Local Payment Network Regulation

Table of Contents:

• Summary
• Chapter One: Scope and Definitions
• Chapter Two: Responsibilities and Delegation
  • Section One: Central Bank of Libya
  • Section Two: Local Payment Network Operator
• Chapter Three: Members and Subscribers of the Local Payment Network
  • Section One: Nature of Institutions
  • Section Two: Participation System Licensing
• Chapter Four: Joining the Local Payment Network
• Chapter Five: Supervision of Payment Systems

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Chapter One

Scope and Definitions

Article 1: General Scope This Regulation governs electronic payment systems and aims to regulate the legal relationships between the participating parties in the Local Payment Network.

Article 2: Purpose of the Regulation This Regulation governs the duties and authorities of stakeholders concerning the Local Payment Network, in accordance with the electronic payment system strategy determined by the Central Bank of Libya (CBL). Within this strategy:

• The CBL holds absolute authority in regulation, supervision, delegation, and arbitration among all stakeholders in the Libyan payment system.
• The Local Payment Network is the central system linking network members (banks and independent electronic payment service providers) to each other and to other parties, for participating in completing electronic payment transactions.
• The Local Payment Network Operator is responsible for executing delegated services, as well as managing, operating, regulating, and monitoring the Local Payment Network, under the supervision and delegation of the CBL, in accordance with the rules specified in this Regulation.

Article 3: Definitions For the purposes of this Regulation, the following terms mean:

• Participation System: The legal authority/right to access payment systems.
• Member: An entity licensed by the CBL as a bank or an independent electronic payment service provider.
• Payment System Subscriber: A subscriber through a member, or the entity operating the payment system, in accordance with established procedures.
• Payment System: An electronic money exchange system, including all tools, mediums, channels, and procedures related to the system.
• Regulation: The Local Payment Network Regulation.
• Licensing Regulation of the CBL: The Electronic Payment Services Regulation issued in March 2020 and any amendments thereto. It is a regulation issued by the CBL specifying the conditions and procedures required to obtain licenses in the electronic payment sector.
• Regulatory Rules of the Local Payment Network: The rules proposed by the Local Payment Network Operator and approved by the CBL for operating the network, in accordance with Article 15.
• Payment Channels: Point-of-sale terminals, ATMs, e-wallets, e-commerce gateways, bill payment platforms, money transfer systems, and other emerging channels.
• Local Payment Network: Refers to the national payment system "Nemo".
• Local Payment Network Operator: The entity authorized by the CBL to operate and manage the Local Payment Network.
• Independent Payment Service Provider: Electronic payment companies that provide direct financial services to customers without a relationship with a commercial bank.
• Public Interest: As defined in Article 4.

Article 4: Public Interest The CBL shall ensure that the Local Payment Network meets the following conditions:

1. It is safe, efficient, and competitive for use by members and subscribers.
2. The network or its associated procedures do not contribute to increasing risks to payment systems and other financial transactions, including money laundering and terrorist financing.
3. The CBL may add other conditions as it deems appropriate, consistent with the public interest.

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Chapter Two

Responsibilities and Delegation

Section One: Central Bank of Libya

Article 5: General Authorities The CBL is the authorized body for regulating and supervising the Local Payment Network, which includes setting mandatory standards and controls for members and subscribers, exercising arbitration authority in operations related to electronic payment systems, and issuing necessary directives to members and subscribers.

Article 6: Imposition of Participation System The CBL may impose the participation system and its associated controls and mechanisms on members and subscribers of a specified payment system, in line with the Bank's policies. The participation system must be consistent with the public interest and the interests of members and subscribers in the system, as well as the interests of individuals and entities wishing to enter the system in the future, or any other matters determined by the CBL. The Bank shall also announce the imposition of the participation system.

Article 7: Amendment of Participation System The CBL may amend the participation system at its discretion, observing the controls stipulated in the preceding article, while committing to announce any amendments to the system.

Article 8: Suspension of Participation System The use of the participation system is suspended in the following cases:

• Expiration of the system's validity.
• Suspension of the participation system by the CBL based on the request of a member or subscriber, or in cases of force majeure.
• Suspension or termination of the payment system by the CBL upon expiration or cancellation of its approval.
• The participation system is permanently suspended at the discretion of the CBL, observing the controls in Article 6, with mandatory announcement of the suspension.

Article 9: Enforcement of Participation System Rules

1. If any member or subscriber is prevented from using a specified payment system, they have the right to appeal to the CBL to enable them to resume its use.
2. If it is determined that the prevention was caused by a member or subscriber in violation of relevant provisions, the CBL may issue one or all of the following orders:
   • An order to the member or subscriber to rectify the situation and comply with the participation system.
   • An order to the member or subscriber in the system to compensate any person who may have incurred loss or damage due to violation of legal provisions related to the participation system.
   • Any other orders deemed necessary by the CBL.
3. The CBL may discharge the member or subscriber from what is attributed to them, or modify any of the preceding orders if necessary.

Article 10: Payment System Criteria The CBL may impose criteria on members and subscribers of the payment system at its discretion, consistent with the public interest. The CBL shall circulate any amended or added criteria to members and subscribers, with the circulation confirmed and its effective date published on the CBL's electronic website.

Article 11: Arbitration in Disputes The CBL may take the necessary arrangements and procedures to resolve disputes between members and subscribers of the payment system regarding this system, as well as between a party and one of the members or subscribers in the payment system, provided that the dispute relates to:

• Compliance with the participation system.
• Financial matters of the payment system specific to members and subscribers.
• The efficiency, competitiveness, or risks facing the payment system. These disputes are resolved through arbitration, in accordance with the systems and procedures followed under Libyan law. The CBL shall designate the arbitrating body, with both parties to the dispute undertaking not to refer the dispute to court.

Article 12: Directives In case of non-compliance by members and subscribers with the specified criteria, the CBL issues binding directives to them in the payment system. This is done by notifying the member or subscriber in writing of taking a specific action, or refraining from taking a specific action. The directives must be consistent with the criteria specified by the CBL. A member or subscriber is considered to have committed a violation if they perform an act, fail to perform one, or cause their action/inaction to violate the Bank's directives. The CBL may impose appropriate financial or administrative penalties for these violations in accordance with prevailing legislation.

Section Two: Local Payment Network Operator

Article 13: Delegation of CBL Authorities The CBL has full authority to delegate its administrative, regulatory, and supervisory powers stipulated in this Regulation to entities it deems qualified. It may revoke the delegation at any time in accordance with the public interest.

Article 14: Delegation to Local Payment Network Operator The CBL may delegate a specific portion of its powers to the Local Payment Network Operator for the purpose of regulating and monitoring the network. The operator has the right to determine the operational rules and provisions of the network according to the granted delegation.

Article 15: Role of Local Payment Network Operator The Local Payment Network Operator proposes the technical rules and requirements necessary for operating and managing the network. These are published by the operator as regulatory rules of the Local Payment Network after approval by the CBL. The operator bears the responsibility to ensure that its rules do not conflict with CBL decisions.

Article 16: Management of Local Payment Network The Local Payment Network Operator directs electronic payment transactions securely between payment channels for electronic transactions and manages acceptance at point-of-sale terminals. It intermediates the electronic payment process to facilitate ordering, routing, and delegation through multiple channels such as ATMs, e-wallets, e-commerce gateways, bill payment platforms, money transfer systems, and any other emerging channels. Based on delegation from the CBL, it manages communications, settlement, and netting. It is also responsible for determining connection standards and specifications between banks and electronic payment service providers operating in Libya, and connecting the local payments network with regional and international payment networks.

Article 17: Supervision of Local Payment Network Operator The Local Payment Network Operator is subject to the supervision and oversight of the CBL.

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Chapter Three

Members and Subscribers of the Local Payment Network

Section One: Nature of Institutions

Article 18: Nature of Members Banks and independent electronic payment service providers are permitted to be members of the Local Payment Network in accordance with conditions specified by the CBL, in addition to:

• Obtaining a license or operating permit from the CBL.
• Registering as members with the Local Payment Network Operator, in accordance with rules approved by the CBL.

Article 19: Nature of Subscribers Electronic payment service providers affiliated with members are permitted to subscribe to the Local Payment Network in accordance with the following conditions:

• Obtaining an operating permit from the CBL.
• The subscriber contracts with a bank that is a member of the Local Payment Network.
• Registration as a subscriber with the Local Payment Network Operator.

Section Two: Participation System Licensing

Article 20: License Granted by CBL Institutions wishing to join the Local Payment Network must apply for a license and operating permit from the CBL, subject to procedures governed by the Licensing Regulation.

Article 21: Licensing Conditions The license to operate on the Local Payment Network is granted by the CBL, and its approval depends on the institution proving compliance with the conditions stipulated in the CBL's Licensing Regulation.

Article 22: Membership and Subscription with Local Payment Network Operator Institutions licensed by the CBL may not begin transactions on the Local Payment Network until they fulfill the conditions stipulated in the Regulatory Rules of the Local Payment Network.

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Chapter Four

Joining the Local Payment Network

Article 23: Joining Conditions The conditions for joining the Local Payment Network are determined by the network operator, under the supervision of the CBL. They are published in the Regulatory Rules of the Local Payment Network approved by the Bank, in accordance with Article 15.

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Chapter Five

Supervision of Payment Systems

Article 24: Supervision of the Payment Network The CBL supervises the proper functioning of all payment systems. To achieve this, it defines criteria by which members, subscribers, and the Local Payment Network Operator report performance-related data, fraud, incidents, and compliance with regulatory principles. Reporting criteria are sent to the Local Payment Network Operator to ensure they are circulated and correctly applied by members and subscribers.

Article 25: Supervision of Members and Subscribers Specialized departments at the CBL supervise the implementation of applicable controls and criteria through direct supervision (e.g., field visits) and indirect supervision (remote oversight and reports). The supervision mechanism depends on the type and degree of risks. Reports on risk management policies and procedures specific to members and subscribers are issued and reviewed in accordance with criteria defined by the specialized department.

Article 26: Control Rights of Local Payment Network Operator The CBL is granted the authority to access the system (viewing rights) to monitor balances on a daily basis and perform daily settlement with a group of liquid assets. The Bank may impose additional intensive supervision on members and subscribers at its discretion. The Local Payment Network Operator may conduct direct and indirect reviews to verify that members and subscribers comply with the conditions stipulated for the Local Payment Network. The Bank is immediately notified of the results of these reviews.

These Regulations apply in full integration with other related regulations governing payment systems and are consistent with prevailing laws. Issued by the National Payments Council on 10 Sha'ban 1444 AH (corresponding to March 2, 2023 AD).