The National Bank of Ukraine (NBU) brought up to date and harmonized regulation of electronic money with Ukrainian and EU legal framework on financial monitoring.
“Now using e-money will be easier, and users will be well informed and protected,” noted Oleksii Shaban, Deputy Governor of the NBU.
Key changes prescribed by the new regulation rules are as follows:
Required e-money user identification
Banks are required to conduct independent due diligence of e-money users, including identification and verification, the same as for opening accounts. This applies to customers, who open e-purses for the purpose of different transactions, such as purchasing goods and paying for services, etc.
In addition, e-money remittances should be accompanied by information of the payer and the payee.
This is a requirement of the Law of Ukraine On the Prevention and Counteraction to Legalizing (Laundering) the Proceeds from Crime, Terrorism Financing, and Financing the Proliferation of Weapons of Mass Destruction (hereinafter referred to as the “Law On Financial Monitoring”), that came into force on 28 April 2020.
New e-money users have been identified and verified by financial institutions starting from 28 April 2020, that is since the Law On Financial Monitoring came into effect.
Existing customers holding e-purses as of 28 April 2020 are to be identified and verified by banks in the course of routine update and clarification of information.
Furthermore, the regulator has set out conditions that release users from due diligence1 if:
- the transaction initiated is an e-money transaction using a prepaid card and all required risk-mitigating measures are taken
- goods and services are paid for with cash or a payment card using an e-purse (technical/transit) opened for one-time purpose to ensure the technical side of this transactions, provided the issuer complies with respective requirements as to accompanying a fund transfer with information in line with law.
Setting new limits on e-money transactions
For identified and verified e-purse users, the NBU has lifted the restrictions set previously on amounts of e-money for settlements and transfers.
A replenishable e-purse can have a maximum of UAH 400,000, and nonreplenishable – UAH 5,000.
Tightening requirements to e-money issuing banks on monitoring commercial agents’ operation
As before, e-money issuers in Ukraine can only be banks. At the same time, nonbank financial institutions and other commercial companies can be agents and provide e-money distribution services, replenish e-purses, and transact settlements2.
In order to mitigate risks of unlawful use of e-money the regulator has tightened requirements to monitoring commercial agents’ operation. In particular, from now on such agents:
- are committed to open a separate current account with the issuing bank for agent services (save distribution and replenishment agents that are banks, nonbank financial institutions or at the same time are merchants in the loyalty program)
- are to use cash received from the customer to credit it on the separate current account only and cannot use such funds for other purposes
- shall confirm each transaction on cash acceptance with a cash voucher
- shall have no right to delegate their authority to other business entities and individuals through agency agreements.
The issuing bank shall exercise control of compliance with the cash crediting procedure.
Improving consumer rights protection in e-money
In order to improve consumer right protection of e-money users the regulator has also set a range of requirements to e-money issuing banks. In particular, the issuing bank:
- shall, before entering into the agreement with the user, inform the latter on generating an e-purse and receive the user’s consent
- shall not lend funds received as advanced payment for issued e-money
- should provide users with information on the name and location of the issuer and operator, terms and conditions for generating/using an e-purse, the procedure and ways of transferring funds between individuals and paying with e-money, the amount and payment procedure for goods with e-money, the amount and payment procedure of commission by the user as well as other information
- shall not engage commercial agents to issue e-money.
Respective provisions are set out in NBU Board Resolution On Adopting Amendments to Regulation on Electronic Money in Ukraine No. 133 dated 11 September 2020. The Resolution comes into effect on 15 September 2020.
At the same time the NBU offered a smooth transition period for banks. Banks have six months to draft and submit amendments to e-money rules to the regulator and bring operation in line with the new regulatory requirements.