By Luciano Fantin: This article talks about discretionary measures, which may be demanded by the BCB to owners of payment schemes to guarantee robustness, efficiency and a sound functioning of payment schemes.
Although the headline may seem too emphatic, it is actually true.
On November 24 2014, the BCB has issued Circular Letter 3,735, which allows the regulators to demand the adoption of preemptive measures by those owners of payment schemes, which have not taken seriously enough the new regulatory framework, based on Federal 12,865 as of October 9 2013.
These measures are targeted more precisely at the owners of payment schemes, which amongst others fail to observe the aspects contained on Article 4 of Circular Letter 3,682/13 such as the payment scheme’s risk management, operational aspects linked to anti-money laundering, business continuity, information security, information destined to the final users, interoperability and monitoring of the participants.
Based on a discretionary evaluation, the BCB may determine the adoption of preemptive measures, as e.g.:
- Establishment of additional rules, procedures and operational limits, including:
- Risk management;
- Additional collaterals;
- Conditions to allow for interoperability of the participants;
- Conditions for the participation in the payment scheme and
- Nature of participation.
- Establishment of additional monitoring and control measures;
- Limitation or even waiving of fees;
- Product sale limitation or suspension, rendering of payment services suspension and operational modalities suspension;
- Maintenance of the payment scheme’s validity of rules and procedures;
- In the case that the communication between the owner and the participants of the payment scheme is deemed to be weak or inexistent the BCB may assume direct contact with the participants.
In a nutshell the events happen in following order:
- The BCB determines the adoption of preemptive measures to the owner of a payment scheme;
- The legal representatives and the responsible appointed director are summoned for clarifications. They have to attend the request within 5 days and there will be the signing of specific minutes;
- The BCB may require an action plan to solve the situation, which generated the need for preemptive measures;
- This plan has to be presented to the BCB within 60 days;
- This plan has to be implemented within 6 months;
- The BCB may require update reports on the plan to the external auditors.
Finally, Federal Law 9,784/99 (“Administrative Legal Process”) also applies to this matter.
We conclude that the owners of payment scheme shall take not only the contents of this new regulatory framework very seriously but as well its deadlines. We understand that if the findings are perceived to be relevant enough, the BCB will have powers to influence the business directly in order to guarantee robustness, efficiency and sound functioning of payment schemes.
The adoption of preemptive measures would be in our view an extreme situation, which should be avoided at all cost by the owners of payment schemes. Besides the obvious questions related to the management of their own business, there is a relevant image risk for the owners of payment schemes in these institutions vis-à-vis the general public, the participants and also the BCB.