Circular 3/2013 on Clearing Houses for Mobile Device Transfer Transactions

(First Section) OFFICIAL GAZETTE Friday, December 6, 2013 BANK OF MEXICO CIRCULAR 3/2013 regarding clearing houses for transfers through mobile devices.

A logo appears at the margin, stating: Bank of Mexico.

CIRCULAR 3/2013

SUBJECT: CLEARING HOUSES FOR TRANSFERS THROUGH MOBILE DEVICES

The Bank of Mexico, with the objective of continuing to promote the proper functioning of payment systems and in protection of the public's interests, considering that it is convenient to strengthen competition among financial entities that offer their clients the possibility of making electronic fund transfers to identified accounts using the last ten digits of a mobile phone line, has resolved to establish the terms and conditions applicable to the functioning and operation of clearing houses whose purpose is to process such transfers, as well as the requirements that such clearing houses must meet and the procedure they must follow to request authorization from the Bank of Mexico to organize and operate with such status.

For the above, based on Articles 28, sixth and seventh paragraphs of the Political Constitution of the United Mexican States; 24 of the Bank of Mexico Law; 3, fractions II and XII, 19, 19 Bis, 21, 22, and 47, 49, fraction VII and 49 Bis of the Law for the Transparency and Ordering of Financial Services; 4th, first paragraph, 8th, fourth and seventh paragraphs, 10, first paragraph, 14 Bis in relation to 17, fraction I and 15 in relation to 20, fraction XI, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Legal Directorate and the General Directorate of Payment Systems and Corporate Services, respectively, as well as Second of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, fractions VIII and X, has resolved to issue the "Rules for the organization, functioning and operation of clearing houses for transfers through mobile devices", in the following terms:

RULES FOR THE ORGANIZATION, FUNCTIONING AND OPERATION OF CLEARING HOUSES FOR TRANSFERS THROUGH MOBILE DEVICES

1st. Object and Definitions.- These Rules aim to establish the terms and conditions applicable to the functioning and operation of the clearing houses referred to in Articles 3, fraction II, 19 and 19 Bis, of the Law for the Transparency and Ordering of Financial Services, whose purpose is to process Transfers through Mobile Devices, as well as the requirements that such clearing houses must meet, and the procedure they must follow, to request authorization from the Bank of Mexico to organize and operate with such status.

For the purposes of the provisions of these Rules, the following shall be understood, in singular or plural:

Clearing: the process by which clearing houses for Transfers through Mobile Devices determine the debtor or creditor balance among their own participants, resulting from the exchange of orders for Transfers through Mobile Devices.

Settlement: the process through which participants in the clearing houses for Transfers through Mobile Devices fulfill the monetary obligations owed to them resulting from the Clearing of Transfers through Mobile Devices.

Routing: the service of sending and receiving messages related to Transfers through Mobile Devices between participants and the clearing houses for Transfers through Mobile Devices.

Transfer through Mobile Device:
a) the electronic transfer of funds between deposit accounts managed by two participants in the respective clearing house, in which the ordering account holder has transmitted to the participant who is their client the respective request for a transfer order through a mobile device whose mobile phone line number has been associated with the account that said participant manages for them.

2nd. Authorization Request.- The Bank of Mexico may only grant the authorizations referred to in these Rules to anonymous companies constituted in accordance with the General Law of Commercial Companies that meet the requirements indicated in this Rule.

Companies or persons intending to constitute a clearing house for Transfers through Mobile Devices must submit to the Bank of Mexico, through the Management of Authorizations, Consultations and Legal Control, an authorization request to organize and operate as such.

The aforementioned requests must attach the following documentation:

I. Instrument duly notarized before an authorized public official by which sufficient powers are granted to the representatives of the respective promoters who present the corresponding request to the Bank of Mexico;

II. Draft statutes of the company intended to be organized and operated as a clearing house for Transfers through Mobile Devices, which must expressly include, at least, the following:

a) The recognition, as part of its corporate purpose, of the performance of functions as a central entity or administrator of any mechanism for centralized processing with the purpose of exchanging instructions for Transfers through Mobile Devices, as well as the designation of all operations it intends to carry out individually;

b) The address of its central administration within national territory;

c) The establishment of a minimum of five and a maximum of fifteen council members forming its board of directors, who must meet the same requirements imposed by the Credit Institutions Law for council members of multiple banking institutions;

d) The designation that, of the total council members, those constituting at least twenty-five percent must be independent, and that, to be considered as such, they must meet the same requirements established in the Credit Institutions Law for such council members of multiple banking institutions, as well as the express condition that the agreements taken by the council must have the approval of at least one of said independent council members;

e) The condition that any transmission of its shares must have the authorization of its board of directors, in terms of what is provided by Article 130 of the General Law of Commercial Companies, which, in turn, must be subject to the condition that the company obtains prior approval from the Bank of Mexico, and

f) The agreement that any modification to the company's statutes must have, for its validity, the prior authorization of the Bank of Mexico;

III. List and information of persons who directly or indirectly intend to hold any participation in the capital of the company subject to the authorization request, which must contain the following:

a) The amount of social capital that each of them will subscribe and the origin of the resources they will use for such effect;

b) The financial situation, for natural persons, or the financial statements, for legal entities, in both cases for the last three years, and

c) That which allows verifying that they have satisfactory honorability and credit and business history;

IV. List of persons proposed to occupy the positions of councilors, general director, auditor, and main executives of the company;

V. Document in which the respective promoters express their agreement that the requested authorization will be subject to the condition that the company subject to such authorization is duly constituted as a participant in the payment system indicated in the 5th of these Rules;

VI. Legal instrument accrediting the ownership or right of use of the computer systems and programs they use or intend to use for the operation of the clearing house;

VII. General functioning plan that allows the clearing house for Transfers through Mobile Devices in question to adequately comply with the object imposed by the Law for the Transparency and Ordering of Financial Services, as well as the applicable provisions, and which describes in detail the following:

a) The different stages of the Routing process of operations, as well as the Clearing and Settlement of the obligations generated by said operations among their participants;

b) The operating procedure between the clearing house and its participants, including, among others, the operating hours and the means or, if applicable, systems to be used to transmit and process the information exchanged by its participants;

c) The legal acts they have celebrated with the telecommunications company or companies, as well as the tariffs and technical specifications of the service provided by said companies;

d) The financial feasibility study of the company, and

e) The bases for applying profits;

VIII. Internal norms to which the clearing house for Transfers through Mobile Devices in question will be obligated, in order to adequately comply with the object imposed by the Law for the Transparency and Ordering of Financial Services, as well as the applicable provisions, which must include, at least, the following aspects:

a) Access requirements for potential participants, in which the adherence, on equal terms, of any financial entity that, in terms of the laws governing it, carries out the collection of public resources in the national market must be permitted, provided that this satisfies the respective requirements, established for all financial entities for this effect;

b) Operating procedure manuals and technical specifications of the process to exchange payment instructions between the clearing house and its participants.

As part of the procedures referred to in the previous paragraph, clearing houses for Transfers through Mobile Devices must expressly establish that, in case they agree with the respective participants to receive directly transfer order sending requests from their clients, they may only receive said requests subject to the condition that said clients are given the option to send the respective requests originating through data transmissions via Internet or by any other means authorized by the Bank of Mexico at the request of the respective clearing house.

Likewise, the operation manuals indicated in this subsection must establish the communication protocols that clearing houses for Transfers through Mobile Devices will use, as well as the procedures they will follow, in the receipt and processing of transfer orders and, if applicable, the respective requests sent to them;

c) Tariff schemes and other charges they will charge their participants for the provision of their services, with the tariff breakdown for each of the services provided;

d) Procedures for dispute resolution between the clearing house and its participants, as well as among participants for operations carried out through the clearing house;

e) Conventional penalties or measures that must be adopted in case of non-compliance with internal norms;

f) Security measures to preserve the integrity of information and avoid its unauthorized disclosure, describing the technical elements as well as the preventive processes that will be implemented for this purpose;

g) Mechanisms for the management of risks derived from their functioning, including the internal control and regulatory compliance model that the respective clearing house for Transfers through Means of Disposition will follow;

h) Business continuity plans, and

i) Requirements for guarantees to cover the Settlement of the results of the Clearing among its participants, and

IX. In the case of companies already constituted for which authorization is requested to organize and operate as clearing houses for Transfers through Mobile Devices, the following additional documentation must be included:

a) The constitutive act of the company notarized before a public notary and registered in the Public Registry of Commerce and, if applicable, the modifications to it, as well as their corporate statutes;

b) The description of its social capital structure, indicating the identity of all persons who possess, directly or indirectly, any participation therein, as well as the description of its corporate structure with indication of the persons acting as the main executives of the company;

c) The document accrediting the address of its central administration, and

d) The public instrument or certified copy before a public official of the general or special power of the representative of the company, with the registration data in the Public Registry of Commerce, as well as a statement signed by the secretary of the board of directors authenticating that the powers of the legal representative have not been revoked, modified or limited on the date of presentation of the request.

The Bank of Mexico may require additional documentation, information and certifications it deems necessary to verify the aforementioned requirements and evaluate the convenience of granting the requested authorization.

3rd. Resolution.- Once the requirements indicated in Rule 2nd are satisfied, the Bank of Mexico will analyze whether the authorization is appropriate and must inform its decision to the applicant within a period not exceeding ninety calendar days. In carrying out such analysis, the Bank of Mexico will take into account the prevailing conditions in the market.

In the event that, after the period indicated in the previous paragraph has elapsed, the Bank of Mexico does not communicate its decision to the applicant, it shall be understood that said authorization request has been denied.

4th. Conditions of the Authorization.- The authorization granted by the Bank of Mexico to a company to organize and operate as a clearing house for Transfers through Mobile Devices will be personal and non-transferable and will have indefinite validity.

The Bank of Mexico will publish in the Official Gazette of the Federation the authorizations referred to in these Rules, as well as their modifications and revocations.

5th. System Linkage.- To comply with the obligation imposed by the third paragraph of Article 19 Bis of the Law for the Transparency and Ordering of Financial Services, companies that have obtained authorization from the Bank of Mexico to constitute and operate as clearing houses for Transfers through Mobile Devices must constitute themselves as participants in the Interbank Electronic Payments System (SPEI), prior to the start of their operations as a clearing house for Transfers through Mobile Devices.

For the same effects indicated in this Rule, clearing houses for Transfers through Mobile Devices are obligated, on the one hand, to receive, accept and process the electronic fund transfers directed to them by said payment system in accordance with applicable regulations and, on the other hand, to accept said electronic fund transfer orders that, in turn, meet the requirements established for such effects by the payment system itself, as well as to carry out the Routing, Clearing and, if applicable, Settlement activities related to said orders.

6th. Information.- Clearing houses for Transfers through Mobile Devices must provide the Bank of Mexico, in the terms and deadlines indicated by it, the information and documentation related to:

I. The participants in the clearing house;

II. Number and amount of Transfers through Mobile Devices exchanged by each of the participants of the clearing house;

III. Number and amount of returns of Transfers through Mobile Devices exchanged by each of the participants of the clearing house;

IV. Contingency events that have been registered in the processing, Clearing and Settlement services, both in the operations they process for their own participants and in those they process with other clearing houses for Transfers through Mobile Devices, as well as the corrective actions taken, and

V. Any other aspect different from those indicated in the previous subsections that the Bank of Mexico deems necessary to evaluate the adequate organization, functioning and operation of the clearing house in question.

7th. Internal Norms.- In the event that the clearing houses referred to in these Rules intend to make any modification to their corporate statutes or internal norms, they must obtain prior and written authorization from the Bank of Mexico, through a request submitted to the Management of Authorizations, Consultations and Legal Control.

Clearing houses for Transfers through Mobile Devices must at all times subject their internal norms to the regulation on the matter issued by the Bank of Mexico.

8th. Charges.- Clearing houses for Transfers through Mobile Devices may not determine the charges they charge their participants for the provision of services, based on the shareholding they hold in said clearing house.

9th. Authorization of Charges.- Clearing houses for Transfers through Mobile Devices may charge their participants, for the basic services of Routing, Clearing and Settlement, only those charges that have the prior authorization of the Bank of Mexico and, in any case, said clearing houses must refrain from imposing discriminatory charges and from granting discounts for volume of operation.

10th. Tied Sales.- Clearing houses for Transfers through Mobile Devices are obligated to refrain from conditioning the provision to their Participants of the basic services of Routing, Clearing and Settlement to the acquisition of other services or products and, in any case, must offer their services in an disaggregated manner and must charge individual tariffs for each of said services.

11th. Information Protection. Clearing houses for Transfers through Mobile Devices must obligate themselves to keep in the greatest confidentiality appropriate according to law all the information and documentation related to the operations and services carried out or processed by said entities and, by virtue thereof, must refrain from giving news or information about the Transfers through Mobile Devices they process to any person, except to the participants involved in said operations, as well as to the Bank of Mexico and to other authorities that have legal powers to require and obtain said information in accordance with the procedure established by the applicable provisions for this effect.

12th. Supervision.- For the supervision of compliance with what is provided in these Rules, the Bank of Mexico may adopt, among others, the following measures:

I. Require clearing houses for Transfers through Mobile Devices all the information it indicates for the purpose of supervising compliance with the provisions applicable to them, in which case said clearing houses will be obligated to provide that information in the deadlines and terms indicated by the Bank of Mexico;

II. Carry out inspections in the offices, facilities, equipment and information and communication technology systems of clearing houses for Transfers through Mobile Devices, which must allow their access, and

III. Issue recommendations regarding the functioning of clearing houses for Transfers through Mobile Devices.

13th. Sanctions.- The Bank of Mexico will sanction, with a fine imposed in terms of what is provided in the Law for the Transparency and Ordering of Financial Services, the clearing house for

(First Section) OFFICIAL GAZETTE Friday, December 6, 2013

Transfers via Mobile Devices that incur in any of the following infractions of these Rules:

I. Not provide in the form, conditions, deadlines, and other characteristics determined by the Bank of Mexico, the information or documentation that must be presented in terms of these Rules, as well as that which it requires to supervise the adequate compliance with these and to provide the fulfillment of its functions;

II. Not comply with any of its internal norms;

III. Modify any of its internal norms or statutes without prior authorization from the Bank of Mexico;

IV. Not link its processing systems to SPEI, cease to participate in it, or not carry out any of the acts indicated in the second paragraph of Rule 5a;

V. Charge its participants for the provision of services based on the shareholding they have in said clearing house, or

VI. Infringe any other provision provided in these Rules.

Taking into account the circumstances of the specific case, the Bank of Mexico, in addition to the fine that corresponds in its case, may limit or partially suspend the operations of the Clearing Houses for Transfers via Mobile Devices for infringing these Rules in a repeated or serious manner.

14a. Revocation.- The Bank of Mexico may revoke the authorization granted to a Clearing House for Transfers via Mobile Devices when this:

I. Does not initiate its operations within a period of twelve months counted from the date on which the authorization was granted;

II. Ceases to carry out the activity that was authorized to it for a period greater than six months without justified cause;

III. Has presented to the Bank of Mexico, as part of the authorization request referred to in these Rules or in response to information requests that it makes in accordance with these Rules, false documents or declarations or by any other irregular means;

IV. Ceases to meet the requirements considered for the granting of the authorization;

V. Enters into a process of dissolution and liquidation;

VI. Is declared in commercial bankruptcy by the judicial authority, or

VII. Commits serious infractions or is a repeat offender.

15a. Recidivism or serious infractions.- For the purposes of the limitation, suspension, or revocation provided in these Rules, a clearing house that having incurred in an infraction that has been sanctioned, commits another of the same type or nature within the two immediate years following the date on which the corresponding resolution became final, will be considered a repeat offender.

Likewise, for the purposes of these Rules, serious infractions will be considered the violation by the Clearing Houses for Transfers via Mobile Devices of what is provided in Rule 2a., when they do not have the advisors referred to in fraction II, subsections c) and d) or when a transmission of the shares representing their share capital is carried out in violation of what is provided in subsection e) of that same fraction; Rule 7a., first paragraph, when they modify their corporate statutes or internal norms without having the authorization of the Bank of Mexico; Rule 9a., when they make charges for the basic services of Routing, Clearing, and Settlement that do not have the authorization of the Bank of Mexico; Rule 11a., when they fail to fulfill their obligation to keep confidentiality or disclose information or documentation contrary to what is provided by said Rule, and Rule 13a., when they do not carry out the link referred to in fraction IV, cease to participate in SPEI, or do not carry out any of the acts indicated in the second paragraph of Rule 5a., as well as when they make charges to their participants contrary to what is provided in fraction V of said Rule 13a.

TRANSITORY PROVISIONS

FIRST. These Rules will enter into force on the next banking business day following their publication in the Official Gazette of the Federation.

SECOND. The persons who on the date of entry into force of these Rules operate as clearing houses for Transfers via Mobile Devices will have a period of ninety natural days counted from the aforementioned date to present the requests referred to in Rule 2a. These persons may continue to operate with such character until such time as the Bank of Mexico grants or denies the corresponding authorization.

Mexico, D.F., December 4, 2013.- BANK OF MEXICO: The General Director of Payment Systems and Corporate Services, Lorenza Martínez Trigueros.- Initials.- The General Legal Director, Luis Urrutia Corral.- Initials.

For any inquiries regarding the content of this Circular, please contact the Department of Authorizations, Queries, and Legal Control, at the phones (55) 5237-2308, (55) 5237-2317 or (55) 5237-2000, extension 3200.