Regulatory Alerts2012-08-15
Banks' Responsibility in Entering Merchant Agreements
The Norwegian Financial Supervisory Authority (Finanstilsynet) clarifies that banks must ensure merchant agreements are exclusively concluded with the actual sales location and that payment terminal settlements flow directly from the payer to the merchant's account. The authority warns that terminal lessors intercepting transaction funds act as intermediaries in the payment flow, thereby conducting licensed payment services. Consequently, such lessors are subject to licensing requirements under the Financial Business Act § 4b-1, and banks must enforce strict customer control and agreement frameworks to prevent regulatory breaches.
Circular 15/2012 Banks' Responsibility in Entering Merchant Agreements CIRCULAR: DATE: 15.08.2012 RECIPIENTS: Banks FINANSTILSYNET P.O. Box 1187 Sentrum 0107 Oslo
Banks' Responsibility in Entering Merchant Agreements 2 | Finanstilsynet 1 Banks' Responsibility in Entering Merchant Agreements A merchant agreement is entered into between a bank and a merchant who owns or leases a payment terminal. The merchant agreement in the Norwegian payment system, cf. the Bank Axept rules and the FNO agreement framework, is a prerequisite for activating a payment terminal, and links the terminal to an identified user and a settlement account for the transactions that occur via the terminal. The Finanstilsynet is aware that some lessors of payment terminals also offer terminals where settlement for transactions made on the terminal is transferred to an account belonging to the lessor. The lessor has carried out settlement for transactions related to the terminal, and there is no merchant agreement for the terminal between the party leasing the terminal and the bank. In these cases, the lessor has acted as an intermediary in the payment flow. The Financial Business Act § 4b-1 sets requirements for a license for providers of payment services. Payment services are defined in the Financial Contracts Act § 11, cf. the reference in the Financial Business Act § 4b-1, third paragraph, as e.g.: "carrying out payment transactions". The Finanstilsynet wishes to point out that providers of payment terminals, by receiving funds from payment transactions at merchant locations, and subsequently settling with the merchant, conduct licensed business. Under the Payment System Act Chapter 3, the Finanstilsynet supervises systems for payment services. The Finanstilsynet clarifies that banks, through agreement frameworks and customer control, both upon entering into and during the ongoing follow-up of merchant agreements, must ensure that the merchant is the same as the sales location and that transactions carried out with the payment terminal are effected by transfer from the payer's to the merchant's account. Emil R. Steffensen Anne Merethe Bellamy Director for Financial and Insurance Supervision Director for Accounting and Audit Supervision Contact Persons: Department for Financial and Insurance Supervision Senior Advisor May Camilla Bruun-Kallum, tel. 22 93 99 35 Special Advisor Anders Hole, tel. 22 93 97 72 Department for Accounting and Audit Supervision Section Manager Frank Robert Berg, tel. 22 93 98 47