THE CENTRAL BANK is looking to boost its regulatory oversight of e-money issuers by increasing the requirements for both banks and nonbank financial institutions that are looking to enter the business.
A draft circular posted on the website of the Bangko Sentral ng Pilipinas (BSP) also focused on requiring enhanced due diligence for high value e-money transactions.
Based on the proposal, banks and nonbanks that are also electronic money issuers (EMIs) should prepare a minimum capitalization of P200 million for this function. This is applicable for EMI banks that have a one-year average value of aggregated inflow and outflow transactions worth P25 billion and higher.
Meanwhile, small-scale EMI banks and nonbanks will need to comply with a P100-million minimum capital requirement.
As part of due diligence, the BSP will require EMIs to categorize their clients in order to determine transaction limits and suitable thresholds based on their risk assessment.
Meanwhile, government agencies will not be subjected to such limits for government-to-person and government-to-merchant payment transfers.
Large value, single-transaction payouts from an EMI account breaching P500,000 and its equivalent in foreign currency will be subjected to enhanced due diligence, the BSP said.
EMIs are expected to keep due diligence records for a period of at least five years.
Nonbanks that are looking to enter the business are expected to comply with central bank regulations related to electronic payment and financial services, as well as IT and liquidity risk management. They need to comply with anti-money laundering and counter-terrorism financing measures, and corporate governance requirements.
The BSP said EMIs should provide clear terms and conditions for merchants and users, noting disclosures should be given to stakeholders 30 days prior to implementation of a change in their system.
Through the proposed regulation, the BSP sets apart e-money from a deposit that earns interest. It also stressed that e-money is only credited to customers at face value and will not be higher than the amount used to purchase it.
The BSP warned that financial institutions that engage in e-money operations without securing a license from the central bank will face penalties and sanctions. A financial institution that has started its EMI operations within a year since receiving its regulatory approval will also have their license automatically revoked.
Stakeholders may send their feedback regarding the BSP’s proposed regulation until March 18.
Latest BSP data showed there are 29 lenders that have an EMI bank license, while 38 are regulated as nonbank EMIs.
In December 2021, the BSP imposed a two-year moratorium on application of nonbank EMIs as it looks to monitor the development of the growing sector. Nonbanks that wish to enter the EMI business can instead go through a regulatory sandbox framework of the BSP where their services will be tested in a controlled environment until they are ready for exit and eventual market participation.
Amid the rise of online transactions during the pandemic, the Anti-Money Laundering Council in a report said suspicious transaction reports from EMIs doubled to more than 140,000 in 2020 from a year earlier. — Luz Wendy T. Noble