Legal Regime of the National Payments System

Friday, September 7, 2018 Number 133 DIÁRIO DA REPÚBLICA (Republic Gazette) SÃO TOMÉ AND PRÍNCIPE SUMMARY NATIONAL ASSEMBLY Law No. 17/2018. Legal Regime of the National Payments System.

N.º 133 – September 7, 2018 SÃO TOMÉ AND PRÍNCIPE - DIÁRIO DA REPÚBLICA 1839 NATIONAL ASSEMBLY Law No. 17/2018 Legal Regime of the National Payments System

Preamble Considering the increase in transactions in financial markets, both national and international, and the consequent sophistication of financial products, facilitated by technological advances, requiring the development and improvement of payment systems to ensure the efficient and secure transfer of funds among individuals, commercial entities, and others, as well as financial institutions; Considering also the need to review the current Legal Regime of the National Payments System, in order to adequately respond to modern requirements imposed by the pronounced development and complexity of transactions in financial markets; Taking into account the importance of the National Payments System as one of the fundamental pillars of monetary policy, financial stability, and overall economic development of a country; Considering further the predominant role of the Central Bank in this entire process, which must be empowered to act as the main intervener in the development of the National Payments System, as well as in implementing internationally accepted procedures and practices for payment systems, thereby conferring greater effectiveness, security, and efficiency; The National Assembly decrees, under the terms of paragraph b) of Article 97 of the Constitution, the following:

CHAPTER I General Provisions Article 1. Object and Scope

1. This Law establishes the legal regime applicable to the regulation, superintendence, and management of the National Payments System.
2. This Law applies throughout the territory of the Democratic Republic of São Tomé and Príncipe to any payment service or system operating, wholly or partially, in the country.

Article 2. Definitions

1. For the purposes of this Law, the following terms are understood as: a) "Clearing agreements" or "netting agreements": a written agreement that converts multiple credit obligations into a single net credit or a single net obligation and includes bilateral netting, multilateral netting, novation netting, close-out netting, payment netting, or a combination of any of these types; b) "Agent": an individual or collective person that provides payment services on behalf of a bank or payment service provider; c) "Settlement agent": an entity that provides accounts so that system participants maintain funds and proceed with the settlement of transactions between system participants; d) "Electronic cheque presentation": the electronic transmission, by an institution authorized to draw cheques, of an image and payment information of a cheque, to the creditor institution on which it is drawn; e) "Bank": a legal entity duly licensed by the Central Bank of São Tomé and Príncipe (BCSTP) to exercise activities that consist, inter alia, in receiving deposits or other refundable funds from the public in order to apply them for its own account by granting credit; f) "BCSTP": Central Bank of the Democratic Republic of São Tomé and Príncipe, established by Decree-Law No. 8/92 of August 3; g) "Clearing house": an entity, including the BCSTP, that provides clearing or settlement services to a system; h) "Payment card": a card or other device, including a code or other means of access to an account, which can be used to withdraw money or make payments and covers cards or devices regardless of whether they are credit, debit, or prepaid; i) "Cheque": a negotiable instrument directed to a bank and payable on demand, issued against a bank account located in São Tomé and Príncipe and payable within the country; j) "Clearing": the process of transmitting, reconciling and/or confirming orders for fund or securities transfers prior to settlement, including netting of orders and the establishment of final positions for settlement; k) "Close-out netting" or "close-out netting": a netting agreement under which, and after the occurrence of certain events specified by the parties in the agreement, all or some of the transactions referred to in the netting agreement may be terminated and, if terminated, their respective final value becomes due and payable; l) "Multilateral netting" or "multilateral netting": an agreement between three or more parties to settle their obligations; m) "Novation netting" or "novation netting": a clearing agreement between the parties covering a set of transactions where an account of the amounts due is maintained and the rights and obligations of the parties regarding that account are continuously extinguished and replaced by a single amount due by one party to another; n) "Settlement account": a deposit account opened and maintained by participants with the BCSTP or an authorized operator in the settlement system as provided in this instrument; o) "Central counterparty" or "CC": an entity that acts as an intermediary between buyers and sellers, becoming, in a settlement system, the buyer for each seller and the seller for each buyer; p) "Direct debit": a set of transfers initiated by the beneficiary, based on authorization granted by the debtor to the beneficiary, the beneficiary's payment service provider, or the debtor's. The term covers any payment order issued by the bank or payment service provider of the beneficiary, or an intermediary, directed to execute the beneficiary's order; q) "Central Securities Depository" or "CSD": an entity where securities are deposited, which facilitates the processing of transactions in book-entry form. Securities may be held in a CSD either in dematerialized format (electronic record) or as physical certificates. A CSD may also provide custody and asset management services; r) "Financial guarantee": an asset provided by the guarantor to ensure compliance with an obligation by the guaranteed party; s) "Payment instrument": any tangible or intangible instrument that enables a person to obtain money, goods, or services, or to make payments or transfer funds. These include, but are not limited to, cheques, fund transfers initiated by paper or dematerialized means (such as ATMs, automatic payment terminals, internet, telephone, mobile phones) and payment cards, including prepaid; t) "Payment instruction": an order for the financial settlement of one or more obligations, or for the extinction of any other obligation between participants of the same system or clearing house, given to the BCSTP or its operator; u) "Settlement": the act of fulfilling obligations through the transfer of funds or securities between two or more parties; v) "Real-time gross settlement" (RTGS): the procedure through which final settlement of transfer instructions occurs on a net basis in one or more isolated and predetermined periods during the processing day; w) "Gross settlement": settlement of fund or securities transfer orders that occurs individually on a basis of successive and individual instructions; x) "Real-time gross settlement" or "RTGS": final settlement of fund payment obligations and account registration of securities and instruments on a transaction-by-transaction basis, in real time as they occur during the day of operation within normal business hours; y) "E-money": monetary value stored electronically, including magnetically or in any other tangible or intangible device (such as SIM cards or computer systems), represented by a claim on the issuer, which is issued after receipt of funds for the purpose of carrying out payment operations and is accepted as a means of payment by third parties in addition to the issuer; z) "Netting": determination of net payment obligations or determination of the final net value relating to settlement obligations between two or more participants in a system; aa) "Operator": the BCSTP or any other entity licensed or authorized by the BCSTP as an operator of a system; bb) "Participant": a party recognized within the rules of a system as eligible to transact, clear and settle through the system with other participants, whether directly or indirectly. A direct participant is a participant in a system that is responsible for settling its own payments, the payments of its clients, and the payments of indirect participants on whose behalf it proceeds with settlement; cc) "Payment service provider": any entity that provides payment services; dd) "Settlement rules": rules, regardless of how they have been established, that provide the framework within which payment obligations are calculated, cleared or settled and include rules for adopting measures in case a participant is unable or likely to become unable to fulfill its obligations to the payment system, clearing house, central counterparty, or other participants. These rules encompass the settlement of obligations relating to securities; ee) "Payment services": set of the following services, which include the issuance of e-money and payment instruments: i. Services that allow deposits and cash withdrawals; ii. Execution of payments; iii. Issuance and/or acquisition of payment instruments; iv. Provision of fund transfer services; and v. Any other auxiliary services to money transfers, including the issuance of e-money and payment instruments; individualized provision of internet, communications, or network access services are not included in this definition. ff) "Fund transfer services": payment services that accept cash or other payment instruments (including e-money instruments) at one location and pay the corresponding sum in cash or another form to a beneficiary at another location through communication, message, transfer, or via a clearing network to which the fund transfer service belongs; gg) "Clearing system": sets of procedures through which participants present and communicate information regarding the transfer of funds or securities to other participants through a centralized system or at a single location, and includes mechanisms for calculating participant positions on a bilateral or multilateral basis to facilitate the settlement of their obligations; hh) "Settlement system": a system established and operated by the BCSTP or authorized or licensed by it, for fulfilling payment obligations as well as the settlement of securities-related obligations; ii) "National Payments System": set of instruments, procedures and processes for interbank fund transfers that ensure the circulation of monetary values within the territory of the Democratic Republic of São Tomé and Príncipe, and include: i. Issuance and management of payment instruments; ii. Payment, clearing and settlement systems, including those that process and register securities, as well as agreements and procedures related to these systems and services, such as their respective interfaces; and iii. The payment service providers themselves, including system operators, as well as any third party acting on their behalf, whether as an agent or through outsourcing agreements, operating wholly or partially within the territory of the Democratic Republic of São Tomé and Príncipe. jj) "Payment system": any system or set of procedures for processing, clearing and/or settling funds; kk) "Credit transfer": a set of transfers initiated by the payment order from the debtor, executed with the objective of making a payment to the beneficiary. The term covers any payment order issued by the bank or payment service provider of the debtor, or an intermediary, directed to execute the debtor's payment order; ll) "Electronic fund transfer": any fund transfer initiated by a person through an instruction, authorization or order directed to a payment service provider, so that it debits or credits an account held by the person with that payment service provider, through electronic means; mm) "Cheque truncation": payment, by the drawee institution, of the cheque presented to it, electronically, for clearing, by the acquiring institution; nn) "Final net value": the net value obtained after "netting" or otherwise ascertained, being the net value of obligations between parties in accordance with settlement rules issued by the BCSTP or a clearing agreement concluded between the parties.
2. The term "system" in this Law means, indistinctly, a payment, clearing and/or settlement system.

Article 3. Public Interest Objectives

1. The National Payments System must fulfill public interest objectives, namely: a) Security; b) Reliability; c) Transparency; and d) Efficiency.
2. To fulfill the security objective, systems must possess appropriate, coherent and adequate infrastructure for the type of operations they process, as well as operate with competent personnel and appropriate and transparent rules aimed at enabling: a) Control of credit, liquidity, legal, operational and systemic risks; b) Prevention of risks by the BCSTP arising from its responsibilities as a financial settlement agent; c) Immediate, automatic and unconditional execution of offered guarantees.
3. To fulfill the reliability objective, the BCSTP must determine that systems are equipped with minimum business continuity plans, which ensure that operations process continuously and without interruption within established hours, and are equipped with replica facilities for recovery in case of failures or disasters.
4. Fulfilling the transparency objective requires that systems have their own rules, published to participants in a timely manner and that the final beneficiary is previously informed about prices and fund availability periods, as well as the cessation of Payment Service provision.
5. To satisfy the efficiency objective, system operators must ensure competitiveness and equity in the prices of services provided.

CHAPTER II BCSTP Competencies Article 4. General Competencies The BCSTP has, under this Law, the following competencies: a) Coordinate and promote the proper functioning of the National Payments System; b) Define and implement policies for the continuous modernization and development of the National Payments System; c) Authorize and license payment service providers and system operators in accordance with the provisions of this Law and complementary regulation; d) Ensure compliance with public interest objectives, as provided in this Law, through continuous control and monitoring of the activities of various systems; e) Determine general or individual conditions, standards, norms and procedures for the implementation of this Law and complementary regulation regarding any authorized entity and its activity, and ensure that such conditions, standards, norms and procedures are duly respected; f) Perform any other functions assigned to it regarding payment, settlement or clearing systems, or the issuance of payment instruments, in order to allow their effectiveness and achievement of their objectives; and g) Authorize and define the terms and conditions for the establishment and functioning of various payment systems.

Article 5. Operational Function of the BCSTP The BCSTP may provide infrastructure for payment, clearing and settlement systems to their respective operators or participants, and in this regard, the BCSTP may: a) Establish, hold, operate and participate in clearing and settlement systems; b) Act as a CC for participants; c) Hold cash accounts for operators and participants, which can be used for clearing and settling transfers in a system; d) Hold securities accounts for operators and participants, which can be used for system operation; e) Extend intra-day credit determined by the BCSTP to entities that are participants in payment, clearing and settlement systems. For this purpose, adequate financial guarantees must be provided to the BCSTP; f) Require proof of operations, accounting records, contracts, agreements and other documents related to any payment system; and g) Act as a CSD regarding government securities.

Article 6. Cooperation with Other Entities

1. The BCSTP must cooperate with other public authorities responsible for the regulation and supervision of financial institutions and other entities directly or indirectly involved in providing payment services or operating systems in the Democratic Republic of São Tomé and Príncipe, as well as in the regulation, monitoring and supervision of capital markets in the country.
2. The foregoing includes the BCSTP's capacity to establish agreements and protocols with other monetary authorities and international organizations with functions in the areas of supervision and superintendence of payment systems.

Article 7. Advisory Committee for the National Payments System The BCSTP may create an Advisory Committee for the National Payments System (CCSNP), chaired by the BCSTP and composed of representatives of entities participating in or representing relevant interests in the National Payments System, approved by the BCSTP.

Article 8. Objectives of the CCSNP The objectives of the CCSNP are to advise the BCSTP in the regulation and superintendence of the National Payments System, including among others: a) Advise the BCSTP regarding technical operational standards and other rules related to payment services, and the clearing and settlement of payments and securities; b) Issue opinions, on its own initiative or when requested, on matters related to the improvement or modernization of the National Payments System; c) Submit studies, suggestions or recommendations to the BCSTP that contribute to the continuous development of the National Payments System.

CHAPTER III Authorization and Licensing Article 9. Authorization Principle

1. The authorization to provide payment services or to act as an operator of a system is granted by an act of the BCSTP.
2. The powers of the BCSTP also include suspension or revocation of authorization.
3. To obtain a BCSTP authorization to provide Payment Services or act as an operator of a system, an applicant may be subject to the obligation to maintain own funds at levels specified by the BCSTP, which may be determined by the type of services provided, average or aggregate payment amount, or other factors that the BCSTP considers relevant.
4. In case of management of payment instruments, the BCSTP may substitute authorization with simple registration when the operation and management of a specific category of payment instruments do not involve specific risks for the market or when subjecting to the authorization procedure may significantly affect competitiveness.
5. Banks that already provide payment services under a license granted by the BCSTP do not need to obtain a new authorization under this Law.
6. Notwithstanding the foregoing, banks must comply with operational requirements and information provision and disclosure requirements established by the BCSTP and are subject to supervision rules and requirements applicable to authorized individuals and entities under this Law.
7. Without prejudice to paragraph 5 of this article, banks are required to obtain authorization for the operation of systems.
8. Authorizations granted under this article are subject to the procedure established by the BCSTP for this purpose.
9. No authorization or acquired right under this Law is transferable, in whole or in part, except as defined by the BCSTP, and any transfer in violation of applicable rules is null.
10. An authorization granted under this Law may be renewed and subject to the payment of fees or other costs as determined by the BCSTP.
11. The BCSTP may, for the purposes of this Law, modify, substitute, alter and eliminate the terms of the granted authorization.
12. For the purposes of the foregoing, the competent authority must respect previously acquired and legally protected interests and rights.
13. When the BCSTP, on its own initiative, decides to modify the conditions of an authorization, it must notify the holder of the reasons for the proposed modification, granting a period of no less than five business days for the holder to provide comments before adopting the final decision.
14. The BCSTP may, whenever justified, grant exclusively to an operator the management of payment systems.

Article 10. Licensing The BCSTP may establish the obligation of licensing, and establish the respective terms, for payment service providers and operators.

CHAPTER IV Superintendence Article 11. BCSTP Assignments

1. In matters of regulation and superintendence over the National Payments System, the BCSTP may, at any time, adopt general rules and define criteria for