As mentioned under the Newsletter published in our website back in September 2013 titled “New Law on Payment & Security Reconciliation Systems, Payment Services and Electronic Money Organisations”, there were some uncertainties with respect to the Law on Payment and Security Reconciliation Systems, Payment Services and Electronic Money Organizations numbered 6493 (“Law”) given the absence of its secondary legislation.
The Banking Regulation and Supervision Agency (“BRSA”) has finalized the aforesaid secondary legislation and now both the Regulation on Payment Services and Issuance of Electronic Money and Payment and Electronic Money Organizations (“Regulation”) and the Communiqué on Management and Supervision of the Information Systems of Payment and Electronic Money Organizations (“Communique”) have entered into force effective from June 27, 2014.
The Communiqué aims to regulate the technical and technological issues regarding the information systems to be used by payment and electronic money organizations. The main issue regulated under the Communiqué is the security and surveillance of the information technology systems used by payment or electronic money organizations. However, this Client Alert will rather focus on the key points mentioned under the Regulation.
According to the Regulation, both payment and electronic money organizations must include the necessary wording in their trade names indicating that they are either a payment organization or an electronic money organization. This, however, is a minor issue to be considered during the incorporation stage of the company.
Following their incorporation, companies who wish to engage in the services set forth under the Law will have to submit to the BRSA the documents listed under the Regulation and apply for a license.
In terms of the application documents, if a foreign based bank or financial institution directly or indirectly holds 10% or more shares of or has control over the newly incorporated company which will engage in the activities under the Law, the Regulation requires that additional documentation shall have to be provided to the BRSA for a license. However, if the aforementioned bank or financial institution is under the supervision of the BRSA (i.e. a Turkish bank or financial institution), then these additional documents will not be requested and there will be a significant decrease in the amount of documents which shall be submitted to the BRSA for a license. Another important issue which is worthy of note is that the Regulation grants the BRSA wide powers regarding share transfers (i.e. change of control) of companies that engage in the activities set forth under the Law. In other words, companies will need to obtain prior consent of the BRSA before changing their shareholding structures.
The Regulation also includes provisions on activities which are prohibited to payment and electronic money organizations. To be more precise, these organizations cannot engage in any activity other than payment services or issuance of electronic money without prejudice to the exceptions set forth under the Regulation.
Another important point to note is that the Regulation prohibits payment and electronic money organizations from giving out loans.
The Regulation places importance on corporate governance of companies who wish to engage in these activities. In summary, the board of directors of these companies must consist of at least three members (inclusive of a general manager) and the general manager is considered a natural member of the board. Moreover, there are certain standards set forth under the Regulation regarding the necessary qualifications of the general manager. Also, the companies must establish their internal control and risk assessment systems in accordance with the Regulation and shall be audited by one of the independent audit firms determined by the BRSA.