PART 3: GRIEVANCE PROCEDURES, FOREIGN PARTICIPATION AND LICENSING REQUIREMENTS

GRIEVANCE PROCEDURES UNDER THE PAYMENT SYSTEMS AND SERVICE ACT 2019

As indicated in the previous post, the Bank of Ghana has the power to reject an application for authorisation or a license. When this happens, the unsuccessful applicant is not barred from future application, he may continue to apply in so far as the defects which caused the rejection have been cured. The Act does not place any time limit on when the defect should be cured, thereby giving the applicant as much time as he needs to set his affairs in order.
The Act also balances the powers of the Bank of Ghana, by subjecting the said powers to the principle of “audi alteram partem”, which means both sides must be heard. Under the Payment Systems and Services Act, where a license or authorisation is to be suspended or revoked, it cannot be done in an arbitrary manner without giving the holder of the license or authorisation notice of the intended action nor an opportunity to be heard.[1] The notice however, is time-bound and as such the holder of the license or authorisation is required to act swiftly.
Aside from the above, there are no other direct grievance procedures under the Act, neither does the Payment Systems and Services Act expressly or impliedly forbids aggrieved persons from making an appeal to the High Court. This is unlike the provisions of the Banks and Specialised Deposit-Taking Institutions Act 2016 (Act 930)[2] which limits actions in connection with but not limited to, appointment of official administrators, liquidation, suspension in the payment of dividends to shareholders and issuance of licenses to operate as a bank or specialised deposit-taking institution, to arbitration alone.
However, under the Bank of Ghana Act 2002 (Act 612), the Bank of Ghana is a corporate entity that that can sue and be sued in its name. Section 1 of the Bank of Ghana Act 2002 (Act 612 reads),

“The Bank of Ghana in existence immediately before the commencement of this Act shall, subject to this Act, continue to be in existence as a body corporate with perpetual succession and a common seal and may sue and be sued in its corporate name”

It stands to reason then, that an aggrieved person may seek redress in court against the Bank of Ghana as there are no known fetters or limitations on the right to seek court redress.

 

PENALTIES UNDER THE PAYMENT SYSTEMS AND SERVICES ACT 2019

The Act makes it an offence for a non-banking entity to carry on business as a payment service provider without first acquiring a license under Section 9. The sanction for unauthorised business under the Act is a fine[3] or imprisonment or both. Any individual charged with said offence is liable on summary conviction to a fine of a minimum of 2000 penalty units[4] and a maximum of 4,000 penalty units[5], or a term of imprisonment of not less than 4 years and not more than 7 years; or to both the fine and imprisonment. The body corporate shall on conviction  immediately cease business and shall be liable to pay a fine of not less than 4,500 penalty units[6] and not more than 7,000 penalty units.[7]
Additionally, any entity under the Banks and Specialised Deposit-Taking Institutions Act 2016, which carries on business as a payment service provider without authorisation shall pay a fine of 5,000 penalty units[8] and shall immediately cease all operation of payment services.
These penalties are not limited to Payment Service Providers and as such all corporate bodies and individuals found illegally operating as electronic money issuers would be duly sanctioned. Any corporate body under the Banks and Special Deposit-Taking Institutions Act 2016, found operating as an electronic money issuer without the necessary authorisation commits and offence[9] and is liable on summary conviction to a fine of not less than 4,000 penalty units[10] and not more than 7,000 penalty units.[11] On conviction, said entity must immediately cease the issuance of electronic money.
If a non-bank entity is convicted of operating as an electronic issuer without a license[12], in the case of the individual involved, he is liable on summary conviction to a fine of not less than 1,500 penalty units[13] and not more than 3,000 penalty units[14] or to imprisonment of not less than 4 years and not more than 7 years or to both. The corporate body itself is liable on summary conviction to a fine of not less than 2,500 penalty units[15] and not more than 5,000 penalty units.[16]
In the event that the terms of the authorisation or license are contravened, the individual involved commits an offence and is liable on summary conviction to a fine of not less than 1,500 penalty units[17] and not more than 3,000 penalty units[18] or to imprisonment of not less than 4 years and not more than 7 years or to both. The company involved is liable on summary conviction to a fine of not less than 2,500 penalty units[19] and not more than 5,000 penalty units.[20]
The penalties above, though, seem a bit inadequate in serving as a deterrent. Any corporate body or individual with the funds or ability to secure the minimum capital requirements, would not be severely affected by such a fine. The fines would look miniscule as compared to the funds required as a minimum capital requirement.
Furthermore, for offences that have wide reaching consequences for the Ghanaian populace, the prison terms ought to be harsher to properly deter persons from committing such offences. The maximum limit of 7 years is not sufficiently severe to deter persons involved. The prison sentences ought to be a minimum of 10 years, as seen with possession of narcotics, because like possession crimes, these offences have consequences that are far reaching.

FOREIGN PARTICIPATION UNDER THE PAYMENT SYSTEMS AND SERVICES  ACT 2019

Under the Payment Systems and Services Act 2019, all foreign companies that wish to be service providers or electronic money issuers must have 30% equity holding from a Ghanaian. This is more than what is provided for under the Ghana Investment Promotion Centre (GIPC) Act 2013 (Act 865). Under the GIPC Act, foreign enterprises that seek to partner with Ghanaians to form a joint venture must have not less than 10% equity participation by a Ghanaian.
This increase in the minimum Ghanaian participation could very well be to protect the country’s interests, since payment service providers and electronic money issuers form part of the Fintech industry in Ghana, which is still growing; thus, more Ghanaian participation is to be encouraged. Another point of view is that perhaps, with such a requirement, it would be easier to protect the interest of Ghanaian citizens. The higher the requirement for a foreign company, the easier it would be to assess whether or not said business is fraudulent or otherwise. Additionally, since the capital requirements in itself is high in order to manage risk, placing 90% of the burden on the company might hinder foreign participation rather than encourage it.
Currently, the license fee for payment service providers is Gh₵20,000,000.00; thirty percent (30%) of that would be Gh₵6,000,000, which is considerably high. However as indicated the capital requirements are set such that in the event that the company is liquidated or the license is revoked, the customers would be safely cushioned against the fall.
Presently, there is no set period for which Ghanaian participation must be attained, foreign companies must therefore have at least 30% equity participation at the beginning of the application for the license or authorisation. To give such companies a period of say, five to ten years to attain such participation or capital would be for Bank of Ghana to ignore security and risk management principles. The good news though, is that, neither the Payment Systems and Services Act, nor the Companies Act, limit the minimum Ghanaian participation to one Ghanaian per company. It is possible to have as many Ghanaians as needed to be shareholders in order to reach the 30% equity participation. Foreign companies may therefore partner with as many Ghanaians to reach this 30% equity participation requirement.

LICENSING REQUIREMENTS RELEASED BY THE BANK OF GHANA PURSUANT TO THE PAYMENT SYSTEMS AND SERVICES ACT

Under the Section 101 of the Act, the Bank of Ghana may by notice release rules and guidelines for the effective implementation of the Act.
To operationalize the Payment Systems and Services Act 2019, BoG has since released a notice stating the minimum capital requirements, minimum governance requirements and minimum system requirements for the various categories of payment service providers under the Act.[21]
 

• Minimum Systems Requirements 

	PAYMENT SERVICE PROVIDERS (ENHANCED LICENCE)	PAYMENT SERVICE PROVIDERS (MEDIUM LICENCE)	PAYMENT SERVICE PROVIDERS (STANDARD LICENCE)
ISO 27001	Yes	No	No
PCI/DSS	Yes	No	No
EV SSL	Yes	Yes	No
Authentication	Multi-Factor (Minimum 2)	2 Factor	2 Factor
Back-up Policy	Yes	Yes	Yes
Evidence of Back-up setup	Yes	Yes	Yes

• Minimum Governance Requirements

	PAYMENT SERVICE PROVIDERS (ENHANCED LICENCE)	PAYMENT SERVICE PROVIDERS (MEDIUM LICENCE)	PAYMENT SERVICE PROVIDERS (STANDARD LICENCE)
Dedicated Physical Office Space	Yes	Yes	No
Verified Board of Directors	Yes	Yes	Yes (Advisory Board)
Clear Balanced and Adequate Organisational Structure	Yes	Yes	No
Data Protection Policy	Yes	Yes	Yes
External Audit	Tier 2 to Tier 1 Audit Firm	Tier 3 to Tier 1 Audit Firm	Tier 4 to Tier 1 Audit Firm
Procedures Manual	Yes	Yes	Yes
Risk Management Framework	Yes	Yes	Yes
Compliance Framework	Yes	Yes	Yes
Registered Ghana Business	Yes	Yes	Yes
Data Protection Certificate	Yes	Yes	Yes (after a year of operation)

• Minimum Capital Requirements

LICENCE TYPE	PERMISSIBLE ACTIVITIES	CAPITAL (GHS MIL)	PROCESSING/ LICENCE RENEWAL FEES (GHS 000)	TENOR
Payment Service Providers & Electronic Money Issuers Sections 22(1) and (24) (1)	1.     Issuance of electronic money, 2.     Recruitment and management of agents, 3.     Creation and management of wallet. 4.     Wallet based domestic money transfers including transfers to and from bank accounts, 5.     Cash in and cash out transactions, investment, savings, 6.     Credit products only in partnership with banks, 7.     Insurance and pension products only with authorised insurance and pension companies	20	25/100/10	5 Years
Payment Service Providers (Scheme) Section 8(1)	Routing of payment transactions, authorisation and settlement request from merchants, acquiring and issuing banks.	8	20/90/8	5 Years
Payment Service Providers (Enhanced licence) Section 8(1)	1.     Aggregation of merchant services, processing services, 2.     Provision of hardware and software, printing and personalisation of EMV Cards, 3.     Provision of inward International remittances services, merchant acquiring, POS deployment and Payment aggregation	2	12/40/7	5 Years
Payment Service Providers (Medium licence) Section 8(1)	1.     Payment Gateway and Portals/Payment aggregation which is connected to Enhanced PSP. 2.     Training and support of merchants. 3.     Printing of non-cash payment instrument, development of market platforms, payment application/ solution for Credit, Savings and 4.     Investment products in partnership with Banks.	0.8	8/15/5	5 Years
Payment Service Providers (Standard licence) Section 8(1)	1.     Payment application solution/ development, 2.     Merchant development platform, 3.     Payment solution	No capital required. To leverage on Enhanced licence	0.5/1/0.2	5 Years

Pursuant to the requirements above, the Bank of Ghana has since licensed its first Dedicate Electronic Money Issuer, Zeepay Limited, a local Fintech Company[22] to provide the following services;

• Cash In;
• Cash out;
• P2P (peer to peer) Transfers
• Bill Payments;
• Airtime Top-up; and
• International Money Transfer (IMT).

 
The Bank of Ghana has also established a Fintech Innovation Office to license and oversee inter alia, dedicated electronic money issuers, payment service providers and other emerging forms of payment delivered by non-bank entities as part of its bid to digitise the economy. The Fintech Innovation Office according to the press release[23] by the Bank of Ghana, would also formulate policies for the development of Fintech in Ghana and ensure greater interoperability

CONCLUSION

Ghana’s agenda for a cashless society is a laudable agenda, especially more so as technology continues to permeate our day to day activities. Fintech is here to stay, it is only right that the country be not left behind.
To make room for the growth of Fintech as an industry and for subsequent regulation, the powers of the Bank of Ghana are sufficiently wide under the Act. After all, as seen in the recent NAM1-Menzgold saga, the Diamond Capital Scandal and the collapse of over 10 banks in the country as a result of non-compliance or fraud, the Government has a personal interest on behalf of its citizens to ensure hard earned monies are not lost at a whim’s pleasure.
Dr. Settor Amediku aptly put it this way, while speaking at the 23rd National Banking Conference organized by the Chartered Institute of Bankers,

 “Consumer protection issues have gained prominence in the digital financial service on account of complexity of digital ecosystem. For this reason, regulatory guidance is required for effective consumer protection”

The Payment Systems and Services Act 2019 is a commendable start to the regulation of Fintech of Ghana. It is hoped that this law evolves as the nature of Fintech evolves in society and does not become an archaic piece on display in the face of growth.
NB:
If you missed parts 1 and 2, Kindly click on the links below

THE DIGITAL AGENDA: LEGAL REFORMS TO ACCOMMODATE FINTECH IN GHANA

THE DIGITAL AGENDA: LEGAL REFORMS TO ACCOMMODATE FINTECH IN GHANA (PART II)

FOOTNOTES
[1][1] Section 12(2), Payment Systems and Services Act 2019
[2] Section 141, Banks and Specialised Deposit-Taking Institutions Act 2016
[3] A fine is charged in penalty units.
See Section 27 (1) and the 2^nd Schedule of the Interpretation Act 2009, Act 792, “One penalty unit us equal to Gh₵12.00”
[4] Gh₵24,000
[5] Gh₵48,000
[6] Gh₵54,000
[7] Gh₵84,000
[8] Gh₵60,000
[9] Section 22 (6) & (7), Payment Systems and Services Act 2019
[10] Supra (fn 105)
[11] Supra (fn 107)
[12] Section 25, Payment Systems and Services Act 2019
[13] Gh₵18,000
[14] Gh₵36,000
[15] Gh₵30,000
[16] Supra (fn 108)
[17] Supra (fn 114)
[18] Supra (fn 115)
[19] Supra (fn 116)
[20] Supra (fn 108)
[21] https://www.bog.gov.gh/wp-content/uploads/2019/09/Revised-Notice-Licensing-of-Payment-System-Providers-CURRENT.pdf
Last visited on 2/04/2020
[22] https://www.bog.gov.gh/wp-content/uploads/2020/04/Press-Release-Bank-of-Ghana-licenses-First-Fintech.pdf
Last accessed on 4^th May 2020
[23] https://www.bog.gov.gh/wp-content/uploads/2020/05/Press-Release-Bank-of-Ghana-Establishes-FinTech-Innovation-Office-2.pdf
Last accessed on 8^th May 2020