Adwoa E. Paintsil*

 

PART 2: THE OVERVIEW OF THE PAYMENT SERVICE ACT

 

THE PAYMENT SYSTEMS AND SERVICES ACT 2019 (ACT 987)

The Payment Systems and Services Act 2019 (Act 987), which repeals the previous Payment Systems Act passed in 2003 (Act 662), was assented to by the President of Ghana on 13^th May 2019. It is aimed at providing an enabling regulatory environment for digital payments. Its purpose is to:

(1) amend and consolidate laws and guidelines relating to the connection of payers and recipients of money by payment instruments or electronic money (“Payment Service”),

and

(2) regulate institutions which issue electronic money and provide Payment Service.

1.  

The Payment Systems Act applies to banks, specialised deposit-taking institutions, Payment Service Providers, Dedicated Electronic Money Issuers, and their affiliates and/or agents.[1]

 

Under the Act, the Bank of Ghana has overall supervisory and regulatory authority[2] in all matters relating to payment, settlement and clearing systems. This power gives the Bank of Ghana the mandate, inter alia,

1. for the issuance of electronic money, payment instruments, payment service providers and electronic money businesses[3];
2. to ensure that financial services are extended beyond traditional branch-based channels to the domain of every day transactions[4];
3. to ensure that electronic money is only provided by authorized financial institutions regulated by the Banks and Specialised Deposit Taking Institutions Act 2016 (Act 930) and duly licensed non-bank entities which are engaged solely in the business of electronic money and activities related or incidental to the business of electronic money[5];
4. to ensure that customers of electronic money issuers benefit from adequate transparency, fair treatment and effective recourse mechanism[6];
5. for the formulation, monitoring and review of policies on payment systems in Ghana[7]
6. for the authorization of banks and specialized deposit-taking institutions to conduct business under the Payment Systems and Services Act 2019[8];
7. for the licensing of non-bank financial institutions under the Payment Systems and Services Act 2019[9];
8. for the approval of foreign entities in the country who wish to establish representative offices[10]
9. for any other payment system or product, the Bank of Ghana may determine.[11]

 

In furtherance of the mandate of the Bank of Ghana under the Payment Systems and Services Act 2019, the Bank of Ghana is to establish a Payment Systems Advisory Committee[12] to advise the Bank of Ghana on,

1. the regulation and oversight of payment systems under the Act
2. the operational and technical stands on the payment systems in place
3. all other incidental or related matters affecting payment systems and services, and settlements and clearing of payments.

The Payment Systems Advisory Committee is to include[13] a representative from the National Information Technology Agency[14]; the Governor of the Bank of Ghana; a representative from the Ministry of Finance; and relevant stakeholders to be determined by the Bank of Ghana.

These powers of the Bank of Ghana, are supplemented by the power to release notices, and guidelines for the implementation of the Act. These powers, nonetheless, do not give the Bank of Ghana the authority to pass subsidiary legislation. Hence, for matters which require legislation, the Minster for Finance, is the proper authority to pass the legislation.[15]

 

Per the Payment Systems and Services Act, there are two broad categories of individuals (artificial or natural) who must be licensed or authorised to carry out any business related to electronic businesses, payment systems and services. These are Payment Service Providers and Electronic Money Issuers.

The grant of the authorisation or license is given by the Bank of Ghana, and is valid for 5 years subject to yearly renewal. The yearly renewal process requires payment of the renewal fee, submission of a tax clearance certificate and any other information requested by the Bank of Ghana. [16]

An application for a license or authorisation may be either accepted or rejected within 90 days after submission of all necessary documentation to the Bank of Ghana. The license or authorisation according to the Act should have been applied for latest by February 2020[17]; however, this deadline has been since extended to December 2020.[18]

 

The grant of the license or authorisation however, may be revoked[19] by the Bank or suspended.[20] The license or authorisation may be suspended by the Bank of Ghana where the payment service provider has failed to meet the infrastructural, or any other requirements specified by the Bank of Ghana.[21] The license or authorisation may also be suspended by operation of law under any other enactment, or in instances where the Bank of Ghana is satisfied that the payment service provider is conducting its business in a manner detrimental to the interest of the payment system.[22] Where the Bank of Ghana intends to suspend a license or authorisation, Bank of Ghana must give notice to the payment service provider to show cause why the suspension should not be carried out.[23] The Act natheless, fails to state how long this notice must be; notice in this case must be reasonable.[24]

Should the payment service provider fail to provide payment services for a continuous period of 6 months after the license or authorisation is granted, the license or authorisation may be revoked.[25] The same goes, if the payment system provider ceases to operate for a continuous period of more than 6 months[26], goes into liquidation or is declared insolvent[27], or is engaged in a pattern of unsafe financial practices.[28] The revocation is on notice to the payment system provider and does not limit the right of the Bank of Ghana to initiate any other action against the payment service provider. On revocation the payment system provider is mandate to pay to all customers, all electronic monies held, within 10 days of the revocation.[29]

 

PAYMENT SYSTEM PROVIDERS

Payment System Providers are defined in Section 102 of the Act as any body corporate licensed or authorised to provide payment services (services to facilitate the transfer of funds between two people using the various forms of payment instruments[30] or electronic money).

According to Sections 7 of the Payment Systems and Services Act 2019, all non-bank entities must acquire a license to operate a payment system i.e. to operate as a payment system provider.

To obtain said license, the corporate body must

1. Apply for the license using a prescribed form. The application for the license mandates the company to share its particulars, a business plan, financial projections for at least 5 years, the bank account to be used, expansion plan (if it intends to expand its business operations) and the nature and functionality of the proposed payment services.[31]
2. Have a valid certificate from the Data Protection Commission[32]
3. Have a minimum of 30% equity participation held by any Ghanaian.[33]
4. Maintain a minimum paid-up capital to be determined by Bank of Ghana.[34]
5. Pay the necessary license fee[35]
6. Have a board of directors with at least three members, two of which must be resident in Ghana. Out of the two resident directors, one must be the CEO of the company.[36]
7. Have the appropriate technology for fraud monitoring, relevant third-party certifications of compliance, a system capable of interoperability and a cyber-security policy (where applicable).[37]
8. Keep proper books of accounts and information technology systems and make sure said books are audited. The audited report is to be submitted to the Bank of Ghana.[38]
9. Agree to be bound by the universal principles of consumer protection.[39]
10. Set up an effective customer care procedure and system for intended customers of the applicant to submit complaints.[40]

 

An application for a license may be rejected[41] where,

1. The applicant or any of its shareholders have been convicted of a crime involving a financial transaction in any jurisdiction;
2. The application contains false or misleading information
3. The applicant fails to respond to any other additional requests from the Bank of Ghana concerning the application within 30 days;
4. The documents submitted under the application are incomplete or;
5. The Bank of Ghana has reasonable grounds to believe that the applicant is incapable of providing the necessary services for the provision of payment systems.

Given the recent decision of the Bank of Ghana to revoke the license of Heritage Bank while an action against the owner of Heritage Bank, Seidu[42] Agongo, it is possible for a license to be rejected on basis that there is a pending action involving a crime of a financial nature against the applicant or any of its shareholders. Additionally, under the Banks and Specialised Deposit-Taking Act 2016, a license may be revoked if it is found out that the shareholders of the financial institution are no longer fit and proper persons. The Banks and Specialised Deposit-Taking Act 2016 defines a fit and proper person[43] as,

“a person who is suitable to hold the particular position which that person holds or is to hold as regards,

1. 1. the probity, competence and soundness of judgment of the person for purposes of fulfilling the responsibilities of that person;
   2. the diligence with which that person fulfils or is likely to fulfil those responsibilities;
   3. whether the interest of depositors or potential depositors of the entity are threatened, or likely to be, in any way threatened by the person holding that position; and
   4. that the integrity of the person is established and the qualifications and experience of the person are appropriate for the position in the light of the business plan and activities of the entity which the person serves, or is likely to serve, taking into account the size, nature and complexity of the institution;”

In Section 2 of the Payment Systems and Services Act, the Act is to be read together with all other relevant enactments including the Banks and Specialised Deposit-Taking Act 2016. This suggests that a license or authorisation may be declined where the Bank of Ghana is of the opinion that a person is not a fit and proper person as described in Section 156 of the Banks and Specialised Deposit-Taking Act 2016.

This rejection, however, is not the end of the road for the applicant, the applicant may apply again provided that the noncompliance for which the application was rejected, have been cured.

 

Where the corporate body seeking to be a payment service provider is regulated under the Banks and Specialised Deposit Act 2016 (Act 930), the corporate body must apply for authorisation rather than a license.[44]  The application for authorisation must set out the nature and functionality of the intended services, a business plan, financial projections for 5 years, an expansion plan (if it intends to expand its business operations), and any other information requested by Bank of Ghana. Additionally, the applicant must have fulfilled[45] the following requirements,

1. Have a board of directors with at least three members, two of which must be resident in Ghana. Out of the two resident directors, one must be the CEO of the company.[46]
2. Pay the necessary processing fee[47]
3. Have the appropriate technology for fraud monitoring, relevant third-party certifications of compliance, a system capable of interoperability and a cyber-security policy (where applicable).[48]
4. Agree to be bound by the universal principles of consumer protection.[49]
5. Set up an effective customer care procedure and system for intended customers of the applicant to submit complaints.[50]

 

The application for authorisation may be rejected[51] by the Bank of Ghana, in the event that,

1. The application contains false or misleading information
2. The applicant fails to provide the additional information requested by Bank of Ghana within 30 days
3. The documentation submitted is incomplete
4. The Bank of Ghana has reasonable grounds to believe that the applicant is incapable of running such a business.

 

ELECTRONIC MONEY ISSUERS

Electronic money issuers are defined in Section 102 of the Payment Systems and Services Act 2019, as a payment service provider that can issues electronic money.  On successful application of a license or authorisation to be a payment service provider, the corporate body may subsequently, operate as an electronic money issuer[52], albeit with further authorisation and licensing.

Section 22 of the Payment Systems and Services Act 2019, states the additional requirements to operate as an electronic money issuer as follows[53];

1. Provision of the nature and functionality of the intended electronic money operations
2. Information on the proposed electronic money services to be offered
3. A business plan
4. Financial projections for 5 years
5. Expansion plans where applicable
6. Any other additional information requested by Bank of Ghana.

The application to be an electronic issuer may be rejected by the Bank of Ghana, the acceptance or rejection must be communicated to the applicant within 90 days.

 

The Act also permits corporate bodies to register as Dedicated electronic money issuers. As an applicant for a license to be a dedicated electronic money issuer, bodies not regulate under the Banks and Specialised Deposit-Taking Institutions Act 2016, must[54],

1. Be duly incorporated under the Companies Act 2019;
2. Include in its regulations of incorporation a stipulation that the electronic monies owed to its customers are held in trust and shall not be encumbered in case the company is wound up;
3. Ensure that its significant shareholders and directors are fit and proper persons;
4. Ensure that it engages in only the business of electronic money and related or incidental activities like money transfers and remittances or set up a separate entity for such business if its main business is different from or not related to electronic money;
5. Ensure that the company has 30% equity participation of a Ghanaian;
6. Ensure that the body has a customer float account holding bank
7. Ensure that any other requirement set by the Bank of Ghana is fulfilled.

 

Additionally, the body corporate must fulfil the following requirements[55];

1. Provide the particulars of the applicant including a list of its significant shareholders and their corresponding share percentages;
2. Information on all bank accounts to be used in the operation of the electronic money business;
3. Provide documentary evidence of the capital to be used including the original sources of the funds

 

AGENCY RELATIONSHIPS UNDER THE PAYMENT SYSTEMS AND SERVICES ACT 2019

On acquisition of licenses or authorisation, companies are allowed to appoint agents[56] to serve their customers.[57] This provision makes it possible for the various mobile money agents across the country to operate. Any corporate body that wishes to use agents is must apply to the Bank of Ghana for authorisation first.[58] The applicant is to provide the following information to the Bank of Ghana on application;

1. The type of services the intended agent would provide[59]
2. The geographical coverage of the agent over a 3-year period[60]
3. The intended used of any master-agent[61]
4. Due diligence policies, procedures and reports on the agent[62]
5. Copies of all draft agency agreements[63] which shall inter alia define the rights and responsibilities of both parties, set out the scope of work to be performed thereunder, specify permissible actions, a confidential clause and a clause granting the Bank of Ghana unfettered access to the agent/master-agent’s internal systems, information, data and documentation.
6. All policies and procedures available and applicable to the provision of services through the agent[64]
7. A description of the technology to be used and all applicable policies and procedures[65]
8. Risk assessment report of the operations the agent is to perform including mitigating measures to be adopted to control identified risks[66]
9. An internal audit report on the internal controls to be used in the agency and for any master-agent[67]
10. Anti-money laundering and countering financing of terrorism policies and procedures[68]
11. The operational policies and procedures of the principal including policies on the monitoring and enforcement of compliance by agents and master-agents[69]
12. All policy documents on how the principal intends to address the risk of the agent overselling or overcharging[70]
13. Full incentive structures for agents and master-agents including fee and revenue sharing structures[71]

 

The Principal or master-agent in this case is also mandated to have policies and procedures for the conduct and due diligence[72] of agents/master-agent, and provide the particulars of the agent/master-agent within thirty days of appointment to the Bank of Ghana.[73] Thus, reducing the risk of financial fraud, which in recent times has proven a challenge to Ghana’s drive for a thriving digitised money industry, particularly for MTN Ghana Ltd.[74]

To ensure that fit and proper persons are engaged as agents or master-agents, the Payment Systems and Services Act 2019 obliges principals to consider the following in assessing the eligibility[75] of the prospective agent/master-agent;

1. The agent/master-agent’s criminal records if any in matters relating to finance, fraud, honesty or integrity
2. Any negative information in credit reference bureaus
3. Business experience and track record where applicable
4. Any other matter which impacts on the person

In addition to the above, the agent/master-agent to be, must not be classified as non-performing borrower by any bank or specialised deposit-taking institution at least a year before appointment and for the duration of the agency agreement.[76]

After appointment, the permissible activities[77] of the agent/master-agent shall perform under the agency agreement shall include;

1. Functions associated with the marketing of credit, savings, investment and insurance products[78];
2. Receipt, verification and forwarding of applications for the functions listed in (a) above to a bank or specialised deposit-taking institution;
3. Receipt, verification and forwarding of applications for payment cards, account opening and cheque books to a bank or specialised deposit-taking institution;
4. Mail delivery to customers
5. Other activities authorised by the Bank of Ghana

Among the list of activities that are not permitted[79] for agents are;

1. Cashing bank cheques
2. Undertaking foreign exchange transactions
3. Grant guarantees in any transaction the agent/master-agent performs and/or facilitates
4. Appraisals of credit and insurance applications
5. Making advance payments from funds released by the principal
6. Subcontract part or all of its contractual obligations under the agency agreement.
7. Branding or holding themselves out as a bank or special deposit-taking institution

Agents/master-agents are not bound by exclusivity to a specific principal and may enter agreements with more than one principal.[80]

All Agents/master-agents caught engaging in non-permissible activities shall pay an administrative fine of 1,000 penalty units.[81]

 

The Final part in the series would highlight measures taken by the Bank of Ghana to put the Payment Systems and Services Act 2019 into practice as well as foreign participation.

 

TO BE CONTINUED……

 

*This Article was put together with the aim of educating the public on the new Payments Systems and Services Act 2019 (Act 987). Due to its length, this Article shall be published in three parts.

*The Author is a junior associate at Smith and Adelaide Law, Unit B804, The Octagon, Accra.

Image Credit: Google Images

 

FOOTNOTES

[1] Section 1, Payment Systems and Services Act 2019 (Act 987)

[2] Section 3(1), Payment Systems and Services Act 2019 (Act 987)

[3] Section 3(2)(b), Payment Systems and Services Act 2019 (Act 987)

[4] Section 3(2)(e), Payment Systems and Services Act 2019 (Act 987)

[5] Section 3(2)(f), Payment Systems and Services Act 2019 (Act 987)

[6] Section 3(2)(g), Payment Systems and Services Act 2019 (Act 987)

[7] Section 3(2)(i), Payment Systems and Services Act 2019 (Act 987)

[8] Section 3(2)(k), Payment Systems and Services Act 2019 (Act 987)

[9] Section 3(2)(l), Payment Systems and Services Act 2019 (Act 987)

[10] Section 3(2)(m) Payment Systems and Services Act 2019 (Act 987)

[11] Section 3(2)(n), Payment Systems and Services Act 2019 (Act 987)

[12] Sections 4(1) & (2), Payment Systems and Services Act 2019 (Act 987)

[13] Section 4(3) Payment Systems and Services Act 2019 (Act 987)

[14] The National Information Technology Agency (NITA) is a public service institution under the control of the Ministry of Communications. The Agency was established in 2008 for the implementation of IT policies in Ghana

[15] Section 100, Payment Systems and Services Act 2019, All regulations passed shall be on the advice of the Bank of Ghana and which advice is binding on the Minister

[16] Section 19 and 27(1), Payment Systems and Services Act 2019

[17] Section 104(2), Payment Systems and Services Act 2019, “An existing Electronic Money Issuer or Payment Service Provider shall apply for authorisation or licence under this Act within nine months of the coming into force of this Act”

The Act came into force on 13^th May 2019, nine months from this would be 13^th February 2020.

[18] Bank of Ghana extended the deadline by a notice to June 2020 and which extension was further extended to December 31^st 2020 on 30^th March 2020.

See https://www.bog.gov.gh/wp-content/uploads/2020/03/NOTICE-EXTENSION-OF-DEADLINE-FOR-MEETING-THE-MINIMUM-CAPITAL-REQUIREMENTS.pdf

Last visited on 5^th May 2020

[19] Section 13, Payment Systems and Services Act 2019

See also Section 14, Payment Systems and Services Act 2019, the general public shall be informed of the revocation of the license.

[20] Section 12, Payment Systems and Services Act 2019

[21] Section 12, Ibid

[22] Section 12, Ibid

[23] Section 12, Ibid

[24] See Article 296(a) & (b) of the 1992 Constitution of Ghana, “Where in this Constitution or in any other law discretionary power is vested in any person or authority;

• that discretionary power shall be deemed to imply a duty to be fair and candid;
• the exercise of the discretionary power shall not be arbitrary, capricious or biased wither by resentment, prejudice or personal dislike and shall be in accordance with due process of law…”

[25] Section 13(1)(h), Payment Systems and Services Act 2019

[26] Section 13(1)(i), Payment Systems and Services Act 2019

[27] Section 13(1)(f) & (g), Payment Systems and Services Act 2019

[28] Section 13(1)(e), Payment Systems and Services Act 2019

[29] Section 13 (6), Payment Systems and Services Act 2019

[30] Section 102, Payment Systems and Services Act 2019, payment instruments refer to any medium, electronic or written for ordering payment or transmission of money.

[31] Section 8(2), Payment Systems and Services Act 2019

[32] Section 8(1)(b), Payment Systems and Services Act 2019

[33] Section 8(4), Payment Systems and Services Act 2019

[34] Section 17, Payment Systems and Services Act 2019

[35] Section 19, Payment Systems and Services Act 2019

[36] Section 18, Payment Systems and Services Act 2019

[37] Section 20, Payment Systems and Services Act 2019

[38] Section 40(5)

[39] Section 44, Payment Systems and Services Act 2019

[40] Section 47, Payment Systems and Services Act 2019

[41] Section 8(8), Payment Systems and Services Act 2019

[42] See https://ghanatalksbusiness.com/owner-of-heritage-bank-seidu-agongo-is-not-fit-and-proper-to-own-a-bank-bog/

https://www.ecofinagency.com/finance/0701-39486-ghana-central-bank-revokes-license-of-heritage-and-premium-banks

Last visited on 12/04/2020

[43] Section 156, Banks and Specialised Deposit-Taking Act 2016

[44] Section 10(1), Payment Systems and Services Act 2019

[45] Section 10 (3), Payment Systems and Services Act 2019

[46] Section 18, Payment Systems and Services Act 2019

[47] Section 19, Payment Systems and Services Act 2019

[48] Section 20, Payment Systems and Services Act 2019

[49] Section 44, Payment Systems and Services Act 2019

[50] Section 47, Payment Systems and Services Act 2019

[51] Section 10 (5), Payment Systems and Services Act 2019

[52] Section 21, Payment Systems and Services Act 2019

[53] Section 22 (3), Payment Systems and Services Act 2019

[54] Section 23, Payment Systems and Services Act 2019

[55] Section 24, Payment Systems and Services Act 2019

[56] An agent is defined under Section 102 of the Payment Systems and Services Act 2019 as a person who provides agency services to customers on behalf of a principal under an agency agreement. Agents are extended to include Agent Network Managers who directly provide banking services or electronic money services to end users.

[57][57][57] Section 86, Payment Systems and Services Act 2019

[58] Section 86(2), Payment Systems and Services Act 2019

[59] Section 86 (3) (a), Payment Systems and Services Act 2019

[60] Section 86 (3) (b), Payment Systems and Services Act 2019

[61] Section 86 (3) (c), Payment Systems and Services Act 2019

See also Section 102, Payment Systems and Services Act 2019, a master-agent is a legal person with an agreement with the principal to contract and manage agents that provide banking or electronic money services or payment services to end users on behalf of the principal

[62] Section 86 (3) (d), Payment Systems and Services Act 2019

[63] Section 86 (3) (e), Payment Systems and Services Act 2019, the draft agreements must be in accordance with the provisions of the Act under Section 87

[64] Section 86 (3) (e), Payment Systems and Services Act 2019

[65] Section 86 (3) (f), Payment Systems and Services Act 2019

[66] Section 86 (3) (g), Payment Systems and Services Act 2019

[67] Section 86 (3) (h), Payment Systems and Services Act 2019

[68] Section 86 (3) (i), Payment Systems and Services Act 2019

[69] Section 86 (3) (J), Payment Systems and Services Act 2019

[70] Section 86 (3) (k), Payment Systems and Services Act 2019

[71]  Section 86 (3) (l), Payment Systems and Services Act 2019

[72] Section 89 (3), Payment Systems and Services Act 2019

[73] Sections 92 and 93, Payment Systems Act 2019

[74] As at 2017, MTN sanctioned an estimate of 3,000 agents for mobile money fraud

See https://www.businessghana.com/site/news.general/154472/MTN-sanctions-3-000-agents-for-mobile-money-fraud

[75] Section 89 (1), Payment Systems Act 2019

[76] Section 89 (2), Payment Systems and Services Act 2019

[77] Section 90, Payment Systems and Services Act 2019

[78] AirtelTigo currently provides insurance services to its users

See https://www.airteltigo.com.gh/VAS/insurance

Last visited on 6/4/2020

[79] Section 91, Payment Systems and Services Act 2019

[80] Section 94, Payment Systems and Services Act 2019

[81] Section 91 (5), Payment Systems and Services Act 2019

That is, Gh₵12,000