ACI’s Emerging Payment Systems March 24-25, 2014 International Emerging Payments Landscape Mike Rodin Associate General Counsel The Western Union Company Tweeting about this conference? #ACIPayments
International Remittances • No Longer “Unregulated” • Dodd-Frank and the CFPB • Increased Regulation in Asia and Elsewhere • Anti-Money Laundering and Fraud Prevention #ACIPayments 2
How to Navigate in Cross Currents • Decide on Your Risk Tolerance • Choose Your Baseline • Choose Your Poison • Expect Surprises #ACIPayments 3
Go Alone or Partner? • Don’t Over -Estimate Your Strengths • Don’t Under -Estimate Your Strengths • Don’t Lose Focus • Grape-Watermelon Dilemma #ACIPayments 4
Bio & Disclaimer Mike Rodin is Associate General Counsel at The Western Union Company. His responsibilities include leading legal support for Western Union Digital (westernunion.com and other electronic and mobile channels) new products, mergers & acquisitions, intellectual property, real estate and procurement. The privacy and records management team also reports to him. Over the past several years, Mike has focused on the global expansion of Western Union’s business in core money transfer, digital, and business payments. Mike also has extensive experience in the formation and on-going support of joint ventures in a wide range of businesses in the United States and in other countries. Before joining Western Union, he served as general counsel and regional counsel for bank holding companies, and was a partner in what is now K&L Gates, concentrating on corporate and securities matters. Mike received his undergraduate degree from the University of Chicago and his law degree from New York University. The views expressed are solely those of the speaker and are not to be attributed to The Western Union Company. 5 #ACIPayments 5
ACI’s Emerging Payment Systems March 24-25, 2014 The International Emerging Payments Landscape Chris Daniel Co-Chair, Payment Systems Group Paul Hastings LLP Tweeting about this conference? #ACIPayments
Overview I. China • Administrative Measures for the Payment Services Provided by Non-Financial Institutions • China Union Pay (“ CUP ”) • Notice of the General Office of the State Council on Regulating the Administration of Commercial Prepaid Cards • New Data Privacy Rules II. Russia • National Payment Systems Law III. Brazil • Law No. 12,865 7 #ACIPayments 7
China – Payments Laws and Regulations • Administrative Measures for the Payment Services Provided by Non-Financial Institutions • Issued on June 14, 2010/Effective September 1, 2010 by the People’s Bank of China (“ PBOC ”). • Requirements: Capital AML Custodial — Only a “limited liability company or joint -stock company legally formed inside the People’s Republic of China” may apply for a permit. • Article 2: The term “payment services provided by non - financial institutions” as mentioned in these Measures refers to some or all of the following monetary capital transfer services provided by non-financial institutions as the middlemen between payers and payees: Payment through the network; Issuance and acceptance of prepaid cards; Bankcard acquiring; and Other payment services as specified by the People’s Bank of China. 8 #ACIPayments 8
China – Payments Laws and Regulations Cont. • China Union Pay (“ CUP ”) • CUP operates an inter-bank transaction settlement system through which inter- bank, cross-region and cross-border usages of bankcards issued by associate member banks may be realized. • CUP has a monopoly in its home country. China does not let foreign companies issue their own bank cards denominated in RMB, build networks to support such cards or process interbank point-of-sale transactions. As such, every card using RMB currency must pass through the CUP settlement network and CUP collects fees on almost all credit card transactions in China. • In addition to being the sole card network in China, CUP participates in all other aspects of a card payment transaction through its subsidiaries. CUP has subsidiaries that act as an online payment service provider, merchant acquirer, and issuer processor. • Similar to the U.S. card associations (Visa, MasterCard, Discover, etc.), CUP has contractual relationships with “associate member banks” who issue credit and debit cards to businesses and individuals. CUP has approximately 400 associate member banks around the world. 9 #ACIPayments 9
China – Payments Laws and Regulations Cont. • Notice of the General Office of the State Council on Regulating the Administration of Commercial Prepaid Cards • Issued on May 23, 2011 by the General Office of the State Council based on opinions by various other departments. • Closed-Loop Commercial Prepaid Cards regulated by the Ministry of Commerce. • Open-Loop Commercial Prepaid Cards regulated by the PBOC. • The People’s Bank of China shall, in strict accordance with the Administrative Measures for the Payment Services Provided by Non financial institutions (Order No. 2 [2010] of the People’s Bank of China), strengthen the supervisory inspection of issuers of multi-purpose prepaid cards, improve business management rules, and maintain the safe and stable operation of the payment system. Without the approval of the People’s Bank of China, no non -financial institution may issue multi-purpose prepaid cards; otherwise, upon discovery, the non-financial institution shall be punished for illegal payment and settlement business operation. • Any entity which purchases 5,000 yuan or more cards at one time or any individual who purchases 50,000 yuan or more cards at one time shall do so through bank transfer rather than in cash. For purchase through bank transfer, a card issuer shall register the names of paying and receiving accounts, account numbers, amount and so on of each transaction. Thirdly, we shall set quotas for the issuance of commercial prepaid cards. The par value of an unregistered commercial prepaid card shall not exceed 1,000 yuan, and that of a registered commercial prepaid card shall not exceed 5,000 yuan. 10 #ACIPayments 10
China – Payments Laws and Regulations Cont. • New Data Privacy Rule • The Ministry of Industry and Information Technology recently promulgated the Several Regulations on Standardizing Market Order for Internet Services (the “ Privacy Rule ”), which sets out basic rules regarding the collection, retention, and use of personal information by “internet information service providers” (“ IISPs ”). • The definition of an IISP (and by extension, the applicability of the Privacy Rule) is very broad. • Some of the important aspects of the Privacy Rule include the following: • IISPs must obtain users’ prior consent if they collect their personal information or provide such information to others; • IISPs have to properly maintain users’ personal information and take immediate remedial steps in case of disclosure (although those steps are not defined); • IISPs may only collect users’ personal information as necessary to provide their services; and • IISPs must expressly convey to users the method, content, and purpose of the processing and collection of personal information and may not utilize this information outside of the scope consented to by the user. 11 #ACIPayments 11
Russia – Payments Laws and Regulations • Russian National Payment Systems Law • Federal Law No. 162- FZ of June 27, 2011, “On the National Payment System” • Comprehensive coverage of wholesale (large value) and retail payment systems. • Regulates participation in retail systems by banks and non-banks. • Bank card networks, prepaid cards, “electronic money” transfers, bank transfers (ACH, money transmitters and funding of transfers from mobile phone accounts) • Consumer protections similar to Reg E, disclosures, receipts, error correction. • Anti-money laundering and Know Your Customer requirements. • Registration requirements and “prudential” regulation of non-banks. • Supervision by Bank of Russia; monitoring of non-bank agents by tax authorities. 12 #ACIPayments 12
Russia – Payments Laws and Regulations Cont. • Russian National Payment Systems Law: E-Money and AML Concerns • E-money includes all prepaid products that involve use of electronic means of payment (cards, e-wallets, payment chips). • It is prohibited for an e-money operator to pay interest on a client's account balance. This requirement accounts for the difference between credit institutions acting as e-money operators and traditional e-money — it is not permitted to use e-money to draw deposits. • E-money transfers not exceeding 15,000 rubles and total operations using the transfers not exceeding 40,000 rubles a month may be carried out without requiring payer identification. • E-money transfers exceeding 15,000 rubles require payer identification. • E-money transfers cannot exceed 100,000 rubles. 13 #ACIPayments 13
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