Legal act: Resolution of the Board of the Bank of Lithuania No. 03-106 of 23 July 2020, Amending Resolution No. 247 of the Board of the Bank of Lithuania of 30 December 2009 on Requirements for Electronic Money Institutions and Payment Institutions Regarding Internal Control, Risk Management and Safeguarding of Received Funds.
Effective date: 1 January, 2021.
Amendment:
Amendments related to the requirements for safeguarding electronic money holders’ and / or payment service users’ funds:
- The possibilities for Institutions to conclude deposit agreements are expanded, without limiting their type and term. Deposit accounts opened under a deposit agreement, other than an irrevocable time deposit, may be considered as custody accounts.
- The terms and conditions of the custody account agreement or of the securities custody account agreement, including the annexes to those agreements, shall provide that:
- the relevant account is intended solely for the safeguarding and administration of electronic money holders’ and / or payment service users’ funds or only securities, acquired by funds received by the Institution from electronic money holders and / or payment service users;
- these funds and securities remain the property of the electronic money holders and payment service users who transferred them;
- they may not be subject to recovery under the debts of the Institution.
- If the terms and conditions of the custody account or securities custody account opening agreement, including the annexes to these agreements, do not contain the above conditions, the Institution must obtain an approval from the credit institution or custodian of securities or enter into a separate agreement.
- The institution must ensure that only funds held by electronic money holders and / or payment service users will be held in the custody account, unless:
- the funds are used to pay the fees charged by the credit institution for the custody account management service, but only if the credit institution where the custody account is opened does not provide another possibility to pay these fees;
- the funds are received from electronic money holders and / or payment service users in the form of commissions and other fees for payment and other ancillary services closely related to payment services. The institution must transfer these funds to another account opened in the name of the institution at the intervals specified in the internal documents, which must be determined considering the peculiarities of the institution’s business model.
- Internal control procedures must include at least the verification of funds. The verification of amounts must be documented.
- Institution that provides payment services through an intermediary must:
- make sure that intermediary has documented segregation procedures;
- have procedures in place for the exchange of information and internal control to ensure that funds are properly segregated by the intermediary;
- transfer to the custody account the amount of own funds corresponding to the funds received by electronic money holders and / or payment service users through intermediaries acting on behalf of the Institution, if the intermediary has not yet transferred those funds.
- Cash and investments in BBB-rated corporate bonds, other than those acquired before 31 December 2020 and complying with the legislation in force at the time of acquisition, will no longer be considered safe, liquid and low-risk assets. Safe, liquid and low-risk assets include:
- debt securities which, according to the Chapter 2 of Title II of Section 3 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (hereinafter – the Regulation) (with all subsequent amendments to the Regulation) shall apply 0, 20, 50%. risk weights;
- investment units of coordinated collective investment undertaking investing only in the debt securities referred to in the above subparagraph;
- debt securities, investment units of the coordinated collective investment undertaking which do not comply with the requirements set out in the above subparagraphs, but which were acquired before 31 December 2020 and complied with the requirements of the legal acts in force at the time of acquisition.
If the Institution safeguards clients’ funds by investing them in safe, liquid and low-risk assets, an investment policy approved by the collegial management body must be prepared
Recommendation:
to prepare internal documents establishing the process for the safeguarding of electronic money holders and / or payment service users funds, accounting and internal control procedures for such funds.
Prepared by associate, assistant attorney-at-law Eglė Juškaitė.
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