Instruction No. 001/2018-CSBF on the Exercise of Electronic Money Activities by Credit Institutions

BANKY FOIBEN'I MADAGASCAR

COMMISSION DE SUPERVISION BANCAIRE ET FINANCIERE

INSTRUCTION NO. 001/2018-CSBF ON THE EXERCISE OF ELECTRONIC MONEY ACTIVITIES BY CREDIT INSTITUTIONS

The Commission for Banking and Financial Supervision (CSBF),

Having regard to Law No. 2016-056 of February 2, 2017 on electronic money and electronic money institutions, known as the Electronic Money Law,

Having regard to Law No. 95-030 of February 22, 1996 on the activity and supervision of credit institutions, as amended,

Having regard to Law No. 2017-026 of February 8, 2018 on microfinance,

Having regard to Law No. 2016-004 of July 27, 2016, supplemented by Law No. 2016-057 of February 2, 2017, establishing the Statutes of the Central Bank of Madagascar,

Having regard to Decree No. 2014-1684 of October 29, 2014 on the appointment of the Governor of Banky Foiben'i Madagascar,

Having regard to Decree No. 2016-151 of March 8, 2016 partially repealing Decree No. 2013-559 of July 23, 2013 and Decree No. 2017-917 of October 10, 2017 on the appointment of members of the Commission for Banking and Financial Supervision,

Having regard to Decree No. 2017-851 of September 26, 2017 implementing the Electronic Money Law;

DECIDES

Article 1: Object

Pursuant to Articles 34 and 36 of the aforementioned Electronic Money Law, credit institutions may exercise electronic money operations subject to prior authorization from the CSBF.

This Instruction sets forth the conditions for credit institutions to exercise electronic money activities.

Article 2: Conditions for the Exercise of Electronic Money Activities by Credit Institutions

Prior to exercising any electronic money activity or modifying previously granted authorizations, credit institutions must meet the following conditions:

1. Financial Status:

   • compliance with prudential standards at the end of the financial year preceding the authorization request date;
   • justification of the source of funds related to proposed investments;

2. Organizational Structure:

   • availability of human resources with expertise and skills in the proposed technological solutions;
   • clear allocation of responsibilities among the various persons involved in the electronic money activity;

3. Technical Infrastructure:

   • availability of technical and technological tools, particularly technological infrastructure as required by Article 5 of the aforementioned Decree No. 2017-851 of September 26, 2017, enabling in particular:
     • automated processing, traceability, security, and settlement of transactions;
     • data protection and retention;
     • continuity of information system operations in case of system failure;
   • annual audit of technological infrastructure by a qualified body in accordance with Article 5 of the aforementioned Decree No. 2017-851 of September 26, 2017.

4. Control System:

   • establishment of internal control and risk management mechanisms related to the new activity;
   • existence of technological solutions enabling the detection and monitoring of money laundering risks, such as filtering and suspicious transaction detection tools;
   • implementation of a control mechanism for distribution agents;

5. Consumer Protection:

   • existence of consumer protection measures required by the Electronic Money Law.

Article 3: Submission of the Prior Authorization Request

An authorized credit institution wishing to exercise an electronic money activity shall submit a prior authorization request to the General Secretariat of the CSBF, addressed to the President of the CSBF.

This file is submitted in paper form accompanied by an electronic version according to the template presented in Annex 1.

Article 4: Content of the Prior Authorization Request File

The authorization request is accompanied by the information required by Annex 2, relating to detailed descriptions of the proposed electronic money operations, the implemented system, internal control procedures, and mechanisms ensuring risk management, transaction security, and consumer protection.

Article 5: Processing of the Prior Authorization Request

5.1. Upon receipt of the file, the General Secretariat of the CSBF verifies whether the documents and information specified in Annexes 1 and 2 of this Instruction are provided.

The General Secretariat of the CSBF issues a receipt acknowledgment and notifies the applicant of the opening of the processing.

The General Secretariat of the CSBF processes the prior authorization request within three (3) months from the date of receipt. Upon expiration of this period, the file is submitted as-is to the CSBF for a decision.

5.2. In the course of processing, the General Secretariat of the CSBF verifies:
- compliance with the conditions set forth in Article 2 of this Instruction;
- the impact of the electronic money activity on the financial soundness, viability, and sustainability of the institution;
- the security of the electronic money activities proposed by said institution;
- the competence level of persons responsible for the electronic money activity and the involvement of the Board of Directors, management, and internal audit in preventing and managing related risks.

The General Secretariat of the CSBF is authorized at any time to request any additional information deemed necessary for processing the file.

Article 6: Closing of the Processing of the Prior Authorization Request

The General Secretariat of the CSBF closes the processing when the elements and conditions specified in this Instruction are verified.

It notifies the credit institution, by any written-traceable method, of the closing of the processing.

Article 7: Decision Making

7.1. The CSBF has a period of one (1) month from the date of closing of the processing to rule on the prior authorization request. It may invite management to present the project and answer potential questions that may clarify decision-making.

7.2. The CSBF sets in the prior authorization decision:
- the types of authorized electronic money operations;
- potentially the suspensive condition(s) accompanied by a three (3) month period to allow the credit institution to fulfill them in accordance with Article 9 of this Instruction;
- the requirement for additional own funds commensurate with the institution's activity volume.

The President of the CSBF notifies the credit institution, by any written-traceable method, of the prior authorization decision.

Article 8: Rejection of the Prior Authorization Request

8.1. The CSBF may reject the prior authorization request, in particular, when:
- the elements and conditions required by this Instruction are not met;
- the involvement of entities comprising the governance structure is not reflected in the project;
- financial projections are based on unjustified or unrealistic parameters that may jeopardize the institution's financial situation;
- the file presents persistent gaps or inconsistencies.

8.2. The President of the CSBF notifies the credit institution, by any written-traceable method, of the duly reasoned rejection decision.

If the credit institution intends to maintain its project, it submits a new request with the new elements required by this Instruction.

Article 9: Suspensive Conditions

9.1. To justify the fulfillment of suspensive conditions, the credit institution submits to the General Secretariat of the CSBF the required documents before the expiration of the period stipulated in the prior authorization decision.

The General Secretariat of the CSBF conducts a prior review of the actual fulfillment of the suspensive conditions.

If the required conditions are met, the President of the CSBF informs the credit institution, by any written-traceable method, of the lifting of the suspensive conditions. The prior authorization becomes effective upon notification of the lifting of the suspensive conditions.

9.2. The credit institution may request in writing an extension of the fulfillment period for suspensive conditions at least one (1) month before the expiration of the period stipulated in the prior authorization. The President of the CSBF may grant a new period depending on the nature of the submitted request.

In the absence of fulfillment of suspensive conditions and where no extension request is submitted, the President of the CSBF informs the credit institution of the lapse of the prior authorization decision.

Article 10: Final Provisions

This Instruction enters into force upon its notification to the profession through the Professional Association and its publication on the Banky Foiben'i Madagascar website.

The Annexes form an integral part of this Instruction.

Done in Antananarivo, on APR 12, 2018
For the Commission for Banking and Financial Supervision The President,

(Signature)
Alain H. RASOLOFONDRAIBE
Governor of Banky Foiben'i Madagascar

Annex 1

Template for Prior Authorization Request
(to be addressed to the President of the CSBF)

Mr. President,

In my capacity as ....................................¹ of ...................................., I have the honor to request from the Commission for Banking and Financial Supervision prior authorization to exercise electronic money activities.

I hereby submit the required file prepared in accordance with Instruction No. 001/2018-CSBF of April 12, 2018 on the exercise of electronic money activities by credit institutions, accompanied by its electronic version.

I certify the accuracy of the transmitted information and documents and declare that, to my knowledge, there are no other important facts for which the Commission should be informed.

I undertake to promptly notify the Commission of any change in circumstances that would significantly alter the communicated information.

Please accept, Mr. President, the expression of my high consideration.

Signature (and seal)

¹ Signatory's capacity (Managing Director: Chairman and Managing Director, General Administrator, General Manager, Director or Manager) ² Name of the credit institution

Annex 2

LIST OF DOCUMENTS AND INFORMATION TO BE PROVIDED BY THE CREDIT INSTITUTION

The documents are to be provided in French version and presented in the order and according to the references below

INFORMATIONS ET DOCUMENTS REQUIS	Réf. dans le dossier à transmettre au SG-CSBF	Colonnes réservées au SG-CSBF
		Oui/non	Observations
1. PRÉSENTATION GÉNÉRALE
1.1. Demande d'autorisation	1.1.1. Prior authorization request signed by the managing director according to Annex 1 template.
	1.1.2. Board of Directors resolution approving the extension to electronic money activity.
1.2. Motifs et résultats attendus	1.2.1. Justification focused on market orientation and positioning.
	1.2.2. Market orientation and positioning.
	1.2.3. Role to play in the financial landscape.
	1.2.4. Proposed objectives and expected results.
1.3. Float account	1.3.1. Procedures for depositing the master account with designation of depository bank(s).
	1.3.2. Master account agreement(s) with depository bank(s).
1.4. Description of the proposed electronic money activity	1.4.1. Types, nature, characteristics, and tariff conditions of proposed operations and services.
	1.4.2. Detailed description of operational processes for each offered product and service, highlighting transaction functioning and associated financial flows.
	1.4.3. Types and characteristics of proposed electronic money instruments.
	1.4.4. Target customer description.
	1.4.5. Projected implementation schedule.
	1.4.6. Procedures manuals related to electronic money activity.
2. DESCRIPTION DU PROJET
2.1. Structure organisationnelle et opérationnelle	2.1.1. Presentation of Board involvement in the new activity.
	2.1.2. Number of persons designated as responsible for electronic money activity and description of their functions.
	2.1.3. Other functions involved in the activity (commercial, compliance, internal audit, ...).
2.2. Projections financières	2.2.1. Investment table indicating equipment costs and related depreciation.
	2.2.2. Market study related to the new activity with realistic parameters justifying business plan items and their evolution.
	2.2.3. Three-year projected financial statements accounting for the new activity.
	2.2.4. If external financing is used: - identities of financial partners in the electronic money issuance activity, - draft agreements or letters of intent signed by an authorized partner representative.
2.3. Réseau de distribution	2.3.1. Distribution network management procedures, including selection criteria, training, control mechanisms, and tools provided to agents.
	2.3.2. Projected number of agents or commercial partners the institution intends to use.
	2.3.3. Draft standard mandate contract referred to in Article 30 of the Electronic Money Law, indicating mandatory mentions set by the Instruction for distribution agents.
2.4. Infrastructure technique	2.4.1. Detailed presentation of information system architecture and technical infrastructure, highlighting hardware, tools, and security mechanisms.
	2.4.2. Information and data archiving and traceability procedures (frequency, format, location, duration).
	2.4.3. Detailed description of operational processes, transaction kinetics, and associated financial flows.
	2.4.4. Network capacity and availability.
	2.4.5. Description of the business continuity plan.
	2.4.6. If external technical service providers are used, draft contracts with technical partners.
2.5. Dispositifs de gestion des risques et de contrôle interne	2.5.1. Mechanism for prevention, identification, control, and monitoring of risks related to electronic money activity.
	2.5.2. Description of internal audit responsibilities for this activity.
	2.5.3. Updated internal control procedures manual accounting for the activity extension.
2.6. Dispositif de lutte contre le blanchiment et le financement du terrorisme (LAB/CFT)	2.6.1. AML/CFT procedures adapted to electronic money operations.
	2.6.2. Procedures for distribution agents to transmit any information required by the AML/CFT mechanism.
	2.6.3. Training and information procedures for agents regarding AML/CFT.
2.7. Protection des consommateurs	2.7.1. Draft standard customer agreement referred to in Article 76 of the Electronic Money Law.
	2.7.2. Description of consumer protection mechanisms required by Articles 76 to 78, 92 to 100 of the Electronic Money Law.
	2.7.3. Customer service procedures manual.