On 26 July 2016, a new Law of the Republic of Kazakhstan No. 11-VІ “On Payments and Payment Systems” (the Law on Payments) was adopted. Save for a number of certain provisions, the new Law on Payments comes into force on 10 September 2016 and will completely substitute the existing Law of the Republic of Kazakhstan No. 237-І “On Payments and Money Transfers” dated 29 June 1998.
The new Law on Payments has been drafted by the National Bank of the Republic of Kazakhstan in order to: (a) commence regulation of the activities of operators of instant payment systems, and (b) align the national legislation on payment systems with the international standards.
For convenience, all provisions of the new Law on Payments can be divided into two large parts. The first part sets forth a legal framework for the functioning of payment systems and provision of payment services in Kazakhstan. The second part deals with payments and money transfers per se, including those which are made with payment cards and electronic money.
In particular, the first part of the Law on Payments envisages, inter alia, the following:
- Definition of the terms “payment system”, “operator of a payment system”, and “participant of a payment system”;
- General requirements for the establishment and functioning of payment systems;
- Types of payment systems, criteria and methods for determining the significance of payment systems;
- Requirements for operators and participants of payment systems;
- Types of providers of payment services, as well as the types of, and general parameters for rendering, payment services;
- Procedures for the establishment and the registration of (non-banking) payment organizations, as well as the status and the functions of such organizations in the process of rendering payment services;
- Competence of the National Bank of the Republic of Kazakhstan in connection with the regulation of and control over the payment systems and the market of payment services.
Thus, unlike the previous law, the new Law on Payments sets forth a detailed legal regime for the field of the payment systems and for the payment services market. The provisions of the new Law on Payments will allow, inter alia, the establishment of a state control over the activities of non-banking payment organizations and will oblige operators of the payment systems, including the operators of the foreign payment systems, to comply with the unified “rules of the game” adopted on the Kazakhstan market.
The second part of the Law on Payments classifies in a new way the means of making payments and the types of payment instruments. According to the new Law, payment instructions (platezhnoe trebovanie), payment requests (platezhnoe poruchenie), checks (chek), bills (veksel), mandatory collection orders (inkassovoe rasporyazhenie), as well as payment orders (platezhniy order), payment notices (platezhnoe izveschenie), and means of electronic payments now constitute the “types of payment instruments”. In turn, the “means for making payments” now comprise a cash transfer, an electronic money transfer, a transfer of money by using payment documents, an issuance of a payment document which contains a money obligation or a payment order, and a use of means of electronic payments.
Notwithstanding this new approach to classification of the means of making payments and the types of payment instruments, it is unlikely that such approach would cause any serious practical implications.
The practical implications, however, are being expected with regard to the matter of change of fees for payments and money transfers. The new Law provides that a payment services provider is not entitled to increase unilaterally the payment services fees, as they are set on the date when a respective agreement on rendering of payment services between the payment services provider and its client was signed. However, this rule does not apply to fees for international payments and/or international money transfers. In the latter case, a payment services provider shall be entitled to change the fees subject to a respective notice sent to its client in the manner as may be stipulated in the underlying agreement between them.
Another remarkable novelty associated with the new Law on Payments is that an explicit “escrow account” concept is finally established in Kazakhstan law. An escrow account is defined as a current or deposit account opened by a client in the name of another person when the latter is restricted to perform debit transactions with such bank account until the conditions determined by the client occur or are fulfilled by such person. Money placed on the escrow account cannot be subject to foreclosure unless otherwise is provided for by the court's decision. The establishment of the concept of “escrow account” will slightly strengthen the position of the local banks in connection with, inter alia, participation of such banks in payments under the cross-border mergers and acquisitions deals. Earlier, due to the absence of an explicit definition of the “escrow account”, the parties to such deals preferred to open escrow accounts with foreign banks.
In addition, the Law on Payments now establishes the terms and conditions for unilateral refusal to perform a bank account agreement and a bank deposit agreement. This novelty is intended to solve any obstacles of the local banks associated with the processes of the closing of so called “dormant accounts”.