September 2012

New Rules for Payment Systems and E-Money

On 18 September 2012 the Ukrainian Parliament passed the Law Amending Certain Legislative Acts of Ukraine Regarding the Functioning of Payments Systems and Development of Non-Cash Payments (the "Law"). The Law is currently awaiting President's signature and, if signed by the President, will become effective upon its official publication.

According to the publicly available draft of the Law, the Law is intended to introduce, inter alia, certain amendments that will adversely affect the functioning in Ukraine of international payment systems (such as Visa and MasterCard).

The Law in particular provides that payments for the services provided by the payment institutions to the participants of payment systems in the territory of Ukraine shall be made solely in Ukrainian Hryvnias. This requirement also applies to payments to be made in favor of non-resident payment institutions.

Under the Law, participants of payment systems can place guarantee deposits for the transfers inside Ukraine only in Ukrainian Hryvnias in the Ukrainian bank accounts.

The Law contains ambiguous provisions regarding the procedure of routing and clearing services stating that routing and clearing with respect to the transactions conducted in Ukraine with the use of payment cards issued by resident banks shall be performed in Ukraine according to the procedure established by the National Bank of Ukraine. This wording makes it unclear whether such routing and clearing services can be provided by non-resident processing companies.

The Law provides for the establishment of a Register of Payment Systems, Their Participants and Operators of Payment Infrastructure Services, which is to be maintained by the National Bank of Ukraine. Payment institutions, participants of payment systems and operators of payment infrastructure services can operate in Ukraine only after their entry into the Register.

In addition to these amendments, the Law also gives the National Bank the right to set thresholds for cash payments for individuals, legal entities and individual entrepreneurs, as well grants to the State Tax Administration the authority to oversee the observation of the established procedure for cash payments for goods and services.

The Law also introduces the following novelties in regulation of e-money in Ukraine:

  1. the definition of electronic money is introduced for the first time in Ukrainian law. The Law provides that such money must be treated equally with other money obligations;
  2. legal entities can exchange electronic money for non-cash funds only. Individuals can also exchange electronic money for cash as well as non-cash funds and transfer them to other individuals;
  3. electronic money can be created by banks in Ukrainian Hryvnias only;
  4. acceptance, distribution, exchange of electronic money can be done by the banks or their agents.

Finally, the Law introduces the following sanctions:

  1. administrative liability for violations of the laws on electronic money - a fine from UAH 1 700 up to UAH 3 400 (UAH 8 500 up to UAH 17 000 for repeated violations);
  2. criminal liability for money counterfeiting, illegal creation and usage - a fine from UAH 51 000 to UAH 85 000.

If the Law is signed by the President, it would significantly impede the current system in Ukraine since nowadays already emitted electronic money are circulating. The procedure on adjusting such money to the Law requirements is not entirely clear. Also, the Law does not establish fully transparent rules for banks acting as issues of such money, which may potentially lead to monopolization in this sector.

For further information please contact partner Iryna Pokanay and associate Oksana Muntyan

© Asters 2012
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