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Licensing and Authorization of Payment Instrument Issuers (Directives No. 314/2020)
National Bank Of EthiopiaO31N4P/S2/0012l02020
Summary
This directive outlines the licensing and authorization requirements for Payment Instrument Issuers in Ethiopia, aiming to promote the safety and efficiency of the national payment system, encourage innovation in financial services, and protect user interests. It details application processes, operational requirements, customer due diligence, and oversight mechanisms.
Who's affected
Entities seeking to issue payment instruments, including licensed financial institutions and new applicants, as well as existing payment instrument issuers.
Action required
Entities intending to issue payment instruments must apply to the National Bank of Ethiopia, fulfilling all specified requirements for licensing and authorization.
Key points
8- Establishes licensing and authorization framework for Payment Instrument Issuers.
- Details capital requirements, governance, and operational standards.
- Introduces tiered account levels with varying transaction limits.
- Mandates robust customer due diligence, KYC, and AML/CFT procedures.
- Outlines customer protection measures, including complaint handling.
- Specifies reporting and oversight responsibilities of the National Bank of Ethiopia.
- Defines conditions for Limited Use Payment Instrument Issuers.
- Repeals Regulation of Mobile and Agent banking Services Directive No FIS/0112012.
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Requirements
16- Minimum paid-up capital of Ethiopian Birr 50,000,000 for companies.
- Government ownership for specific enterprises.
- Shareholder structure requirements (e.g., max 20% shareholding by one person, min 10 shareholders for non-government enterprises).
- Detailed business plan for at least five years.
- Operational policies and procedures, including customer due diligence, AML/CFT, and dispute resolution.
- System-related functions and technical conditions, including security and data management.
- Risk management framework.
- Specific requirements for directors and executive management (education, experience, reputation).
- Compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) policies.
- Requirements for electronic account management, including limits and dormancy handling.
- Electronic money float management and segregation of user funds.
- Customer protection measures, including transparent terms, complaint handling, and support.
- Reporting requirements to the National Bank of Ethiopia on transactions, accounts, and incidents.
- Annual external audits.
- Specific conditions for Limited Use Payment Instrument Issuers (e.g., balance limits, business scope).
- Payment of application, licensing, and renewal fees.
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Rights and permissions
10- Users are entitled to receive electronic or physical receipts for transactions.
- Users have the right to have their electronic accounts denominated in Ethiopian Birr.
- Users have the right to have their funds safeguarded and insulated from creditors of the issuer.
- Applicants whose applications are rejected may appeal the decision.
- Users can claim funds from closed electronic accounts.
- Users are entitled to fair treatment, transparency, and confidentiality.
- Users have the right to be notified of service interruptions and changes.
- Users have the right to appeal complaints.
- Limited use payment instrument users have the right to refund or transfer outstanding balances.
- Users' electronic account balances may be covered by a deposit insurance scheme when operational.
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Restrictions
10- Payment instruments and accounts must be denominated in Ethiopian Birr.
- Transactions must be electronic and in real-time.
- Specific transaction limits apply to different account levels (Level 1, 2, 3) and walk-in users.
- No person other than Government may hold more than 20% of the shares of a licensed payment instrument issuer.
- Companies other than government enterprises must have a minimum of 10 shareholders.
- Limited use payment instruments cannot be used by agents.
- No interest or financial return is paid to users of limited use payment instruments.
- Payment instrument issuers cannot engage in activities unrelated to their core business without approval.
- Funds of users must be safeguarded and not commingled with third-party funds.
- Certain changes (e.g., issuing new products, amending articles) require prior written approval from the National Bank.
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Penalties
4- Punishment in accordance with Article 35 of the National Payment System Proclamation No. 718/2011 for contravention.
- Administrative measures by the National Bank in accordance with Article 34 of the National Payment Systems Proclamation No. 718/2011.
- Suspension or revocation of authorization or license for non-compliance, providing false information, or compromising public trust.
- Suspension or revocation of registration for Limited Use Payment Instrument Issuers for non-compliance or fraudulent activities.
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Objectives
5- To promote the safety and efficiency of the payment system.
- To encourage the use of innovative payment instruments and financial services.
- To establish clear regulatory requirements to protect users of payment instruments.
- To mitigate risks and maintain the reliability of payment instruments through oversight.
- To ensure compliance with national payment system laws and regulations.
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Organizations
4- National Bank of Ethiopia
- Commercial Code of Ethiopia
- Council of Ministers
- Relevant authorities for trade name registration
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Legal references
4- National Payment System Proclamation No. 718/2011 (Articles 4(2a)/2/, 4(2)/e/, 10(1)/c/, 10(5), 19(3), 20(2), 37(2))
- Banking (amended) Business Proclamation (Article 2(1), Article 58)
- Commercial Code of Ethiopia
- Prevention and Suppression of Money Laundering and the Financing of Terrorism - Proclamation Number 780/2011
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Original sourcehttps://justice.gov.et/en/directives/licensing-and-authorization-of-payment-instrument-issuers-directives-no-314-2020/
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