Law No. 2016-056 on Electronic Money and Electronic Money Institutions

REPOBLIKAN'I MADAGASIKARA Fitiavana - Tanindrazana - Fandrosoana

PRESIDENCE DE LA REPUBLIQUE

Law No. 2016-056 On Electronic Money and Electronic Money Institutions

STATE OF REASONS

In the National Development Plan (NDP), Madagascar aims to achieve strong and inclusive growth for development. This objective requires establishing a favorable environment for the financial sector's development, meeting both the needs of the sector's professionals and all economic actors.

It is from this perspective that work has been carried out over the past few years, with all public and private sector actors, to establish a legal framework governing electronic money and electronic money institutions in Madagascar.

With the adoption of the concept of "electronic money" at the level of digital financial services, Madagascar has successfully leveraged a new leap in technological innovation.

On one hand, mobile telecommunications operators have established a financial service, commonly called mobile money, which allows an individual with a mobile phone to hold a cash equivalent on this cellular device, transfer it as needed, and pay merchants or service providers. Meanwhile, banks and new entrants have also expanded their service offerings by making prepaid payment cards available to the public as electronic wallets.

Digital financial services on mobile devices have achieved real success worldwide. This payment method has been replicated well beyond Africa, where it originated.

Thanks to the streamlining of commercial transactions, many developing and emerging countries have significantly improved their economic growth through increased financial inclusion for their population and the multiplication of new income-generating activities. Consequently, many micro-enterprises have been formalized as they grow.

Worldwide, thanks to the emergence of digital financial services and financial literacy, the ability of vulnerable populations to build a broad "mobile savings" has granted them access to previously unaffordable financial and non-financial services, particularly basic health micro-insurance, electricity, and education.

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Current Malagasy law contains no provisions regarding the concept of "electronic money," "mobile money," the actors in this field, or the rules governing them, despite the rapid development of this financial service across the country. Establishing a legal framework for electronic money and electronic money institutions essentially aims to:

• clarify this concept of electronic money, the actors in this field, and professional rules;
• promote financial inclusion through alternative channels for the circulation of financial flows;
• progressively formalize the informal sector through the traceability of economic agents;
• streamline the economy's financing circuit with more secure mechanisms and tools.

From the foregoing, this law consists of 120 articles and is divided into 8 titles:

• Title I on general provisions covers the object, scope of application, and definitions;
• Title II on electronic money addresses the use of electronic money and transactions;
• Title III on electronic money institutions specifies provisions regarding characteristics, approval, operational and control rules, suspension, dissolution, and liquidation;
• Title IV on the electronic money user establishes rules governing the relationship between the user and the institution, the obligation to accept electronic money payments, and user protection measures;
• Title V establishing the regulatory and supervisory authority defines its powers;
• Title VI on the professional association covers the organization of the profession;
• Title VII covers criminal sanctions;
• Title VIII dedicates transitional and final provisions.

This is the object of the present law.

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LAW ON ELECTRONIC MONEY AND ELECTRONIC MONEY INSTITUTIONS

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LAW ON ELECTRONIC MONEY AND ELECTRONIC MONEY INSTITUTIONS TITLE I: GENERAL PROVISIONS ................................................................................................... 1 CHAPTER I: ON THE OBJECT OF THE LAW AND SCOPE OF APPLICATION ................................................. 1 On the object of the law ................................................................................................................................... 1 On the scope of application of the law ............................................................................................................. 1 CHAPTER II: DEFINITIONS .......................................................................................................... 1 On electronic money ..................................................................................................................... 1 On monetary instruments ...................................................................................................................................... 1 On the user ......................................................................................................................................... 1 On electronic money media ....................................................................................................... 1 On electronic money operations ................................................................................................ 2 On the issuance of electronic money ................................................................................................... 2 On the management of electronic money ................................................................................................... 2 On the transfer of electronic money ..................................................................................................... 2 On electronic money institutions ........................................................................................... 2 TITLE II: ON ELECTRONIC MONEY ........................................................................................ 2 CHAPTER I: ON THE USE OF ELECTRONIC MONEY ........................................................ 2 Section 1: Electronic money operations .............................................................................. 2 On electronic money operations by card ................................................................................. 2 On online electronic money operations ................................................................................... 3 On mobile telephone-based electronic money operations ............................................................. 3 On the provision of banking services through electronic money ......................................... 3 Section 2: Prohibitions ................................................................................................................... 3 On the illegal exercise of electronic money operations ................................................................. 3 On the illegal exercise of banking activities by an electronic money institution ................... 3 On shareholders and members of governing bodies ......................................................................... 4 CHAPTER II: PROVISIONS REGARDING TRANSACTIONS ............................................... 4 On the traceability of operations ............................................................................................................. 4 On the settlement of operations .............................................................................................................. 4 On reimbursement at any time .......................................................................................................... 4 On reimbursement upon withdrawal of approval .................................................................................... 5 TITLE III: ON THE ELECTRONIC MONEY INSTITUTION ...................................................... 5 CHAPTER I: CHARACTERISTICS, ORGANIZATION, AND OPERATION OF THE ELECTRONIC MONEY INSTITUTION ....................................................................... 5 Section 1: Characteristics of the electronic money institution ......................................... 5 On legal form and registered office .................................................................................................. 5 On minimum capital ................................................................................................................................ 5 Section 2: Organization and control structures of the electronic money institution ............................................................................ 5 On organization and operation of the electronic money institution .............................. 5 On control structures of the electronic money institution ................................................. 6 Section 3: Distribution agents .................................................................................................... 6 On the designation of distribution agents .............................................................................................. 6 On the obligations of electronic money institutions towards distribution agents ......... 6 Section 4: Change in status of an electronic money institution ...................................................... 6 CHAPTER II: APPROVAL OF THE ELECTRONIC MONEY INSTITUTION.. 7 Section 1: Requirement for approval ..................................................................................................... 7 On the application for approval ............................................................................................................. 7 On the exercise of electronic money operations by credit institutions ......................... 7 On the exercise of electronic money operations by microfinance institutions (MFIs).7 Section 2: Processing of the application file ............................................................. 7 On the procedure for processing the file ................................................................................................ 7 On refusal of approval ............................................................................................................................... 8 Section 3: Approval decision .................................................................................................... 8 On notification of the approval decision ........................................................................................... 8

On suspensive conditions to the approval decision ............................................................................ 8 On publication of the approval decision ........................................................................................... 8 Section 4: Register of electronic money institutions ...................................................... 8 On maintaining the register .............................................................................................................. 8 CHAPTER III: OPERATIONAL RULES OF THE ELECTRONIC MONEY INSTITUTION .................................................................................................................................... 9 Section 1: Management, accounting, and prudential standards ........................................................... 9 On management and accounting rules ...................................................................................................... 9 On prudential standards ....................................................................................................................... 9 Section 2: Reporting obligations ................................................................................................ 9 On periodic declarations ......................................................................................................... 9 On the information obligation ................................................................................................................... 9 Section 3: Combating money laundering and terrorist financing ..................... 9 On obligations regarding combating money laundering and terrorist financing ............................................................................................................................................... 9 On the limitation of transactions ............................................................................................................. 9 Section 4: Data protection and retention obligations ............................................ 10 On data protection ......................................................................................................... 10 On data retention ............................................................................................................. 10 On the obligations of the electronic money institution and the distribution agent ..................... 10 Section 5: Professional secrecy ....................................................................................................... 10 On compliance with professional secrecy ........................................................................................................ 10 On the non-opposability of professional secrecy ............................................................................................ 10 Section 6: Compliance with competition .............................................................................................. 10 CHAPTER IV: SUSPENSION, DISSOLUTION, AND LIQUIDATION OF THE ELECTRONIC MONEY INSTITUTION ............................................................................ 11 Section 1: Suspension of activity of the electronic money institution .............................. 11 On the declaration of suspension of activity ............................................................................................. 11 On the resumption of activity ............................................................................................................................ 11 Section 2: Dissolution of an electronic money institution ............................................. 11 On the causes of dissolution .................................................................................................................. 11 On the effect of dissolution ....................................................................................................................... 11 Section 3: Withdrawal of approval of the electronic money institution ....................................... 11 On the causes for withdrawal of approval ........................................................................................................... 11 On notification of the withdrawal of approval .................................................................................................. 12 On the effect of the withdrawal of approval ............................................................................................................... 12 Section 4: Liquidation .................................................................................................................... 12 General provisions ........................................................................................................................... 12 On the appointment and replacement of the liquidator .............................................................................. 12 On the liability and powers of the liquidator ............................................................................ 12 On distribution to creditors .............................................................................................................. 13 On the closing of liquidation ................................................................................................................. 13 TITLE IV: ON THE ELECTRONIC MONEY USER ..................................................... 14 CHAPTER I: RELATIONSHIP BETWEEN AN ELECTRONIC MONEY INSTITUTION AND A USER .............................................................................................................................. 14 Section 1: Agreement between an electronic money institution and a user ............ 14 On the standard agreement ............................................................................................................................. 14 On mandatory statements in the agreement ....................................................................................... 14 Section 2: Electronic money account .................................................................................... 14 Section 3: Global account .................................................................................................................. 14 On the opening of a global account ............................................................................................................. 14 On the nature of the global account ................................................................................................................ 15 On the status of the global account upon withdrawal of approval .......................................................................... 15 Section 4: Use of electronic money ................................................................................. 15 On the conditions for using electronic money ......................................................................... 15 On user obligations ...................................................................................................................... 15 Section 5: Sanctions on the electronic money user ........................................................ 15

On warning .................................................................................................................................. 15 On termination of the agreement between user and institution ... 16 On prohibition of using electronic money ........................................................................ 16 On declaration of revocation ........................................................................................................... 16 Section 6: Right to open an electronic money account ................................................... 16 CHAPTER II: OBLIGATION TO ACCEPT PAYMENT IN ELECTRONIC MONEY ..................................................................................................................................... 16 CHAPTER III: PROTECTION OF THE ELECTRONIC MONEY USER ................................................................................................................................................................. 17 Section 1: Prior information ..................................................................................................... 17 Section 2: Existence of an agreement between institution and user ................................................................................................................................................ 17 On concluding the agreement .......................................................................................................... 17 On modification and termination of the agreement ............................................................................... 18 Section 3: User complaints ......................................................................................... 18 On handling complaints .............................................................................................................. 18 On evidence of complaints ............................................................................................................... 18 On fees related to complaint handling ...................................................................................... 18 TITLE V: REGULATORY AND SUPERVISORY AUTHORITY ............................................ 19 CHAPTER I: BANKING AND FINANCIAL SUPERVISION COMMISSION ....................... 19 CHAPTER II: POWERS OF THE CSBF ................................................................................ 19 Section 1: Administrative and regulatory powers .............................................................. 19 On administrative power .......................................................................................................................... 19 On regulatory power ....................................................................................................................... 19 Section 2: Supervisory power .................................................................................................... 20 On document and on-site inspections ........................................................................................................ 20 On on-site inspection .............................................................................................................................. 20 Section 3: Sanctioning power ....................................................................................................... 20 On disciplinary sanctions ................................................................................................................... 20 On monetary sanctions ...................................................................................................................... 21 TITLE VI: ORGANIZATION OF THE PROFESSION ....................................................................... 21 TITLE VII: CRIMINAL SANCTIONS ............................................................................................... 22 On providing false information to the CSBF ...................................................................... 22 On the illegal exercise of electronic money activities ........................................................................ 22 On misrepresentation as an electronic money institution ...........................................