Circular No. 01/OEF/2023, November 21 – Procedures for the Interbank Transfer and Settlement System

Bank of Mozambique Administration

DEPARTMENT OF BANKING OPERATIONS, ISSUANCE AND SUPERVISION OF PAYMENT SYSTEMS

CIRCULAR NO. 01/OEF/2023

Maputo, November 21, 2023

SUBJECT: PROCEDURES FOR THE INTERBANK TRANSFER AND SETTLEMENT SYSTEM

Given the need to define the operational procedures for the functioning of the Mozambique Interbank Transfer and Settlement System, as well as the duties and obligations of participants, the Bank of Mozambique, under the provisions of Article 21 of Notice No. 9/GBM/2023, approves:

1. The Procedures for the Mozambique Interbank Transfer and Settlement System, the respective annexes, and the complementary instructions that form an integral part thereof.

2. This Circular enters into force immediately.

Any doubts arising from the interpretation of this Circular must be submitted to the Department of Banking Services and Payment Systems of the Bank of Mozambique.

BANK OF MOZAMBIQUE Department of Banking Operations, Issuance and Supervision of Payment Systems [Signature]

Maria Esperança Mateus Majimeja (Administrator)

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1. GENERAL PRINCIPLES AND OBJECTIVES

This document aims to define the procedures for the functioning of the Interbank Transfer and Settlement System (RTGS), in observance of the National Payments System Law and the Interbank Transfer and Settlement System Regulation.

The document also defines the operational aspects of the Interbank Transfer and Settlement System, the duties and obligations of participants, including the Bank of Mozambique in its capacity as operator and manager of the system.

1.1 Objectives

a) The System guarantees the following functionalities: i. Final and irrevocable gross settlement in the Settlement Accounts of participants; ii. Final and irrevocable settlement of the results determined in existing clearing systems, and any other clearing systems that may be approved by the Bank of Mozambique; iii. Financial settlement of operations of the securities clearing and settlement system.

b) System participants act in their own name and must meet criteria for operational capacity, financial solidity, and legal solidity;

c) For the purposes of this document, the term "Procedures" means the set of System rules, the Annexes, the User Manuals, system-related documentation, and other related documentation;

d) For the purposes of this document, the terms used are defined and explained in Annex 1 - Glossary.

1.2 Role of the Bank of Mozambique

1.2.1 Responsibilities of the Bank of Mozambique

a) The Bank of Mozambique is the manager of the RTGS System, and in this capacity has the responsibility to: i. Operate, manage, and monitor it;

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ii. Administer the participants' Settlement Accounts, provide intraday liquidity and other facilities to ensure the efficient and secure functioning of payment systems;
iii. Authorize participants in the RTGS and establish the rules and procedures for its functioning;
iv. Manage the daily cycle operation, provide reports, ensure the security of RTGS data, software, and infrastructure, including the management of alternatives and operational and information safeguard situations;
v. Act as settlement agent.

b) The Bank of Mozambique may delegate operational tasks to third parties, while maintaining its responsibilities towards participants.

1.2.2 Obligations of the Bank of Mozambique

a) As System Operator, it is the responsibility of the Bank of Mozambique to: i. Verify the compliance of received payment instructions, in accordance with the procedures and User Manuals; ii. Ensure the integrity, security, and confidentiality of payment instructions and their transmission to the Recipient Participant; iii. Maintain records of all Payment Instructions; iv. Provide updated information on payment flows and the position of their respective accounts in the system to all participants; v. Provide a dedicated service for user support (Help Desk).

b) As Technical Operator, it is the responsibility of the Bank of Mozambique to: i. Ensure the functioning of the system as described in the Technical and User Manuals; ii. Adopt all necessary measures to protect the computer system, prevent system failures, and provide solutions in contingency situations; iii. Resolve any system failure or dysfunction, in close cooperation with hardware, software suppliers, and service providers; iv. Protect the system and ensure the integrity, availability, and confidentiality of data; v. Provide adequate technical capacity to meet system performance requirements.

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2. PARTICIPATION IN THE SYSTEM

2.1 Operational Capacity

2.1.1 Materials

a) The materials provided to the participant are the exclusive property of the Bank of Mozambique;

b) The participant must keep the materials confidential and use them responsibly without making any modifications;

c) The procedures do not affect the copyright of any of the materials, and the provisions of this paragraph apply, regardless of whether such materials are protected by copyright.

2.1.2 Bank Identifier Code

The participant must possess a SWIFT Bank Identifier Code (BIC), which must be in compliance with the bank identifier codes designated by the Bank of Mozambique.

2.1.3 Communication

a) The participant must communicate via the VPN or SWIFT network to exchange messages with the RTGS;

b) The participant must be connected via a workstation as specified in Annex 13;

c) Documents describing communication standards, protocols, and other functional requirements must be provided by the Bank of Mozambique to participants, as detailed in Annex 5;

d) The participant must comply with the standards, protocols, and other functional requirements, and its connection to the system must be carried out in accordance with them.

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2.1.4 Equipment

a) The participant must acquire its own equipment for the operation of the System;

b) The participant must possess alternative computer equipment for treasury management, accounting, and access to the RTGS;

c) The participant must install and configure the components to support the RTGS software according to the manuals provided by the Bank of Mozambique;

d) The Bank of Mozambique provides each participant with the necessary components related to system security, including the initial set of E-tokens;

e) The participant has no ownership rights over the RTGS software;

f) Any support components provided by the Bank of Mozambique must be returned, when requested, or in the event of exclusion from participation.

2.1.5 Location of Computer Facilities

a) The Primary and Secondary Operations Centers linked to the RTGS must be installed in a location considered adequate by the Bank of Mozambique;

b) No change in the location of the operations center constitutes grounds for requesting changes to the RTGS operating hours;

c) A participant wishing to change the location or characteristics of its primary or secondary operations center must submit a plan proposal, describe the reasons for the change, and obtain approval from the Bank of Mozambique;

d) The Bank of Mozambique may recommend that the participant change the plan, if this represents a risk to the operational integrity of the RTGS.

2.1.6 Minimum Workstation Configuration Requirements for Participants

The participant's RTGS workstations must meet the minimum configuration requirements, according to Annex 13.

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2.1.7 Primary and Secondary Operations Center

a) The participant must possess a primary and secondary operations center;

b) The computer equipment of the primary and secondary operations centers must be operated by qualified and authorized personnel, to act on behalf of the participant;

c) The primary operations center must be staffed with qualified and authorized personnel empowered to take appropriate measures on behalf of the participant.

2.1.8 Certification of Participants

a) In order to ensure the proper functioning of the system, the Bank of Mozambique may condition the maintenance of participation on the success of tests that demonstrate that the participant possesses the necessary technical and operational capacity, namely with regard to its computer systems and communications;

b) The Bank of Mozambique informs the participant of the test dates, content, and technical and operational conditions.

2.1.9 Contingency Solution – RTGS Payment Originator (RTGS PO)

a) The RTGS Payment Originator (RTGS PO) is a contingency solution that can be used by the participant to send and receive Payment Instructions, in the following situations: i. When it cannot send and receive via the Gateway; or ii. As a temporary solution until the participant implements the integration of the Gateway with its core banking system.

b) The participant must not use the RTGS PO simultaneously with the Gateway, as their use is mutually exclusive.

2.1.10 Implementation of Straight Through Processing (STP)

a) The participant must implement straight through processing (STP) for transactions processed in the RTGS;

b) STP must be implemented for the processing and sending of transactions from the participant's core system to the RTGS, and allow for the availability of funds to the final beneficiary within the established deadlines.

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3. ADDITION, CHANGE OF PARTICIPANT STATUS, AND RESPONSIBILITIES

3.1 Addition or Modification of Participants

a) The participant must provide the information indicated in the RTGS membership form, according to Annex 3;

b) The participant must, in the event of merger, demerger, name change, or any other alteration to the information required in the RTGS membership form, notify the Bank of Mozambique and provide the necessary information for the alteration of its data.

3.2 Suspension or Cessation

3.2.1 Suspension

a) The Bank of Mozambique may suspend a participant's access for a specified or indefinite period, in the following circumstances provided for in the respective Regulation;

b) For cases of suspension initiated by the participant, the request must be duly justified, and the Bank of Mozambique may request additional information from the participant, as well as carry out investigations it deems necessary;

c) A participant whose access to the RTGS is suspended cannot participate in the RTGS, but may access its data upon request to the Bank of Mozambique;

d) The suspended participant is not exempt from complying with its obligations, except when expressly provided for in the procedures;

e) From the moment the suspension becomes effective, any Payment Instruction from the respective participant is not accepted by the system;

f) The Bank of Mozambique immediately notifies all participants of any suspension;

g) The Bank of Mozambique may, whenever conditions are met, readmit a suspended participant;

h) The Bank of Mozambique notifies all participants of any decision to reinstate a suspended participant and the respective restart date.

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3.2.2 Cessation of Participation

a) The Bank of Mozambique may exclude a participant from the RTGS in the circumstances provided for in the respective Regulation;

b) For cases of exclusion initiated by the participant, the request must be duly justified, and the Bank of Mozambique may request additional information from participants, as well as carry out investigations it deems necessary;

c) The cessation of participation does not affect any right or responsibility arising from these procedures prior to the moment when the cessation becomes effective;

d) The participant remains bound by these procedures regarding the following: i. Any act or matter preceding the rescission; ii. Any fees, costs, charges, and expenses that may be charged or that must be reimbursed by the participant, in accordance with these procedures regarding periods preceding the rescission.

e) The Bank of Mozambique immediately notifies all participants of cases of cessation of participation;

f) The participant with revoked access retains the clearing rights and obligations provided by law, namely: i. To pay immediately all amounts due to any other participant, regarding obligations arising from transactions in the system; ii. To receive the amounts due to it by other participants regarding transactions carried out in the system.

g) The participant whose access is revoked immediately loses the right to carry out transactions in the RTGS.

3.3 Obligations and Responsibilities of the Participant

3.3.1 General Obligations

a) The participant must issue its Payment Instructions to the RTGS in accordance with the procedures defined in this document;

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b) In the event of transmission problems, the participant must inform the Bank of Mozambique, according to the contacts specified in Annex 9;

c) The participant must monitor its transactions and communicate any irregularities detected;

d) The participant is responsible for the following: i. Compliance with its obligations; ii. Quality of the data it sends to the RTGS; iii. Compliance of data with technical protocols and message formats; iv. Ensure access to its RTGS workstation, according to the security procedure provided; v. Control the processing of its Payment Instructions until they have the status of "technically accepted"; vi. Strictly comply with the procedures listed in this document; vii. Ensure that only duly authorized users have access to the system.

e) The participant is responsible for monitoring, among others, throughout the day: i. The settlement of sent payments; ii. The volume and value of payments to send; iii. Any settlement instructions in the waiting queue; iv. The balance of the Settlement Account; v. Intraday Credit; and vi. The level of its reserves.

f) The participant must avoid unsettled payments;

g) The participant cannot impute costs or expenses resulting from the lack of monitoring and reconciliation of its payment flows to the Bank of Mozambique or to other participants.

3.3.2 Obligations for Transactions Carried Out by Users

a) The participant is responsible for any damage resulting from the non-compliance or incorrect application of the procedures by users and for all transactions carried out by them;

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b) The participant must ensure that its internal systems and procedures ensure adequate protection against fraudulent activities in the system;

c) All fraudulent or suspicious activities must be reported immediately to the Bank of Mozambique, regardless of whether such fraud or suspicion was perpetrated by the participant's team, a client, or any other person;

d) Communication must be made initially by telephone, followed by written confirmation by email or letter, as provided for in Annex 8 of this document;

e) The participant must provide as much information and assistance as possible that are requested by the Bank of Mozambique, to investigate and identify the origin of any fraud or suspicious transaction;

f) The participant is responsible for damages resulting from messages containing errors or by errors that cannot be detected by the checks described in the User Manual;

g) The participant is liable for any RTGS failure resulting from its incorrect use, software errors, or communication failures caused by its internal systems.

3.3.3 Obligations in Case of Restrictive Events

The participant involved in a restrictive event must report the fact immediately to the Bank of Mozambique, and must: a) Identify the irregularity; b) Resolve the problem, within its powers; c) Communicate about the resolution of the problem and the normalization of system functioning; d) Collaborate with the Bank of Mozambique to resolve any problem that affects the RTGS.

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4. SECURITY

4.1 Integrity, Availability, and Confidentiality of Data

4.1.1 Operator and System Manager

a) The Bank of Mozambique ensures that the system has high security standards, with the objective of maintaining the integrity, availability, and confidentiality of all system data;

b) The Bank of Mozambique maintains strict confidentiality of all information provided by participants and processed by the system;

c) The participant authorizes the transfer of any information relating to itself to the Bank of Mozambique, and between this and third parties selected by it, for confidential use within the scope of the provision of services to participants.

4.1.2 Participants

a) The participant must develop and maintain adequate internal security procedures and comply with all procedures recommended by the Bank of Mozambique, in order to prevent unauthorized use of the system;

b) The participant must comply with applicable procedures and ensure that payment flows in its internal systems are protected against any internal or external threat;

c) The participant must settle any Payment Instruction executed in its name in accordance with the procedures.

4.2 Communications

a) Electronic communication is subject to the communication and data security procedures and standards established in this document;

b) The participant must comply with applicable procedures and designated methods.

c) If the Bank of Mozambique acts at the request of the participant, and accepts an instruction given, without following an agreed procedure (a "special instruction") for any reason, this participant is bound by such special instruction and exempts the Bank of Mozambique

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from any loss, liability, claim, or expense attributable to the execution of such special instruction.

4.3 Use of Materials Provided by the Bank of Mozambique

d) The procedures and security devices, codes, passwords, and other access methods are confidential, and participants must use and store them with the utmost care;

e) Participants must notify the Bank of Mozambique immediately of any circumstance that constitutes a breach of the previous paragraph;

f) If the software and hardware provided by the Bank of Mozambique to a participant incorporates security-related features (including ID, E-token, passwords, and other measures), the participant must be solely responsible for the use of such features.

5. CREATION AND MAINTENANCE OF USERS

5.1 General

a) Access to the RTGS is only permitted to authorized and duly identified users;

b) The user indicated in the E-token request form (as specified in Annex 4) must be a person duly authorized by the participant to receive, transmit, and confirm data and instructions within the limits specified in the applicable E-token request form;

c) The Bank of Mozambique may create, maintain, suspend, or eliminate RTGS users;

d) The participant must verify the identity or authority of the person who produces or confirms the content of any instruction;

e) Notwithstanding any other provision of this instrument, the Bank of Mozambique may refuse to execute any instruction whenever it doubts its authenticity;

f) The Bank of Mozambique immediately informs the participant of any rejected instruction;

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g) A participant wishing to register, modify, suspend, or exclude one or more users must request the Bank of Mozambique, in writing, by sending the respective E-token form, according to the Annex;

h) The participant must immediately inform the Bank of Mozambique if any person authorized to use the services on its behalf ceases the contract or leaves the staff;

5.2 Request to Register a User

a) To request the registration of a user, the participant must submit to the Bank of Mozambique, in writing, the E-token request form, at least 10 business days before the effective date, as provided for in Annex 4;

b) Regarding the E-token, the Bank of Mozambique may: i. Allocate E-tokens; ii. Issue a digital certificate for the E-token user.

c) For the user to be registered and perform functions in the RTGS, the participant must ensure that the same was trained and certified by the Bank of Mozambique or an entity indicated by it;

d) The Bank of Mozambique provides an E-token with a PIN for each registered user. The E-token is for exclusive use by the user for whom it is issued, and under no circumstances should it be shared or used by another;

e) The initial E-token password must be changed immediately upon receipt by the registered user;

f) After the initial assignment, the Bank of Mozambique may charge the cost of E-tokens to participants, for example for E-token replacement and expansion of the user base.

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5.3 Request to Modify a User

Only the Bank of Mozambique can assign and change user profiles, according to the responsibilities thereof, required by participants or by the Bank of Mozambique. Such sessions and changes occur under dual control.

6. FINANCIAL GUARANTEE AGREEMENTS

6.1 Reserve Accounts

a) The RTGS participant may hold several Reserve Accounts linked to its Settlement Account;

b) The creation of a Reserve Account allows participants to move funds in the system, from the Settlement Account to the Reserve Account, where the values are used by the RTGS for designated purposes;

c) The participant may move funds from its Reserve Accounts according to its needs;

d) In addition to the Settlement Account, each participant must possess a Reserve Account for the settlement of obligations arising from clearing operations;

e) The RTGS blocks the funds of the Reserve Account during each clearing session.

6.2 Intraday Credit

The Bank of Mozambique provides intraday credit to participants, under the terms provided for in the respective Regulation.

6.3 Settlement of Clearing Files (NSI)

a) NSIs generated externally from clearing operations are settled in the participants' Settlement Accounts in the RTGS;

b) NSIs are treated on an "all or nothing" basis, with all debits and credits settled simultaneously as a batch;

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c) It is the responsibility of each participant to ensure it has sufficient resources, in its Settlement Account or Reserve Account created for NSI files, to cover its net position in each settlement session;

d) If a participant does not have funds in its Reserve Account created for NSI before settlement, the RTGS automatically transfers funds from the Settlement Account to the participant's NSI Reserve Account to cover the debit position;

e) As soon as an NSI is inserted into the RTGS for settlement, all debit values are automatically blocked in the Settlement Accounts, for their settlement;

f) If there is no

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