Norm on Non-Bank Correspondents

Resolution CD-SIBOIF-827-1-MAR28-2014
Dated March 28, 2014

NORM ON NON-BANK CORRESPONDENTS

The Board of Directors of the Superintendent of Banks and Other Financial Institutions.

CONSIDERING

I

That in accordance with Article 2 of Law No. 561, General Law of Banks, Non-Bank Financial Institutions and Financial Groups, published in Gazette No. 232, of November 30, 2005, banks are authorized to intermediated public resources in the form of deposits or any other title, and to provide other financial services such as, granting credits, guarantees or sureties, fund transfers, the issuance or administration of payment instruments such as credit, debit or prepaid cards, among others; however, it is necessary to regulate the forms, means or channels used to carry out these operations already authorized by law, in order to safeguard the interests of their clients or users.

II

That the provision of financial services through distribution channels other than traditional ones would allow increasing the country's banking levels; however, it is required that entities adopt and implement adequate policies, procedures and controls for the risks involved in operating through these new channels.

III

That the experience of other countries in the region has demonstrated that the implementation of alternative distribution channels, such as those known as "non-bank agents or correspondents", has been an effective mechanism for financial institutions to achieve greater depth in their products and services, as it allows them to operate at low costs in places where they do not have branches, counters or ATMs.

IV

That in accordance with the considerations stated above and based on the powers established in Article 3, numeral 13) and Article 10, numerals 1) and 2), of Law No. 316, Law of the Superintendent of Banks and Other Financial Institutions, and its reforms.

In exercise of its powers,

HAS ISSUED

The following,

Resolution CD-SIBOIF-827-1-MAR28-2014

NORM ON NON-BANK CORRESPONDENTS

CHAPTER I
CONCEPTS, OBJECT AND SCOPE

Article 1. Concepts. For the application of this regulation, the concepts indicated in this article, both in uppercase and lowercase, singular or plural, shall have the following meanings:

a) Client: Client or user of the financial institution, defined in the regulations governing the matter on transparency in financial operations.

b) Board of Directors: Board of Directors of the Superintendent of Banks and Other Financial Institutions.

c) Non-Bank Correspondent (NBC): Natural or legal person who exercises commercial or service activities in the national territory, with which a financial institution signs a contract so that, on its behalf, it can provide the services regulated in this regulation through data transmission systems connected in real time.

d) Institution or Financial Institution: Banks and financial companies supervised by the Superintendent of Banks and Other Financial Institutions.

e) Law No. 316: Law of the Superintendent of Banks and Other Financial Institutions, published in Official Gazette No. 196, of October 14, 1999, and its reforms.

f) General Law of Banks: Law No. 561, General Law of Banks, Non-Bank Financial Institutions and Financial Groups, published in Gazette No. 232, of November 30, 2005.

g) CDD Policy: "Customer Due Diligence" Policy referred to in the regulations governing the matter on prevention of money laundering, goods or assets and terrorist financing (AML/CFT).

h) Superintendent: Superintendent of Banks and Other Financial Institutions.

i) Superintendent: Superintendent of Banks and Other Financial Institutions.

Article 2. Object and scope. This regulation aims to establish the minimum requirements that financial institutions must meet to operate through NBCs; as well as to regulate, among other aspects, the services they can provide, the responsibilities in the provision of these services, the hiring requirements for NBCs, contractual prohibitions and the duties of information to clients, to safeguard the interests of clients of these services.

CHAPTER II
AUTHORIZED SERVICES

Article 3. Services. Financial institutions may offer the following services through NBCs:

a) Balance inquiries;

b) Deposits and withdrawals in accounts;

c) Fund transfers;

d) Loan or credit card payments;

e) Cash withdrawals with credit cards;

f) Public or private utility payments;

g) Sending and payment of family remittances;

h) Receipt of documents for processing account opening requests or credit applications and their subsequent transfer to the contracting financial institution;

i) Services channeled through mobile devices, as established in the regulations governing the matter on electronic money operations carried out by financial institutions; and

j) Other services authorized by the Superintendent.

Article 4. Responsibilities of financial institutions. Financial institutions shall be directly liable to their clients for the operations carried out or services provided through NBCs, duly registered and processed in the corresponding electronic terminal of the installed operational platform; consequently, the electronic receipts or notifications of said operations or services delivered to clients must include the following annotation:

"The financial institution (corporate name) is responsible for the operations and services provided through the NBC (corporate name or trade name)".

Likewise, financial institutions shall be responsible for guaranteeing the confidentiality of client information to which their NBCs have access, as well as information subject to banking secrecy or reserve according to the General Law of Banks.

CHAPTER III
REQUIREMENTS TO OPERATE THROUGH NBCS

Article 5. Requirements to operate through NBCs. Financial institutions wishing to operate through NBCs must meet the following minimum requirements:

a) Have a business model for operating through NBCs, approved by the institution's board of directors. This model must consider the following minimum aspects:

1) Policies for the selection and hiring of NBCs, which must contemplate the evaluation of aspects related to the geographic environment, the commercial activity, that it is lawful; and the suitability of their owners, among others.

2) Policies, procedures and internal controls to manage risks associated with the provision of services through NBCs, in particular, operational, technological and money laundering and/or terrorist financing risks, complying with the requirements established in the

regulations governing these matters; and in accordance with the internal policies of the financial institution in these matters.

3) Mechanisms for disclosing information related to NBCs, their location, the authorized services to be provided, the conditions for access to them, the fees to be charged, if applicable, the contact means for inquiries or complaints, among others.

4) Limits on the number of transactions per client, maximum amounts per transaction, frequency of transactions per client, type of transaction, among others, in accordance with the internal policies of each institution.

5) Description of the equipment, programs or applications to be used; the technical diagram of the sending and receiving of information between the NBC and the institution's servers; and the procedure for the registration and conservation of transaction information.

6) Supervision mechanisms and frequency of visits to NBCs to verify that they are operating in accordance with what is established in the contract.

b) Have a technological platform connected online with the electronic terminals located in the NBCs, with the necessary technical capacity to guarantee the security, availability, functionality, efficiency, reliability, confidentiality, auditability and integrity of the information.

c) Have an operational manual for NBCs, which must contain the following minimum aspects:

1) Description of the services to be provided;

2) Conditions of access and use of the services;

3) Limits on the number, amount, frequency and type of transaction, in accordance with the internal policies of each institution;

4) Procedure for the registration of transactions;

5) Alert and monitoring mechanisms for transactions;

6) Technical specifications of the necessary equipment to operate;

7) Quick guide for problem solving; and

8) Contact phones in case of inquiries, emergencies or operational failures.

d) Sign contracts with NBCs that contain the minimum aspects indicated in Article 8 of this regulation.

CHAPTER IV
HIRING OF NBCS

Article 6. Requirements.
1 Financial institutions may hire natural or legal persons whose legal regime or corporate object does not prevent them from acting as NBCs, for which they must ensure that they meet the following aspects:

a) That they are legally authorized in the country to conduct commerce;

b) That they have a good reputation, solvency and suitability in their community; and

c) That they do not operate as an NBC for another financial institution, in which case, the institution intending to operate with the NBC must require it to decide with which of the entities it will continue operating. If the NBC decides to operate with the new financial institution, the first contracting entity must conclude its contractual relationship when so notified by the NBC, in which case, they must agree on the term and procedure to settle operations.

Article 7. Documents for hiring. For the hiring of interested parties to act as NBCs, financial institutions must obtain from them the following documents:

1) For natural persons:

a) Identity card on both sides for nationals, or of the identity card for residents, or another legal document that proves their nationality, in the case of foreigners;

b) Business registration certificate or Single Taxpayer Registry (RUC), if applicable; and

c) Personal, banking or commercial references, as appropriate, in accordance with the internal policies of each institution.

2) For legal persons:

1 Art. 6, reformed on October 20, 2015 - Resolution No. CD-SIBOIF-912-2-OCT20-2015

a) Testimony of the public deed of constitution, bylaws and their modifications, if any, with the corresponding registration reasons;

b) Certification of the board of directors or highest administrative body act of the interested party, in which the decision to act as an NBC is recorded;

c) Document accrediting the legal representative;

d) List of the main partners or shareholders of the company;

e) List with name and position of the directors or administrators of the company, including the general manager;

f) Business registration certificate;

g) Certificate of the Single Taxpayer Registry (RUC); and

h) At least one banking and one commercial reference, in accordance with the internal policies of each institution.

Financial institutions must keep an updated file for each NBC with which they operate. This file must contain the signed contract and the documents referred to in this article.

Article 8. Minimum content of the contract.
2 The contracts that financial institutions sign with NBCs must contain the following minimum aspects:

a) Identification of the contracting parties.

b) The explicit indication of the full responsibility of the financial institution towards the client, for the services or operations carried out through the NBC, in accordance with the terms established in the preceding Article 4.

c) The services to be contracted with the NBC.

d) The commissions to be paid to the NBC for the services provided and the form of payment.

2 Art. 8, reformed on October 20, 2015 - Resolution No. CD-SIBOIF-912-2-OCT20-2015

e) The valid channels and procedures for communication, issuance of instructions or resolution of inquiries between the parties, due to the contracted services.

f) The following minimum obligations for the NBC:

1) Identify itself to the public as an NBC, specifying the authorized services to be provided on behalf of the financial institution.

2) Provide services according to the establishment's own hours.

3) Comply with the operational manual provided by the financial institution.

4) Comply with the internal controls and procedures established by the financial institution to manage risks associated with the services it will provide, in particular, risks related to money laundering and/or terrorist financing, and risks inherent to cash handling, if applicable; in accordance with the internal policies of the institution.

5) Keep confidential the information that identifies the clients of the financial institution who carry out operations in its establishment.

6) Deliver to clients the receipt of the transaction carried out, which must be issued by the electronic terminal supplied to it. This receipt must include, at least, the date, time, type and amount of the transaction, reference number of the operation, as well as the annotation indicated in Article 4 of this regulation.

7) Preserve and safeguard the electronic terminals and other equipment provided by the financial institution.

8) Inform the financial institution about any communication failure that prevents transactions from being carried out online.

g) The obligation of the financial institution to provide training to NBC personnel for the provision of agreed services.

h) The grounds for contract termination.

i) Any other information related to the characteristics and/or restrictions and/or limitations of the services that the NBC will provide.

In the aforementioned contracts, clauses that restrict the freedom of the NBC to terminate the contract in advance when they decide, unilaterally, to operate with another financial institution, may not be included, only terms and procedures for settling operations may be established.

CHAPTER V
CONTRACTUAL PROHIBITIONS

Article 9. Prohibitions. In the contract entered into between the financial institution and the NBC, the following prohibitions must be stated to the correspondent:

a) To have access to information on the balances of the financial institution's clients' bank accounts.

b) To operate when a communication failure occurs that prevents transactions from being carried out online and recorded in the financial institution's system.

c) To assign the contract in whole or in part, without the express acceptance of the financial institution.

d) To charge clients fees that have not been agreed upon with the financial institution.

e) To incur any type of obligation or responsibility on behalf of the financial institution for which it is not expressly authorized in the respective contract.

f) To exceed the limits provided in the operational manual supplied by the financial institution.

g) To condition the carrying out of operations or provision of services contracted with the financial institution on the acquisition of its own products or services.

h) To provide financial services on its own behalf.

CHAPTER VI

DUTIES OF INFORMATION

Article 10. Information on NBCs. Financial institutions must maintain, at least, in their customer service offices and on their websites, available and updated information on the NBCs with which they operate, the services they can provide, the conditions for access to them and the authorized fees to be charged, if applicable, among others.

Article 11. NBC identification notice. Financial institutions must supply NBCs with physical notices that identify them in the provision of the services referred to in this regulation, which must be fixed in their respective establishments in a place visible to the public. Such notices must show the following minimum information:

a) The designation of "NBC", indicating the name of the contracting financial institution. This is without prejudice to the fact that the financial institution may use a trade name for this product, accompanied by the aforementioned information.

b) The services that the NBC can provide.

c) The limits or maximum amounts per transaction, in accordance with the policies established by each institution.

d) The indication to require the receipt for any transaction.

e) Contact means of the financial institution for inquiries or complaints.

CHAPTER VII
FINAL PROVISIONS

Article 12. Supply of information to the Superintendent. Financial institutions must inform the Superintendent about the number and total amount of monthly transactions they carry out, by type of service, in accordance with the Annex attached to this regulation, which is an integral part of it. This information must be supplied in accordance with the Official Calendar for the delivery of information required by the Superintendent.

Article 13. Modification of Annexes. The Superintendent is authorized to make the necessary modifications to the Annex of this Regulation, informing the Board of Directors thereof.

Article 14. Transitional.
3 Financial institutions that, upon the entry into force of this regulation, are operating through the same NBC, must require it to decide with which of them it will continue operating. The financial institution with which operations end must agree with the NBC on the terms and procedures to settle operations.

Article 15. Validity. This regulation shall enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Gazette.

ANNEX
STATISTICAL INFORMATION ON NBCS

Amount figures in United States Dollars
Corresponding to ___ of ______________________ of _____________

Name of Financial Institution: ________________________________________ Geographic Location (Department):
Number of active NBCs:
Number of NBCs deactivated:

Service Type Total Number of Transactions Total Amount of Transactions Account Deposits Account Withdrawals Fund Transfers Loan Payments Credit Card Payments Cash Withdrawals with Credit Cards Public or Private Utility Payments

3 Art. 14, reformed on October 20, 2015 - Resolution No. CD-SIBOIF-912-2-OCT20-2015

Sending and Payment of Family Remittances
Services channeled through mobile devices, in accordance with the regulations governing the matter on electronic money operations.

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