of reports and the creation of a guarantee fund to secure performance of the obligations of those involved in the payment system.
A licence, which a non-bank credit organisation may obtain, is stipulated for carrying out a transfer without a bank account being opened. Less onerous requirements than for other types of non-bank credit organisations have been established for such organisations in terms of their issued capital and the composition of their management.
Particular features of regulation of transfers of electronic funds
Legislators have recognised as a form of non-cash settlement electronic funds (“EF”), which are accounted for by means of an electronic payment means, i.e. equivalents of bank accounts (for example, WebMoney or Yandex.Money, accounted for in electronic ‘purses’).
Meanwhile, EF must be issued on the basis of a prepayment being made to the operator of the EF using funds which are in general circulation. It is forbidden to issue EF without a prepayment. Thus, an EF operator may not provide credit to clients or pay them interest on EF balances.
An EF balance may not exceed an amount equivalent to RUB 100,000 unless the excess is due to exchange rate fluctuations.
The possibility for legal entities and individual entrepreneurs to be involved in EF transfers is restricted. Such entities or persons may only top up their EF balance using a bank account.
For EF operators, requirements are being brought in to ensure financial monitoring and compliance with currency legislation. Thus, anonymous EF transfers (in which the client is not identified) are only possible up to RUB 15,000 and aggregate transfers within a calendar month must not exceed RUB 40,000. Previously, the anonymity of payments was one of the most attractive features for electronic payment systems’ clients. Foreign currency restrictions extend to EF transfers in which a prepayment is made in foreign currency and/or which are between non-residents in Russian currency.
Transactions with EF belonging to legal entities and individual entrepreneurs may be suspended under a similar procedure to that applying to transactions with bank accounts (for instance, during enforcement proceedings or when taxes are recovered).
When a right to use electronic payment means (i.e. electronic purses or other means similar bank accounts but not specific amounts of EF) arises or is terminated, the owners must inform the tax authorities at the place of their tax registration, since taxes and other mandatory payments may be recovered fr om EF account.
Particular features of the regulation of mobile payments
An important development is that a procedure has been laid down for mobile payments – increasing an EF balance by making a prepayment to a mobile communications operator. In particular, the EF operator may not increase the EF balance of the mobile communications operator’s subscriber in excess of the lim its on the amounts laid down for EF transfers. The mobile communications operator must provide its subscribers with information on the procedure for transferring funds in a way similar to that stipulated for EF operators.
New aspects of the regulation of payment agents’ activity
The requirements are clarified in relation to the activity of bank payment agents. Now they may engage subagents and also hand over funds in cash to individuals, provide them with the possibility of using electronic payment means and identify individuals. In addition, they may accept funds in cash with no restriction by the purpose of the payment to suppliers and to compulsory payments as previously stipulated in article 13.1 of the Law On banks and banking activity [2].
For activity involving the acceptance of payments by individuals and carried out by payment agents who are engaged by service providers to accept payments, the current legal regulation will be retained. Further, the tax authorities are given the right to oversee that payment agents credit funds to special bank accounts. They may also impose fines for a breach of these rules.
Conclusions and recommendations
To avoid the risks of having business activity terminated or suspended and the risk of being held liable under amended legislation we recommend that those affected analyse their activity in terms of compliance with the new rules. This applies to those involved in the payment services market and entrepreneurs who use electronic funds and other modern non-bank means of settlements.
Should risks be revealed, they will have to bring their activity into compliance with the new rules, as well as, if necessary, approach the competent authorities (the Central Bank, Ministry of Finance and tax authorities) for clarifications. This will mitigate risks of being liable and will help to create positive practice in applying the new rules.
[1] The Federal Laws On a national payment system and On amending specific items of Russian legislation in connection with the adoption of the Federal Law ‘On a national payment system’ (respectively, No. 161-FZ and No. 162-FZ, both dated 27 June 2011).
[2] Article 13.1 will be repealed by the Federal Law On amending specific items of Russian legislation in connection with the adoption of the Federal Law ‘On a national payment system’ (No. 162-FZ dated 27 June 2011).
For further information, please contact:
in Moscow – Ivan Khamenushko, Senior Partner, at: (495) 967-0007 or by e-mail; Elena Ovcharova, Head of the Administrative Defence of Business Group, at (495) 967-00-07 or by e-mail; Natalya Ivashchenko, Head of group "Telecommunications", at: (495) 967-0007 or by e-mail; Peter Popov, Senior Associate, at: (495) 967-0007 or by e-mail
in St Petersburg - Sergey Spasennov, Partner, Head of St. Petersburg office, at (812) 640-60-10 or by e-mail