Financial Services (Agent Banking) Regulations 2018

GOVERNMENT NOTICE NO. 33

FINANCIAL SERVICES ACT (CAP. 44:05) FINANCIAL SERVICES (AGENT BANKING) REGULATIONS, 2018 ARRANGEMENT OF REGULATIONS

PART I—PRELIMINARY

1. Citation
2. Application
3. Interpretation

PART II—OBJECTIVES 4. Objectives

PART III—APPLICATION FOR AGENT BANKING BUSINESS 5. Registrar’s approval 6. Eligibility for appointment as an agent 7. Vetting of agents 8. Completion of application form 9. Submission of business strategy 10. Notification to the Registrar

PART IV—APPROVAL PROCESS OF AGENTS 11. Approval period

12. Approval letter
13. Refusal of application
14. Resubmission of application

PART V—AGENCY CONTRACT 15. Agency contract 16. Outlet of an entity to be part of entity 17. Termination of agency contract

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27th April, 2018 385 REGULATION PART VI—PERMISSIBLE AND PROHIBITED ACTIVITIES 18. Services to be performed by agents 19. Prohibited activities 20. Other prohibited activities

PART VII—OBLIGATIONS OF BANKS 21. Policies, procedures and guidelines 22. Monitoring and supervision of agents 23. Compliance with Anti-Money Laundering Laws 24. Training of agents

PART VIII—AGENT OPERATIONS 25. Non-exclusivity of agency contract 26. Information on transactions

PART IX—SETTLEMENT OF TRANSACTIONS BY AGENTS 27. Transactions to be real time 28. Transactions to be carried out with effective devices 29. Contract with third party service providers

PART X—CONSUMER PROTECTION 30. Consumer protection systems 31. Minimum consumer protection requirements

PART XI—REPORTING REQUIREMENTS 32. Submission of agent data and information

PART XII—ENFORCEMENT 33. Registrar’s powers 34. Monetary penalties 35. Revocation Schedule

IN EXERCISE of the powers conferred by Section 116 (1) of the Financial Services Act, I, GOODAL EDWARD GONDWE, Minister of Finance, Economic Planning and Development, make the following Regulations—

PART I—PRELIMINARY

1. These Regulations may be cited as Financial Services (Agent Citation Banking) Regulations, 2018. "Act" means the Financial Services Act Cap. 44:05
2. These Regulations shall apply to banks and deposit taking Application microfinance institutions, SACCOs and their appointed agents.

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386 27th April, 2018 Interpretation Cap. 44:05 3. In these Regulations unless the context otherwise require— "Act" means the Financial Services Act; "agent" means an entity that has been contracted by an institution and approved by the Registrar, to provide banking services on behalf of the institution in the manner specified in these Regulations; "agent banking business" means the banking business carried out by an agent on behalf of an institution as permitted under these Regulations; Cap. 44:01 "bank" has the same meaning ascribed to that term in the Banking Act; Cap. 44:01 "banking business" has the same meaning ascribed to that term in the Banking Act; "institution" means a bank, a deposit taking microfinance institution or a SACCO; "Minister" means the Minister of Finance; "outlet" means an agent's place that is used for carrying out its commercial activity but does not include a mobile unit; "real time" means the electronic processing of transactional data instantaneously upon data entry or receipt of a command; "Registrar" means the Registrar of Financial Institutions appointed under the Act; and "SACCO" means Savings and Credit Cooperative Society.

PART II—OBJECTIVES Objectives 4. The objectives of these Regulations are to provide— (a) for agent banking as a delivery channel for offering banking services in a cost effective manner; and (b) a framework for offering agent banking services.

PART III—APPLICATION FOR AGENT BANKING BUSINESS Registrar’s 5.—(1) An institution intending to conduct banking business through an approval agent shall obtain written approval from the Registrar before commencing the agent banking business. (2) In considering an application for the approval of the institution to conduct banking business, the Registrar shall at a minimum assess the institution on the following factors— (a) the adequacy of capital; (b) record of earning capabilities; (c) adequacy of risk management practices; and (d) track record of adherence to relevant laws, regulations, and directives.

Eligibility for 6. The following entities may be eligible for appointment as agents— appointment as (a) Limited liability companies; an agent

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27th April, 2018 387 (b) Merchant or retail shops; (c) Agro dealers; (d) Pharmacies; (e) Sole proprietorships; (f) Partnerships; (g) Cooperative societies; (h) State corporations; and (i) any other entity which the Registrar may approve.

7.—(1) An institution shall, before seeking approval of the Registrar for Vetting of an entity to be contracted as an agent, satisfy itself as to the suitability of the agents proposed entity. (2) An institution shall— (a) be responsible for the accuracy of the information provided by an agent; and (b) sensitize its agents on the provisions of these Regulations and the obligation to comply with them.

8.—(1) An institution shall apply for agent banking business by Completion completing the application form set out in the Schedule hereto. of application (2) An institution may submit an application for several agents at one go.

9. In addition to completing an application form, an institution shall Submission submit to the Registrar a business strategy for agent banking that articulates of business the following— strategy (a) the institution's delivery channel, strategy and how agents fit in this strategy; (b) an estimate of the total population and economically active population of the areas where the agents will operate; (c) an estimate of the proposed agents' volumes or transactions; (d) a description of the commercial activities the proposed agents have been conducting for the twelve (12) months immediately preceding the date of the application; (e) a copy of the standard contract with the agents; and (f) a declaration by the Chief Executive Officer or Director of the institution confirming that the institution has carried out the suitability assessment of the proposed agents.

10. An institution shall notify the Registrar regarding the opening of any Notification new agent. to the Registrar

PART IV—APPROVAL PROCESS OF AGENTS 11. The Registrar shall communicate to an institution which applies for Approval agent banking business the outcome of the application within ten (10) period working days from the date of receipt of a complete set of accurate information.

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388 27th April, 2018 Approval letter 12. Where the Registrar approves an agent, the Registrar shall issue an approval letter to the institution.

Refusal of 13. Where the Registrar declines to approve an application, the application Registrar shall communicate to the applicant, in writing, the reasons for declining the approval.

Re-submission 14. An institution whose application has been declined by the of application Registrar may resubmit the application upon fulfillment of the conditions specified by the Registrar.

PART V—AGENCY CONTRACT Agency 15. An institution shall enter into a written contract with an entity for contract the provision, on behalf of the institution of any banking services.

Outlet of an 16. An outlet of an entity whose operations or activities are managed, entity to be part supervised or is subject to the direction of its head office shall be regarded as of an entity part of the entity for purposes of an application to be appointed as an agent.

Termination of 17. Where an agency contract is terminated, the institution shall agency contract inform the general public of the cessation of the agent from offering banking services through publication of a notice— (a) within the premises where the agent was operating; or (b) in any other manner so as to inform the general public of the cessation of the agent from offering banking services.

PART VI—PERMISSIBLE AND PROHIBITED ACTIVITIES Services to 18. An agent may provide the following banking services as may be be performed specifically agreed with the institution— by agents (a) cash deposit and cash withdrawal; (b) cash disbursements and repayment of loans; (c) payment of bills; (d) cash payment of retirement and social benefits; (e) cash payment of salaries; (f) transfer of funds; (g) balance enquiry; (h) generation and issuance of mini bank statements; (i) collection of documents in relation to account opening, loan application, credit and debit card applications; (j) agent mobile phone banking services; (k) collection of crossed cheques; (l) cheque book request; (m) cheque book collection by customers;

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27th April, 2018 389 (n) collection of bank's mail or correspondence for customers; and (o) any other activity as the Registrar may prescribe or approve.

19. An agent shall not— Prohibited (a) carry out an electronic transaction when there is communication activities failure in the system; (b) carry out a transaction when a transactional receipt or a Short Message Service (SMS) acknowledgement cannot be generated; except where the transaction involved does not require issuance of a receipt, such as cheque book collection; (c) charge any fees directly to the customers; (d) offer any type of guarantee in favour of any institution or customer; (e) offer banking services on its own accord by providing on its own account banking services similar to those provided by an agency contract; (f) provide or hold itself out to be rendering a banking service which is not specifically permitted in the contract; (g) open accounts, grant loans or carry out any appraisal function for purposes of opening an account or granting of a loan or any other facility; (h) undertake cheque deposit and encashment of cheques on its own; (i) transact in foreign currency; (j) be run or managed by an institution's employee or its associate; and (k) subcontract another entity to carry out agent banking on its behalf.

20. An institution may in the contract document specify other activities Other which the agent is prohibited from undertaking. prohibited activities

PART VII—OBLIGATIONS OF BANKS 21. The Board of Directors of each institution shall formulate policies, Policies, procedures and guidelines that ensure that— procedures (a) credible agents are identified; and (b) risks associated with agent banking are properly identified, documented and mitigated; and (c) agent's activities are constantly monitored to ensure compliance with all financial services laws, agent contracts and any other applicable law.

22. The institution shall be responsible for monitoring and supervising Monitoring the activities of its agents. and supervision of agents

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390 27th April, 2018 Compliance 23. An institution shall comply with all applicable Anti-Money with Laundering and Combating Financing of Terrorism laws and requirements. Anti-Money Among others, the institution shall take into account the following— Laundering (a) simplified Know Your Customer (KYC) requirements; laws (b) transactional limits per day, month or year for persons and corporate entities; (c) maximum balance limits on debit and credit; (d) minimum technological security requirements; and (e) authentication criteria per customer per transaction.

Training of 24. An institution shall train its agents on Anti-Money Laundering and agents Combating Financing of Terrorism requirements and on use of simplified know your customer requirements.

PART VIII—AGENT OPERATIONS Non exclusivity 25.—(1) An agency contract between an institution and an agent shall not of agency be exclusive. contract (2) an agent may provide agent banking services to multiple institutions provided that the agent has— (a) separate contracts for the provision of such services with each institution; and (b) the capacity to manage the transactions for the different institutions.

Information on 26. An institution shall— transactions (a) maintain information on the numbers and volumes of transactions carried out for each type of service by each agent; and (b) monitor effective compliance with set limits.

PART IX—SETTLEMENT OF TRANSACTIONS BY AGENTS Transaction to 27.—(1) All transactions by an agent involving deposit, withdrawal, be real time payment or transfer of cash from or to an account shall be real time. (2) An institution shall ensure that an agent is able to carry out real time transactions.

Transaction to 28. An institution shall ensure that agent banking transactions are be carried out carried out with devices which are technically effective and can— with effective (a) transmit transaction information in code; devices (b) carry out electronic transactions on real time basis; (c) allow handling under different user profiles for administration, maintenance and operation; (d) reverse incomplete transactions due to error, system failure, power outage or other defects; (e) process or generate transactional documents or receipts;

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27th April, 2018 391 (f) issue electronic receipts or acknowledgements such as Short Message Service (SMS) acknowledgement; (g) automatically log off an agent once the agent exhausts his daily cash limit or display an error message in case of unauthorized transaction; and (h) generate an audit trail.

29. An institution may enter into a written contract with a third party Contract with service provider for the provision of the following services in respect of its third party agent banking business— service (a) technology platform; providers (b) agent selection; (c) agent network management; (d) agent training; (e) equipment provision; and (f) equipment maintenance.

PART X—CONSUMER PROTECTION 30. An institution shall have appropriate consumer protection systems Consumer for purposes of establishing trust among consumers of agent banking protection services. systems

31. At a minimum, an agent of banking services shall comply with the Minimum following consumer protection requirements— consumer (a) list the services or products being offered to enable customers or protection users to appropriately identify their agents and the services provided requirements through them; (b) have signs that are clearly visible to the public indicating that it is a provider of services of the institution with which it has an agent contract; (c) display the name of the institution it is working for and the institution's logo; (d) display a written notice to the effect that if the electronic system is down, no transaction shall be carried out; (e) display a written notice to the effect that services shall be provided subject to availability of funds; (f) list of charges or fees applicable for each service which are payable to the bank by the customers; and (g) list the name, telephone numbers and location of the institution's branch to which the agent reports its agent activities.

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392 27th April, 2018 PART XI—REPORTING REQUIREMENTS Submission of 32.—(1) An institution shall submit to the Registrar, the following infor- agent data and mation on a monthly basis— information (a) nature, value, volume and geographical distribution of operations or transactions; (b) incidents of fraud, theft or robbery; and (c) customer complaints and the remedial measures taken to address the complaints.

(2) The institution shall submit the information specified in subregulation (1) with fifteen (15) days after the end of the preceding month.

PART XII—ENFORCEMENT Registrar’s 33. In addition to any other powers conferred on the Registrar under powers any financial services law, the Registrar may— (a) request for any information from the institution or agent at any time; (b) carry out impromptu or scheduled inspection of the books and premises of the agent; (c) direct the institution or agent to take such action or desist from such conduct as may be deemed necessary; (d) direct the termination of the agency contract and closure of the agent business; (e) direct the institution to take such action or measures against or on behalf of the agent as the Registrar may find appropriate; (f) revoke the agent banking approval and prohibit the institution from engaging in agent banking business; (g) prohibit the institution from contracting new agents; and (h) impose directions, administrative penalties and enforcement actions as provided under the Act.

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27th April, 2018 393 34.—(1) Notwithstanding the Registrar's enforcement powers under Monetary regulation 33 above, the Registrar shall impose the following monetary penalties penalties for violations of these Regulations— (a) for institutions, up to fifty million Kwacha (K50, 000,000); and (b) for natural persons who are members of the Board of Directors or senior management, up to ten million Kwacha (K10,000,000).

(2) With respect to banks, the Registrar shall— (a) debit the penalty in subparagraph (1) (a) from the main account of the bank maintained at the Reserve Bank of Malawi; and (b) notify the bank in writing prior to debiting the account.

(3) With respect to natural persons or where the institution does not maintain an account with the Reserve Bank of Malawi, the natural person or the institution shall pay the penalty through a bank certified cheque or electronic transfer payable to the Reserve Bank of Malawi within ten (10) working days after being notified by the Registrar.

35. The Financial Services (Agent Banking) Regulations, 2012 are Revocation of hereby revoked. G. N. 27/2012

SCHEDULE (reg. 8 (1)) APPLICATION FORM FOR APPROVAL OF AN AGENT

1. Name of Institution:...................................................................................................

2. Name of Agent(s) (including postal address and contact details) ....................................................................................................................................... .......................................................................................................................................

3. Exact location and name of district where the Agent(s) is/are located ....................................................................................................................................... .......................................................................................................................................

4. Proposed commencement date for each Agent :.......................................................

5. Commercial activity of each Agent ....................................................................................................................................... .......................................................................................................................................

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394 27th April, 2018 6. List of banking services to be provided by each Agent ....................................................................................................................................... .......................................................................................................................................

7. Responsible Branch(es) ....................................................................................................................................... .......................................................................................................................................

Name: ...........................................................................................................................

Signed........................................................................................................................... (Chief Executive Officer/Managing Director)

Dated at ........................... this ........................... day of.......................... 20..............

This Application form must be submitted together with a written declaration by the Chief Executive Officer of the institution or Director confirming that the institution has carried out the suitability assessment of the proposed agents and they have been found to have met the minimum requirements set out in these Regulations.

................................................ *Tick the applicable

Made this 13th day of April, 2018.

(FILE NO. FIN/PFSPD/03/04)

GOODALL GONDWE Minister of Finance, Economic Planning and Development