Resolution 121/2011 Approving the Payment Services Regulation

BOARD RESOLUTION NO. 121/2011
SUBJECT: FINANCIAL ENTITIES MANAGEMENT – APPROVES THE PAYMENT SERVICES REGULATION.

HAVING SEEN:
The Political Constitution of the State approved by referendum on January 25, 2009, and promulgated on February 7, 2009.
Law No. 1670 of October 31, 1995 of the Central Bank of Bolivia (BCB).
Law No. 1488 of May 5, 2004 on Banks and Financial Entities and its subsequent modifications.
The BCB Statute approved by Board Resolution No. 128/2005 of October 21, 2005 and its subsequent modifications.
The Report from the Financial Entities Management BCB-GEF-SANA-DSP-INF-2010-238 of September 22, 2011.
The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2011-337 of September 23, 2011.

CONSIDERING:
That the Political Constitution of the State establishes in its article 328 that it is the responsibility of the BCB, in coordination with the economic policy determined by the Executive Branch, in addition to those indicated by Law, to regulate the payment system.

That pursuant to article 331 of the Political Constitution of the State, financial intermediation activities, the provision of financial services, and any other activity related to the handling, use, and investment of savings are of public interest and can only be exercised with prior authorization from the State, in accordance with the Law.

That Law No. 1670 provides in its articles 2, 3, and 30 that the BCB’s objective is to procure the stability of the internal purchasing power of the national currency; for this compliance, it formulates policies of general application in monetary and payment system matters, which are subject to its regulatory competence, all financial intermediation entities and financial services authorized by the Superintendence of Banks and Financial Entities, currently named the Financial System Supervisory Authority (ASFI).

That Law No. 1488 in its articles 4 and 154, items 4 and 6, determines that financial intermediation and auxiliary financial services activities will be carried out by financial entities authorized by the ASFI, an Institution that has the attribute, among others, to supervise natural or legal persons who carry out auxiliary financial intermediation activities, as well as to incorporate into its scope of competence, in accordance with the BCB, other persons or entities that carry out financial intermediation activities.

That the Financial Entities Management, through Report BCB-GEF-SANA-DSP-INF-2011-238 of September 22, 2011, establishes that technological innovation in the matter of payment instruments and services has evolved notably in recent years; consequently, it is necessary to incorporate payment services into the scope of financial regulation and supervision to not limit access and expansion of alternative payment services and instruments to cash; therefore, the functioning of financial intermediation entities and companies providing these services, their duties and obligations, and the functions of the surveillance and supervision authorities must be regulated.

That according to Report BCB-GAL-SANO-INF-2011-337, the Legal Affairs Management concludes that the proposal for the Payment Services Regulation is legally appropriate, as it does not contravene the current legal framework, and it is the competence of the BCB Board to consider its approval.

That the BCB Board, in its capacity as the highest authority of the Institution, is responsible for defining its policies, specialized regulations of general application, and internal rules, being authorized to issue norms and adopt general decisions that may be necessary for the fulfillment of the functions, competencies, and powers assigned by Law to the Issuing Entity, as established in articles 44 and 54 item o) of Law No. 1670 and articles 9, 11, and 24 of the BCB Statute.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the Payment Services Regulation, in its III chapters and 18 articles, which is attached and forms an integral part of this Resolution.

Article 2.- This Regulation shall enter into force from its approval.

Article 3.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, September 27, 2011

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Marcelo Zabalaga Estrada

_________________________ _________________________ Hugo Dorado Araníbar Ernesto Yáñez Aguilar

_________________________ _________________________ Gustavo Blacutt Alcalá Rafael Boyán Téllez

(ANNEX)
PAYMENT SERVICES REGULATION

CHAPTER I
GENERALITIES

Article 1. (Object). This Regulation aims to define the payment services permitted in the national payment system and to regulate the functioning, operations to be carried out, duties, and obligations of Payment Service Providers (PSPs), as well as the activities of the surveillance and supervision authorities.

Article 2. (Scope). This Regulation applies to a) financial intermediation entities that hold a license to operate from the Financial System Supervisory Authority (ASFI) and b) companies that provide the payment services established in this Regulation.

Article 3. (Payment Service). A set of activities developed within the scope of the payment system associated with the management, clearing, and/or settlement of payment instruments or payment orders.

Article 4. (Surveillance and Supervision Authorities). The Central Bank of Bolivia (BCB) and the ASFI are the surveillance and supervision authorities for the provision of payment services, respectively.

Article 5. (Definitions). For the purposes of interpreting this Regulation, the following definitions are established:

a) Acquiring. The process through which a company, prior to agreement with a card brand, affiliates merchants to process their transactions with these cards, provides electronic terminals, and is responsible for the collection and custody of information on processed transactions and the settlement with affiliated establishments. b) Agent. A natural or legal person that provides payment services on behalf of a PSP. c) Electronic Clearing Chamber (CEC). The term CEC refers to clearing chambers defined by Article 68 of Law No. 1488, which use electronic systems for processing their operations. They are auxiliary financial service companies whose sole object is the automatic and centralized processing of the clearing and settlement of payment instruments. d) Payment Account. A record associated with an electronic payment instrument, which reflects the operations carried out with it. Payment accounts shall be denominated exclusively in national currency (Bolivianos). e) Payment Service Provider (PSP). An auxiliary financial service company that holds a license to operate granted by the ASFI to provide the payment services defined in this Regulation. f) Payment Instrument. An instrument that allows the holder and/or user to instruct payment orders. g) Electronic Payment Instrument. An instrument that electronically allows the holder and/or user to instruct payment orders, withdraw cash, and/or make inquiries related to accounts associated with the instrument. h) Payment Order. An instruction or message by which the assignment and/or transfer of funds to the order of the beneficiary is requested. This includes electronic transfers.

CHAPTER II
ON THE PROVISION OF PAYMENT SERVICES

Article 6. (Obtaining a License to Operate). To provide payment services, PSPs must hold a license to operate granted by the ASFI. The license to operate will specify the payment services that PSPs may carry out within the framework of what is established in this Regulation.

Article 7. (Minimum Requirements for Constitution and License to Operate). The ASFI will determine the requirements for the constitution and obtaining of a license to operate for PSPs through specific regulation on technological, operational, and administrative requirements that contemplate at least the following aspects:

a) Legal form of organization. b) Definition of minimum capital. c) Establishment of a monetary guarantee for the continuity of its operations and for the settlement of payment orders. d) Availability of adequate physical and technological infrastructure for the payment services to be provided. e) Possession of an organizational structure with defined, transparent, and coherent lines of responsibility, as well as effective procedures for identification, management, control, and communication of the risks to which the PSP is or may be exposed, along with adequate internal control mechanisms, including administrative and accounting procedures. Such methods, procedures, and mechanisms will be exhaustive and proportional to the nature, scale, and complexity of the payment services provided by said entity. f) Interoperability of the services and systems provided. g) Description of the operational process of payment services in all its stages. h) Contingency procedures and mechanisms for controlling settlement risks. i) Rights, obligations, and responsibilities of the holders and/or users of the service and the content of contracts with payment agents. j) Proposed tariff structure as well as the procedure for its determination, modification, and dissemination.

Article 8. (Verification of Requirements). It is the responsibility of the supervision authority to verify compliance with the requirements established in this Regulation. The ASFI may request additional information it deems relevant according to the nature of the service provided by each PSP.

Article 9. (No Objection to Financial Intermediation Entities). For the provision of payment services, financial intermediation entities must process the no objection from the ASFI according to the requirements this authority defines in specific regulation.

Article 10. (Permitted Payment Services). Financial intermediation entities authorized by the ASFI and PSPs may provide one or more of the following payment services:

a) Issuance of mobile wallets. b) Administration of payment instruments. c) Processing of payment orders. d) Sending and receiving internal remittances, when they possess the corresponding infrastructure or when they have signed contracts for the service with local PSPs of the beneficiary's destination. e) Payment of international remittances under contract with international remittance entities authorized for their operation by the authorities of origin of the remitting or beneficiary country. f) Currency exchange. g) Accessory activities related to the management of permitted payment instruments or services, such as acquiring payment instruments. h) Others to be approved by Board Resolution of the Central Bank of Bolivia.

Additionally, PSPs may carry out the clearing and settlement of payment instruments.

Article 11. (Prohibitions). PSPs may not carry out operations other than those stated in their license to operate within the framework of what is established in this Regulation.

In the event that they require the incorporation of any payment service or instrument into their operations, they must request authorization from the ASFI with the no objection of the BCB.

Article 12. (Clearing and Settlement of Transactions with Payment Instruments). In the event that the operations of PSPs involve a clearing and settlement process, this must be carried out within the framework of the BCB Regulation on Electronic Clearing Chambers and Clearing and Settlement Services.

Article 13. (Availability of Received Funds). PSPs will make received funds for concepts of payment orders available to the beneficiary immediately, and in the event of contingencies as established in the respective service contracts, the delivery period of funds shall in no case exceed 72 hours from the ordering of payments.

Article 14. (Obligations). The following are the obligations of financial intermediation entities and PSPs:

a) Observe compliance with the regulations issued by the BCB and the ASFI in their respective fields of competence. b) Submit to the BCB and the ASFI all information on their transactions with the frequency required by these authorities. c) Submit their tariffs to the BCB for initial approval and whenever they are modified. d) Make the detail of tariffs for services available to the public. e) Safeguard the databases of financial, statistical, and operational information, as well as all information generated as a result of their activity. f) Provide the user with a detail, at least monthly, of all transactions carried out, including charges for commissions or other concepts. g) Establish control measures to prevent the realization of risks from computer intrusion and others. h) Communicate in a timely manner to the supervision and surveillance organs regarding changes in operations, functioning, and/or technology that they carry out.

Additionally, PSPs have the following obligations:

a) Carry out permanent control and monitoring of the activities carried out by their agents, developing adequate control procedures. b) Not carry out economic activities other than those related to the provision of authorized payment services. c) Contract special external audits of their operations and functioning at the request of the ASFI.

Article 15. (Rights). The following are the rights of financial intermediation entities and PSPs:

a) Receive payment for the services provided. b) Request information from the BCB related to the clearing and settlement of transactions that are settled in the BCB's electronic payment system.

Article 16. (Agents).
I. PSPs may hire agents to provide payment services on their behalf, for which they must sign service provision contracts that specify the duties and rights of the agents and the PSPs. The ASFI will review that these contracts do not contain clauses contrary to current regulations.
II. PSPs will assume total responsibility for the operations carried out by their agents, employing mechanisms that guarantee their efficiency and security.
III. In the event that an agent fails to comply with the provision of the service, the PSP must assume total responsibility for the economic damage caused and reimburse the funds to the affected users.

CHAPTER III
ON SUPERVISION AND SURVEILLANCE ACTIVITIES

Article 17. (Surveillance Activities). The BCB will carry out the following surveillance activities:

a) Approve the tariffs applicable to payment instruments and services. b) Process relevant statistical information and publish aggregated information on the payment services provided. c) Request from the ASFI, when deemed necessary, the review of contingency systems associated with payment services, in addition to the periodic reviews carried out by that authority. d) When deemed pertinent, request from the ASFI that it instruct PSPs to contract a special external audit of their operations and functioning.

Article 18. (Supervision Activities)
I. Within the framework of Law No. 1488 on Banks and Financial Entities (Consolidated Text) and based on this Regulation, the ASFI may apply article 4 of said Law or another it deems appropriate, to incorporate PSPs as auxiliary financial service companies into its scope of competence.
II. The ASFI will carry out the following supervision tasks:

a) Within the framework of this Regulation and in coordination with the BCB, it will issue specific regulation for the provision of payment services and for the constitution and adaptation of PSPs. b) Issue no objection for financial intermediation entities to carry out certain payment services within the framework of article 39, item 25 of the Banks and Financial Entities Law. c) Verify compliance with this Regulation, the specific regulation it issues, payment service contracts, and carry out periodic review of contingency systems associated with payment services, applying sanctions when appropriate. d) Define and control compliance with consumer defense policies, prevention and sanction measures, and ensure that tariffs and/or commissions charged by entities are available for consultation by holders and users.

TRANSITIONAL PROVISION

Sole. (Adaptation Period).
I. PSPs must adapt to what is provided in this Regulation and obtain a license to operate within the period defined and communicated by the ASFI.
II. Financial intermediation entities that currently provide the permitted payment services must adapt to what is provided in this Regulation and obtain the no objection from ASFI within the period this authority defines.