International payment systems to transfer processing inside Russia
Review of e-payments legislation
Operators of international payment systems are arranging interaction with Russian operations and clearing centers in order to avoid restrictions imposed by current e‑payment laws that will become effective starting April 01, 2015.
The project aimed at developing the national payment system was launched in 2011 when Federal Law No.161-FZ “On the national payment system” dated June 27, 2011 (the “NPS Law”) was adopted.
The amendments introduced to e-payment laws in December of 2014 oblige issuing and acquiring banks and operators of international payment systems making money transfers inside Russia either to ensure by March 31, 2015 that all transactions be made through Russian operations and payment clearing centers or to make a security deposit to a special account in the Central Bank of Russia.
Suspension of transactions using international payment cards issued by Russian issuing banks that were subject to economic sanctions in 2014 resulted in amendments to the NPS Law by Federal Law No.319-FZ dated October 22, 2014. The amendments provide for a number of significant changes to the regulation of money transfers in Russia with the use of international payment cards. Please find below a brief summary of the most important changes:
- The national system of payment cards (the “NSPC”) is declared to be a payment system of national significance, which enables it to operate without making a security deposit at the Central Bank of Russia.
- The NSPC currently regulates not only money transfers with the use of payment cards and other electronic payment instruments, but also payment infrastructure services with respect to money transfers which are made in Russia with the use of international payment cards, including authorization of such transactions.
- An NSPC operator must be incorporated as a joint stock company wholly owned by the Bank of Russia. As of the present, such status has been granted only to Joint Stock Company (AO) NSPC.
- Credit institutions and payment system operators must arrange interaction with the NSPC operations and clearing centers as required by regulatory acts of the Bank of Russia and related NSPC rules.
- Operators of payment systems that are not of national significance, which have not ensured transfer of processing to the Russian Federation by March 31, 2015, are obliged to make a security deposit on a special account at the Central Bank of Russia equal to the amount of all money transfers made in Russia in the course of two calendar days. This amendment is intended to secure the obligation imposed on the payment system operator to provide payment infrastructure services continuously. The deposit will be made in the course of two years (by January 2017) in eight consecutive quarterly payments in the amount of 25% of the average daily turnover of the respective payment system in Russia for the preceding quarter.
It should be noted that unilateral suspension of payment infrastructure services to a payment system participant and its clients entails a fine for the operator of a payment system that is not of national significance, in the amount up to 10% of the security deposit for each day of suspension (Article 82.4 of the Law on the Central Bank of Russia) and an administrative fine for officials in the amount up to one million rubles (Article 15.36 of the Code of Administrative Offences of the Russian Federation).
The Bank of Russia will supervise whether credit institutions and payment system operators meet the established requirements.
At present, active work is ongoing with banks and international payment system operators to arrange necessary interaction with AO NSPC. According to the information contained in the register of payment system operators of the Central Bank of Russia, as of March 04, 2015, AO NSPC is already rendering operations and clearing services to leading Visa and MasterCard operators.
At the same time, there is still a number of non-standard connections that are technologically closed-ended outside the Russian Federation and their transfer to the NSPC has not been finally determined yet. This has to do, in particular, with sales through GDS systems used by most travel agencies and by all passenger airlines. If technological infrastructure ensuring connection to the NSPC is not created by April 01, 2015, operations using such connections may be blocked by a bank as prescribed by the Central Bank of Russia.
It is obvious that these requirements are primarily aimed at establishing total interior state control over all payments inside Russia. Market participants are hoping that the system of compulsory interaction of credit institutions and payment systems with AO NSPC will not create any obstacles for business and customers, which, nevertheless, are expected, at least at the initial stage.
Should any questions arise in connection with the above or if you need any additional materials, please contact Igor Gorokhov or Irina Afanasieva, Moscow and St. Petersburg Office of Capital Legal Services.
This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.