AmendmentFintech

Modified International Remittance Service (Directive No. 841/2021)

National Bank Of Ethiopia841/2021

Summary

This directive amends the International Remittance Service Directive No. 841/2021 to improve the operations of formal remittance transfer systems in Ethiopia by reducing costs, increasing access to reliable services, and facilitating foreign currency inflow. It outlines eligibility, obligations for representatives, requirements for dealing with international money transfer service providers, application procedures, prohibitions, settlement processes, transparency, promotion, record-keeping, reporting, inspection, and penalties.

Who's affected

Banks, Ethiopian Postal Service, payment instrument issuers, and international remittance service providers operating in Ethiopia.

Action required

Representatives must ensure their remittance service agreements comply with this directive and submit required applications and reports to the National Bank of Ethiopia.

Key points

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  • This directive amends the previous International Remittance Service Directive No. 71/2020.
  • It aims to enhance efficiency, reduce costs, and increase access to remittance services.
  • Eligibility is limited to banks, Ethiopian Postal Service, and payment instrument issuers.
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    • Strict requirements are placed on representatives regarding customer due diligence, reporting, and agreement terms.
    • Provisions are made for settlement, transparency, and promotion of remittance services.
    • Penalties for non-compliance are in line with the National Bank Establishment Proclamation.
    • Exclusive conditions in remittance service agreements are prohibited.

Requirements

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  • Representatives must notify the National Bank of all locations providing remittance services.
  • Representatives must open work units and provide payment within one business day.
  • Representatives must efficiently use the SWIFT system.
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    • Representatives may use API integration with IRSPs only for international services.
    • Representatives must undertake customer identification and due diligence as per anti-money laundering laws.
    • Representatives are liable for improperly disbursed funds by sub-representatives.
    • Representatives must ensure remittance service agreements conform to Ethiopian laws.
    • Representatives must obtain prior approval from the National Bank before entering into representative agreements with IRSPs.
    • Agency agreements between banks and IRSPs must stipulate minimum terms and conditions.
    • IRSPs shall not have local presence/operational offices in Ethiopia for illegal money exchange.
    • IRSPs must generate adequate foreign currency inflow through formal channels.
    • IRSPs must abide by agreement terms and conditions.
    • IRSPs shall not engage in activities detrimental to the agreement execution.
    • Representatives must assess and conduct regular due diligence on money transfer organizations and report misconducts.
    • Representatives must make remittance service contract agreements only with licensed IRSPs.
    • Representatives must gather sufficient information about IRSPs.
    • Contractual agreements between Representatives and IRSPs shall not be for more than four years.
    • Representatives must use the sample template agreement for IRSPs operating in less than 50 countries.
    • Any alteration in remittance contract provisions requires National Bank approval.
    • Exclusive conditions may not be included in the International Remittance Service Agreement.
    • Agreements must incorporate procedures for preventing money laundering and terrorist financing.
    • Representatives must submit an application letter, IRSP's license, draft contract, pay point addresses, anti-money laundering compliance documents, and evidence of IRSP's international operations (if applicable) to the National Bank.
    • Representatives may not provide remittance service without an approved contract.
    • IRSPs shall not assign employees as liaison officers or interpreters at representative premises.
    • Settlement between Representatives and IRSPs may be made within one business day under specific conditions.
    • Representatives must stop next-day payment and report issues if settlement is not effected within one business day without good cause.
    • Representatives must charge zero or minimum fees and disclose them to the National Bank.
    • Representatives must clearly disclose terms, fees, and charges.
    • Representatives must advertise remittance services through various means.
    • Representatives must keep complete records and registers of all remittance service transactions.
    • Representatives must submit monthly reports to the National Bank within 5 working days after the end of each month.
    • National Bank may require additional periodic reports.
    • National Bank may conduct inspections at pay points and representatives' premises.

Rights and permissions

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  • Representatives can provide service from one or more locations.
  • Representatives can use API integration with IRSPs for international services.
  • Representatives can charge zero or minimum fees and disclose them.
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    • Representatives can advertise remittance services.
    • Representatives can keep records and produce them upon request.
    • National Bank can require additional reports.
    • National Bank can conduct inspections with or without prior notice.

Restrictions

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  • Only banks, Ethiopian Postal Service, and payment instrument issuers are eligible to provide remittance services in association with IRSPs.
  • Ethiopian Postal Service and payment instrument issuers must use a correspondent account of a bank and furnish a draft tripartite remittance service contract for approval.
  • Representatives cannot provide remittance service without a valid, National Bank-approved remittance service contract.
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    • IRSPs cannot assign employees as liaison officers or interpreters at representative or pay point premises.
    • Exclusive conditions cannot be included in International Remittance Service Agreements.
    • Contractual agreements between Representatives and IRSPs cannot exceed four years.
    • Any intended alteration in remittance contract provisions requires National Bank approval at least ten days before.
    • IRSPs are prohibited from having local presence/operational offices in Ethiopia for illegal money exchange.

Penalties

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  • Any person contravening any provisions of this directive shall be subject to penalties in accordance with the National Bank Establishment (as Amended) Proclamation No. 591/2008.

Objectives

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  • To improve the operations of formal remittance transfer systems in Ethiopia.
  • To reduce remittance costs and increase access to cost-effective, reliable, fast, and safe services.
  • To set a conducive and transparent legal framework to facilitate the inflow of remittances.
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    • To improve foreign currency generation through international remittance.
    • To ensure payment instrument issuers use their infrastructures for reliable, safe, and convenient international remittance services.

Organizations

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  • National Bank of Ethiopia
  • Ethiopian Postal Service
  • International Remittance Service Providers

Legal references

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  • National Bank of Ethiopia Establishment Proclamation No. 591/2008, Article 23(3)
  • National Bank of Ethiopia Establishment Proclamation No. 591/2008, Article 27(2)
  • Licensing and Authorization of Payment Instrument Issuers Directive
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    • Prevention and Suppression of Money Laundering and the Financing of Terrorism laws and Directives
    • International Remittance Service (as Amended) Directive N0.71/2020
Original sourcehttps://justice.gov.et/en/directives/modified-international-remittance-service-directive-no-841-2021/
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