Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (1) of 2018

Regarding the Licensing of Payment Service Companies

Based on the provisions of Decision-Law No. (17) of 2012 concerning the National Payments Law, specifically Articles (5) and (9) thereof, and in the public interest, and in accordance with the powers vested in us, we have issued the following Instructions:

Chapter One

Definitions and Scope of Application

Article (1)

Definitions

-A- The words and expressions used in these Instructions shall have the meanings assigned to them below, unless the context indicates otherwise:

Term	Definition
Person	A natural or legal person.
Payment Service	All services related to the management, sending, receiving, and execution of payment orders in any currency, including providing electronic payment services and operating a payment system.
Payment System	The electronic system or arrangement for carrying out clearing or marketing of a payment obligation, and for the purposes of these Instructions includes all services related to the management and operation of clearing and electronic transfer systems among its members.
Payment System Service Provider	The company licensed by the Palestine Monetary Authority to operate a payment system.
Electronic Payment Service	All services related to sending, receiving, and executing electronic payment orders in any currency for clients.

Article (2)

Objective and Scope of Application

1. These Instructions aim to regulate the payment services sector in a safe and transparent manner, contributing to the development of payment services.
2. The provisions of these Instructions apply to payment services and their providers, and include:
   A. Payment system services.
   B. Electronic payment services.

Chapter Two

Licensing

Article (3)

Licensing Provisions

1. No person shall provide a payment service except through a company registered in accordance with prevailing laws, whose purpose is to provide payment system services or electronic payment services.
2. No company whose purpose is to provide a payment service shall be registered except after obtaining prior written approval from the Palestine Monetary Authority for the company's registration.
3. No person shall use the term "payment service" or its synonyms or any other similar expression in any language in its documents, publications, or trade titles unless it holds a license or prior written approval from the Palestine Monetary Authority.
4. The Palestine Monetary Authority may request the competent authorities to take the necessary legal action against any person found to be providing payment services without obtaining prior approval from it.
5. The Palestine Monetary Authority may request a person to provide itself with its identity, documents, and accounts if there is suspicion that it is conducting payment service activities without obtaining the necessary license.

Article (4)

License Application

1. The license application shall be submitted to the Palestine Monetary Authority by the founders in accordance with Appendix No. (1), including all required documents and papers for consideration of the application.
2. The Palestine Monetary Authority shall respond in writing to the applicant within one month from the date of receiving the application regarding its completeness, and the response shall specify the deficiencies that must be provided to the Authority to adjudicate the application.
3. Any deficiencies shall be completed within three months from the date of the response; otherwise, the application shall be considered withdrawn by the applicant.
4. The application shall be deemed complete after the Palestine Monetary Authority has been provided with all required documents and papers.
5. The Palestine Monetary Authority shall take a decision on the applicant within one month from the date of completion and shall notify the applicant of its decision.

Article (5)

Payment Service Providers Register

1. The Palestine Monetary Authority shall maintain a central register of all payment service providers.
2. The Palestine Monetary Authority shall publish on its website and any advertising medium it deems appropriate a list of names of payment service providers licensed by the Authority.
3. The Palestine Monetary Authority may classify payment service providers into categories according to the systemic importance of the services provided.

Chapter Three

Payment System Services

Article (6)

Preliminary Approval

1. The entity applying for preliminary approval to license a payment system service must provide the Palestine Monetary Authority with the following documents:
   A. Draft memorandum of association and internal regulations of the company.
   B. Names, nationalities, places of residence, and curricula vitae of the founders, including qualifications, experience, and supporting documents.
   C. Certificate of non-criminal record for each founder issued by the competent authorities in Palestine.
   D. Economic feasibility study, estimated budgets, and potential company partners for the first three years of the company's operation for realistic estimates.
   E. Draft strategic business plan of the company for the next five years.
   F. Written description of the type of payment system service, its objectives, description of its mechanisms, support for its subscribers and beneficiaries, planned distribution locations, and any other explanatory presentations the Authority may request. G. Description of operational policies and procedures to be used, including:
   1. Customer service, dispute resolution, and anti-money laundering.
   2. Information security and protection.
   3. Internal control procedures and risk management.
      H. Written letter issued by the founders confirming the following:
   4. That none of the founders has been declared bankrupt or unable to pay debts unless their reputation has been restored.
   5. That none of the founders has been convicted by a competent court of a final judgment for crimes of theft, embezzlement, forgery, defamation, bribery, misrepresentation, or any crime involving honor, trust, or public morals, or any money laundering crime.
   6. Sound credit performance, including that none of the founders has defaulted on any of its banking obligations.
2. The preliminary approval shall be considered void if all requirements and conditions necessary to obtain the license are not met within one year from the date of obtaining the preliminary approval, except in cases where the Palestine Monetary Authority decides otherwise.

Article (7)

Requirements for Licensing a Payment System Service

1. The applicant for final written approval from the Palestine Monetary Authority to license a payment system service must provide the Authority with the following data and documents:
   A. Memorandum of association and internal regulations of the company.
   B. Organizational structure of the company and operations manual.
   C. Lease agreement or ownership deed for the company's general/regional headquarters in Palestine.
   D. Documents proving the actual full payment of capital as determined by the Palestine Monetary Authority.

Chapter Four

Electronic Payment Services

Article (10)

1. The entity applying for preliminary approval to license an electronic payment service must provide the Palestine Monetary Authority with the following documents:
   A. Draft memorandum of association and internal regulations of the company.
   B. Names, nationalities, places of residence, and curricula vitae of the founders, including qualifications, experience, and supporting documents.
   C. Certificate of non-criminal record for each founder issued by the competent authorities in Palestine.
   D. Economic feasibility study, estimated budgets, and potential company partners for the first three years of the company's operation for realistic estimates.
   E. Draft strategic business plan of the company for the next five years.
   F. Description of the general framework of the payment system, its feasibility, its operational foundations and models, its signed or planned relationships with other systems, along with information about its provider. G. Description of the system's policies and procedures, which shall include at a minimum the following:
   1. System participation criteria and conditions.
   2. Clearing and settlement mechanism.
   3. Draft operational rules of the system.
   4. Service level to be provided to subscribers.
   5. Risk analysis and measures to mitigate system risks arising from liquidity.
   6. Insolvency of subscribers and the ability to manage these risks.
   7. Measures taken to reduce operational risks from a technical perspective and business continuity plans.
   8. Measures taken to secure and protect electronic transactions and store and retain data related to the system and its subscribers against misuse, damage, loss, or theft.
   9. System subscription plans.
   10. Information on system maintenance services.
   11. Strategic business plan of the company for the next five years.
       H. Description of governance procedures, internal control standards, reporting lines and frequency, risk management, business continuity, accounting registration procedures, and the plan ensuring service provision and continuity.
       I. Clarification of the controls to be adopted to comply with prevailing anti-money laundering requirements and procedures in Palestine.
       J. Settlement bank to be engaged for marketing the results of the payment system service, along with necessary banking guarantees and contractual terms.
2. The Palestine Monetary Authority may appoint any entity it deems appropriate, at the company's expense, to verify the accuracy of the data submitted by the company and its readiness.

Article (8)

Appointment of Executive Management

1. Prior written approval from the Palestine Monetary Authority must be obtained for the appointment of the General Manager, Operations Manager, and Information Technology Manager of a payment system service provider.
2. The Palestine Monetary Authority may refuse to approve the appointment of the General Manager, Operations Manager, or Information Technology Manager in the following cases:
   A. If any of them lacks sufficient academic qualifications and practical experience.
   B. If any of them lacks sufficient skills and experience in the field of payment system operations.
   C. If any of them caused losses to a banking institution, specialized lending institution, or any other institution where they served as a senior executive or board member.
   D. If any of them has been declared bankrupt or unable to pay debts, unless their reputation has been restored.
   E. If any of them has been convicted by a competent court of a final judgment for crimes of theft, embezzlement, forgery, defamation, bribery, misrepresentation, or any crime involving honor, trust, or public morals, or any money laundering crime, unless their reputation has been restored.
3. The Palestine Monetary Authority may dismiss or suspend the General Manager, Operations Manager, or Information Technology Manager from their duties if they violate the provisions of the National Payments Law and the instructions issued thereunder, or commit any acts that cause severe losses to the company they work for or expose it to risks.

Article (9)

Imposing Changes on a Critical Payment System Service Provider

To ensure financial stability, the Palestine Monetary Authority may impose restrictions or obligations on a critical payment system service provider regarding the following:

1. Conditions for access to or participation in the critical payment system service and agreements arising therefrom.
2. Operations of the critical payment system service, including clearing and settlement arrangements and agreements arising therefrom.
3. Interconnection between the critical payment system service and other systems.
4. Interconnection between the critical payment system service and its subscribers.
5. Procedures to be adopted by any subscriber or group of subscribers of the critical payment system service regarding any system operation.
6. Procedures for winding up the operations of the critical payment system service.
7. Risk management.
8. Conditions related to confirming the finality of settlement.
9. Financial conditions and requirements related to liquidity and inter-subscriber guarantees.
10. Operational and financial effectiveness of the critical payment system service regarding clearing arrangements.
11. Conditions to be followed in cases of outsourcing any functions of the critical payment system service.
12. Conditions to be followed to mitigate operational risks and ensure system continuity and business recovery through business continuity plans.
13. Availability of technical and technical requirements to connect the critical payment system service to managed clearing and settlement systems.
14. Conditions to be followed to comply with the Principles for Financial Market Infrastructures issued by the Bank for International Settlements and as the Palestine Monetary Authority deems appropriate.