Palestine Monetary Authority

Instructions No. (1) of 2018

Regarding Licensing of Payment Service Companies

Based on the provisions of Law No. (17) of 2018 concerning the National Payments Marketing Law, specifically Articles (5) and (9) thereof, and in the interest of the public, and according to the powers vested in us, we have issued the following Instructions:

Chapter One

Definitions and Scope of Application

Article (1)

Definitions

• The words and expressions appearing in these Instructions shall have the meanings assigned to them below, unless the context indicates otherwise:

Term	Definition
Person	A natural or legal person.
Payment Service	All services related to the management, sending, receiving, and execution of payment orders in any currency, including providing electronic payment services and operating a payment system.
Payment System	The electronic system or arrangement for carrying out clearing or marketing of payment obligations, and for the purposes of these Instructions, includes all services related to the management and operation of clearing and electronic transfer systems among its members.
Payment System Service Provider	The company licensed by the Palestine Monetary Authority to operate a payment system.
Electronic Payment Service	All services related to sending, receiving, and executing electronic payment orders in any currency for customers.

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Article (2)

Objective and Scope of Application

1. These Instructions aim to regulate the payment services sector in a safe and transparent manner, contributing to the development of payment services.
2. The provisions of these Instructions apply to payment services and their providers, including:
   • a. Payment system services.
   • b. Electronic payment services.

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Chapter Two

Licensing

Article (3)

Licensing Provisions

1. It is prohibited for any person to provide a payment service except through a company registered in accordance with prevailing laws, the purpose of which is to provide payment system services or electronic payment services.
2. No company whose purpose is to provide payment services shall be registered except after obtaining prior written approval from the Palestine Monetary Authority for the registration of the company.
3. It is prohibited for any person to use the term "payment service" or its synonyms or any other expression resembling it in any language in its documents, publications, or commercial titles unless it holds a license or prior written approval from the Palestine Monetary Authority.
4. The Palestine Monetary Authority may request the competent authorities to take the necessary legal action against any person found to be engaging in payment service provision activities without obtaining prior license from it.
5. The Palestine Monetary Authority may request a person to provide it with its identity, documents, and accounts in case there is suspicion that it is conducting payment service provision activities without obtaining the necessary license.

Article (4)

License Application

1. The license application shall be submitted to the Palestine Monetary Authority by the founders according to Annex No. (1), including all required documents and papers for consideration of the application.
2. The Palestine Monetary Authority shall respond in writing to the applicant within one month from the date of receipt of the application regarding the completeness of the application, and the response shall specify the deficiencies that must be provided to the Authority to decide on the application.
3. The deficiencies, if any, shall be completed within three months from the date of the response; otherwise, the applicant shall be deemed to have withdrawn the application.
4. The application is considered complete after providing the Palestine Monetary Authority with all required documents and papers.
5. The Palestine Monetary Authority shall take a decision on the applicant within one month from the date of completion and shall notify the applicant of its decision.

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Article (5)

Register of Payment Service Providers

1. The Palestine Monetary Authority shall maintain a central register of all payment service providers.
2. The Palestine Monetary Authority shall publish on its website and any advertising medium it deems appropriate a list of names of payment service providers licensed by the Authority.
3. The Palestine Monetary Authority may classify payment service providers into categories according to the importance of the services provided systematically.

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Chapter Three

Payment System Services

Article (6)

Preliminary Approval

1. The entity applying for preliminary approval to license a payment system service must provide the Palestine Monetary Authority with the following documents:
   • a. Draft articles of association and internal regulations of the company.
   • b. Names, nationalities, places of residence, and resumes of the founders, including qualifications, experience, and supporting documents.
   • c. Certificate of no criminal record for each founder issued by the competent authorities in Palestine.
   • d. Economic feasibility study, estimated budgets, and potential partners in the company for the first three years of the company's operation for realistic estimates.
   • e. Draft strategic business plan of the company for the next five years.
   • f. Written explanation of the type of payment system service, its objectives, description of its mechanisms, support for its participants and beneficiaries, planned distribution sites, and any other explanatory presentations requested by the Palestine Monetary Authority.
   • g. Description of work policies and procedures to be used, including:
     1. Customer service, dispute resolution, and anti-money laundering.
     2. Information security and protection.
     3. Internal control procedures and risk management.
   • h. Written letter from the founders reinforcing the following:
     1. That none of the founders has been declared bankrupt or unable to pay debts unless their reputation has been restored.
     2. That none of the founders has been convicted by a competent court of a final judgment for crimes of theft, fraud, embezzlement, forgery, defamation, bribery, mismanagement, or any crime involving honor, trust, or public morals, or any money laundering crime.
     3. Sound credit performance, including that none of the founders has defaulted on any of its banking obligations.
   • 2. The preliminary approval shall be void if all requirements and conditions necessary to obtain the license are not met within a period of one year from the date of obtaining the preliminary approval, except in cases where the Palestine Monetary Authority decides otherwise.

Article (7)

Requirements for Licensing Payment System Services

1. The applicant for final written approval from the Palestine Monetary Authority to license a payment system service must provide the Authority with the following data and documents:
   • a. Articles of association and internal regulations of the company.
   • b. Organizational structure of the company and work procedures manual.
   • c. Lease contract or ownership deed for the company's headquarters/regional office in Palestine.
   • d. Documents reinforcing the actual payment of the full capital as determined by the Palestine Monetary Authority.
   • e. Description of the general framework of the payment system, its feasibility, its operational basis and models, its expected or planned relationship with other systems, and information about the provider.
   • f. Description of system policies and procedures, including at a minimum:
     1. Participation criteria and conditions in the system.
     2. Clearing and settlement mechanism.
     3. Draft operational rules of the system.
     4. Service level to be provided to participants.
     5. Risk analysis and measures to mitigate system risks arising from liquidity.
     6. Participant defaults and the ability to manage these risks.
     7. Measures taken to reduce operational risks from technical aspects and business continuity plans.
     8. System subscription plans.
     9. Information on system maintenance services.
     10. Strategic business plans of the company for the next five years.
   • g. Description of governance procedures, internal control regulations, reporting paths and periodicity, risk management, business continuity, accounting registration procedures, and the plan ensuring service provision and continuity.
   • h. Clarification of controls to be taken to comply with prevailing anti-money laundering requirements and procedures in Palestine.
   • i. Settlement bank dealing with it for the purpose of marketing payment system service results and necessary banking guarantees and contractual conditions.
   • 2. The Palestine Monetary Authority may assign any entity it deems appropriate, at the company's expense, to verify the accuracy of the data provided by the company and its readiness.

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Article (8)

Appointment of Executive Management

1. Prior written approval from the Palestine Monetary Authority must be obtained for the appointment of the General Manager, Operations Manager, and Information Technology Manager of the payment system service provider.
2. The Palestine Monetary Authority may refuse to approve the appointment of the General Manager, Operations Manager, or Information Technology Manager in the following cases:
   • a. If any of them does not possess sufficient academic qualifications and practical experience.
   • b. If any of them does not have sufficient skills and experience in the field of payment system operations.
   • c. If any of them caused losses to a banking institution, specialized lending institution, or any other institution where they served as a senior official or board member.
   • d. If any of them has been declared bankrupt or unable to pay debts unless their reputation has been restored.
   • e. If any of them has been convicted by a competent court of a final judgment for crimes of theft, fraud, embezzlement, forgery, defamation, bribery, mismanagement, or any crime involving honor, trust, or public morals, or any money laundering crime, unless their reputation has been restored.
3. The Palestine Monetary Authority may dismiss or suspend the General Manager, Operations Manager, or Information Technology Manager from their duties if they violate the provisions of the National Payments Law and instructions issued thereunder in any acts that caused significant losses to the company they work for or exposed it to risks.

Article (9)

Imposing Changes on Critical Payment System Service Providers

To ensure financial stability, the Palestine Monetary Authority may impose constraints or obligations on the critical payment system service provider regarding the following:

1. Conditions for access to or subscription in the critical payment system service and agreements arising therefrom.
2. Operations of the critical payment system service, including clearing and settlement arrangements and agreements arising therefrom.
3. Interconnection between the critical payment system service and other systems.
4. Interconnection between the critical payment system service and its participants.
5. Procedures to be taken by any participant or group of participants from the critical payment system service provider regarding any system operation.
6. Liquidation procedures for critical payment system service results.
7. Risk management.
8. Conditions related to confirming the finality of settlement.
9. Financial conditions and requirements related to liquidity and guarantees between participants.
10. Operational and financial effectiveness of the critical payment system service regarding clearing arrangements.
11. Conditions to be followed in case of outsourcing any functions of the critical payment system service.
12. Conditions to be followed to reduce operational risks and ensure system continuity and business recovery through business continuity plans.
13. Availability of technical and technical requirements to link the critical payment system service with managed clearing and settlement systems.
14. Conditions to be followed to comply with the principles of Market Infrastructure issued by the Bank for International Settlements and as the Palestine Monetary Authority deems appropriate.

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Chapter Four

Electronic Payment Services

Article (10)

1. The entity applying for preliminary approval to license an electronic payment service must provide the Palestine Monetary Authority with the following documents:
   • a. Draft articles of association and internal regulations of the company.
   • b. Names, nationalities, places of residence, and resumes of the founders, including qualifications, experience, and supporting documents.
   • c. Certificate of no criminal record for each founder issued by the competent authorities in Palestine.
   • d. Economic feasibility study, estimated budgets, and potential partners in the company for the first three years of the company's operation for realistic estimates.
   • e. Draft strategic business plan of the company for the next five years.