The Turkish Banking Regulatory and Supervisory Authority (the "BRSA") has taken a major step forward in regulating e-money and e-payment services. On June 27, 2014, the BRSA issued a new regulation on establishing and operating e-money institutions and payment service providers. The authority also issued a new communique the same day addressing administration of these institutions and providers' IT systems.
The new regulation and communique went into effect upon their publication in the official gazette, also on June 27, 2014.
Less than one year to comply
Most importantly, the regulation requires that e-money and e-payment services providers be licensed to operate in Turkey. E-money institutions and payment services providers are required to establish their Turkish entities and localize their Turkish businesses by June 26, 2015. Until then, they may continue their current operations. They must, however, obtain a license from the BRSA for their operations in Turkey by the end of this one-year transition period. The licensing procedure is similar to the banking license procedure, and requires submitting detailed and complex information to the BRSA, as well as compliance with strict rules in this newly regulated market.
The regulation also introduces detailed compliance rules for opening branch offices, outsourcing certain activities, internal audits, risk management, accounting, reporting and independent audits, establishing a corporate governance board and capital adequacy ratios. Compliance with these new rules and procedures, however, is also not mandatory until June 26, 2015.
Implications for banking activity
The new regulation requires payment services providers to open a pooled customer account with a bank licensed and operating in Turkey to collect payment funds from customers and payments to sellers. Payment services providers must segregate their customers' accounts and records, and separately monitor funds in the pooled customer account. The regulation imposes no foreign currency restrictions for e-money and payment services providers' activities. Activities might be limited, though, by the Turkish bank’s foreign currency capabilities. If the Turkish bank cannot process certain currencies, the regulation allows the funds to be kept in a pooled customer account by conversion into the relevant currency.
The new regulation also sets forth certain compliance requirements for customer contracts, including for amendments and termination. Furthermore, parties' rights and duties as well as payment services providers' liability are also controlled under the new regulation.