Payment & Security Settlement Systems and E-Money Insutitions in Turkey
ADMD Law Office / Bilge Yılmaz
The law regulating electronic money (e-money) and electronic payments (e-payments) in Turkey, namely the Law on Payment and Security Settlement Systems, Payment Services and Electronic Money Institutions No. 6493 (the "Law") entered into force as of June 27, 2013 following publication at the Official Legal Journal (Gazette) dated June 27, 2013 and No. 28690.
This Law introduces a new regulatory framework which covers the procedures and principles of payment and security settlement systems, payment services, payment institutions and electronic money institutions. Within its framework, it establishes new definitions and licence requirements, which will require certain organisations to take further action in order to achieve regulatory compliance for the purposes of providing e-money services.
The Law establishes a system to be used at e-money and related transactions. According to Article 3-z, the system is defined under two headlines as (i) Payment system; structure providing the infrastructure and common rules required for clearing and settlement transactions made for ensuring fund transfers resulting from transfer orders given by three or more number of participants and (ii) Security settlement system; structure providing the infrastructure and common rules required for clearing and settlement transactions made for ensuring security transfers resulting from transfer orders between three or more number of participants.
According to Article 4 of the Law, both systems may only be operated by certain system operators authorized by the Central Bank of the Republic of Turkey (the Bank). Accordingly, certain requirements have been set forth at Article 5 of the law for system operators which the applicants must fulfil to be authorized as operators by the Bank. Such requirements include the requirement to be incorporated as a joint stock company and the minimum company capital to be TRL 5.000.000.
Article 12 of the Law exhaustively lists the transactions to be deemed as "payment services". Such transactions include but not limited to all operations required for operating a payment account, payment transactions including transfers of funds on a payment account of the payment service user and direct debits, issuing or acquiring of payment instruments, money remittance and services for mediating invoice payments.
Accordingly, Article 13 of the Law exhaustively lists the institutions authorized to perform the above listed payment services as: (i) The banks within the scope of the Banking Law numbered 5411; (ii) Electronic Money Institutions or (iii) Payment Institutions.
It should also be noted according to Article 5 of the Regulation on Payment Services, Electronic Money Issuance, Payment Institutions and Electronic Money Institutions published with the Official Legal Journal (Gazette) dated June 27, 2014 and No. 29043 (the “Regulation”), the Turkish Post Office (PTT) is also authorized to perform such payment services within the scope of the provisions of the Postal Services Law No. 6475.
According to Article 33 of the Regulation, the perpetual payment relationship between payment service providers and payment service users shall be regulated with written agreements, unless such agreement is executed via distance communication mediums.
The Regulation also sets forth provisions regarding the payment orders and the transactions between the payer and service provider. Hence, as per Article 47 of the Regulation, the payment order shall be deemed to be submitted once the payment service provider receives the payment order from the payer and the payer shall not be able to withdraw the payment order once it is received by the payment service provider, unless agreed otherwise by the parties. The payment service provider shall transfer the amount of payment order immediately to the payment service user’s account once it receives the payment order or in any case until the end of the work day of the following working day.
It should be also noted that, such payments shall be made with the currency parties agreed upon provided that the currency is in compliance with the Decision on Protection of Value of Turkish Currency No. 32 which entered into force with the Decree of the Council of Ministers dated August 7, 1989 and No. 89/14391.
Payment Institutions are defined as institutions providing payment services in accordance with the provisions of the Law. Accordingly, payment institutions intending to operate in the field of payment services under the scope of the Law can operate upon obtaining permission from the Banking Regulation and Supervision Board, subject to the requirements of Article 14 of the Law:
- The applicant should be incorporated as a joint stock company,
- Shareholders of the applicant owning ten percent or more of the capital and holding control are required to meet the bank founder qualifications laid down in the Banking Law No. 5411,
- The share certificates of the applicant should be issued for capital paid in cash and they should be registered (names) share certificates,
- The applicant company’s capital shall be paid in full, in cash and free from any encumbrances and should not be less than TRL 1.000.000,00 for payment institutions providing services for mediating invoice payments and not be less than TRL 2.000.000,00 for other payment institutions,
- The applicant is required to have diligent management, adequate personnel and technical equipments required for performing the transactions under the scope of the Law and departments handling complaints and objections,
- The applicant is required to take precautions required for the continuity of the operations to be conducted under the scope of the Law and for preservation of security and confidentiality of the funds and information related to the payment service users,
- The applicant is required to have transparent and open shareholding structure and organizational management chart that should not constitute an obstacle for the efficient supervision of the Banking Regulation and Supervision Agency.
Electronic Money Institutions
According to Article 3 of the Law, Electronic Money Institutions are defined as institutions authorized to issue electronic money. Accordingly, the Law restricts the institutions authorized to issue e-money as banks operating in accordance with the Banking Law No. 5411 and electronic money institutions granted with a permission to issue e-money under the scope of the Law. All other institutions are prohibited from issuing e-money as per Article 18 of the Law.
It should be noted that, an electronic money institution intending to issue electronic money under the scope of the Law can operate provided that they are granted permission by the Banking Regulation and Supervision Board.
Article 20 of the Law sets forth the provisions regarding the issuance of e-money. Accordingly, Electronic Money Institutions may only issue e-money for the amount of the funds received from e-money user for the purposes. Once such funds are received, Electronic Money Institution, issuing electronic money converts the funds deposited by the electronic money user into electronic money without any delay and makes them ready for use.
It should also be noted that, the Electronic Money Institutions are required to transfer the funds deposited for the issuance of e-money to a separate bank account to be opened at the banks determined with the Law No. 5411 and keep them on their respective accounts during the term of use. Accordingly, the banks holding the funds shall block the amounts deposited by the Electronic Money Institutions at their accounts held at the Bank during the term of use.
In accordance with Article 18 of the Law, the Electronic Money Institutions are subject to the following conditions of eligibility:
- They should be incorporated as a joint stock company,
- Their shareholders owning ten percent or more of the capital and holding control are required to meet the bank founder qualifications laid down in the Banking Law No. 5411,
- Their share certificates should be issued for capital paid in cash and should be registered (named) share certificates,
- Their company capital shall be paid in full, in cash and free from encumbrances and should not be less than TRL 5.000.000,
- They are required to have management, adequate personnel and technical equipments required for performing the transactions under the scope of the Law and departments handling complaints and objections,
- They are required to take precautions required for the continuity of the operations to be conducted under the scope of the Law and for preservation of security and confidentiality of the funds and information related to the electronic money users,
- They are required to have transparent and open shareholding structures and organizational management charts that shall not constitute an obstacle for the efficient supervision of the Banking Regulation and Supervision Agency.
Operations without Licence
Real persons and officers of legal persons who act as a system operator, payment institution or electronic money institution without having the required operating license pursuant to this Law shall be sentenced to imprisonment from one (1) year to three (3) years and judicial fine up to five thousand days of prison (converted into money at the date of sentencing – according to Article 52 of the Turkish Criminal Code No. 5237, the current rate is from TRL 20 up to TRL 100 per day). Furthermore, if these crimes are committed through a place of business, such business (or company) shall be closed for a period of two (2) to six (6) months, or permanently, if such crimes are repeated.
The Law has entered into force as of June 27, 2013, upon its publication at the Official Legal Journal (Gazette) No. 28690. Accordingly, the institutions already providing payment services at the enforcement date of the Law and to are deemed as a payment institution along with the institutions already issuing electronic money at the enforcement date of the Law and are deemed as an Electronic Money Institution, shall be obliged to apply to the Banking Regulation and Supervision Agency to obtain the necessary permissions within one (1) year starting from the date of publication of the regulations issued by the Banking Regulation and Supervision Agency under the scope of the Law.
If such institutions fail to apply to the relevant authorities within the designated time, they will be deemed as institutions operating without the appropriate licenses and shall be subject to the above mentioned judicial punishments.