Payments system and legal framework for payment and settlement systems

Payments system and legal framework for payment and settlement systems

 July 12th, 2017

Iraq has one of the most advanced electronic payment systems in the world. It is responsible for the exchange of payment orders between banks automatically and using a safe and effective network system.

The Central Bank of Iraq to operate and manage the settlement of accounts between the participants to ensure the safety and efficiency of payment systems and clearing operations.
Iraqi payment systems consists of the following parts:

The total settlement system in real time

Automatic clearing system

Government securities registration system

It seeks and the Iraqi Central Bank is keen to limit the use of cash (CASH) in the country, and the challenge of geography and security issues remaining to make the transfer of money across the country is difficult and risky. Thus moving efforts to automate the processes of settlement checks and salaries and activating automation of electronic card systems, to keep more cash in bank accounts.

Other events, which have been achieved in this regard is the automation of the primary market for the system of government securities, which began to work on them by the Central Bank of Iraq and in consultation with the Ministry of Finance in 2008, while seeking to automate commercial secondary market events which will hopefully work on them soon.


Legal framework for payment and settlement systems

The legal framework for the work of banks and the Central Bank of Iraq in this indicated systems under the Banking Act on 19 September / September 2003, and the law of the Iraqi Central Bank on March 6 / March 2004. The objective of the Central Bank of Iraq in the age of these laws was in line with international banking standards, and seek to strengthen confidence in the economy through the establishment of a secure environment and a sound banking system and competitive available to all. The aim of the Central Bank of Iraq with the support of these laws is to maintain domestic price stability, enhance competitiveness and build a stable financial system.

According to the Central Bank of Iraq Act of 2004 was the organization of work between the participants and the Central Bank of Iraq through contracts prepared for this purpose to ensure the protection of the legal rights of all.

Is currently the Central Bank of Iraq with local and third parties in order to issue a special law with all electronic payment systems to be working within a sound legal environment.

The legislation of the Securities Act and published in the April / April 2004. It also highlights the need for legislation more advanced laws to cover the activities of the private sector in the stock market as well as the organization of primary and secondary markets for government securities.

Issuance of electronic signature law and electronic transactions No. 78 of 2012.

Issuance of electronic payment services funds Regulation No. (3) for the year 2014, which regulates the work of electronic payment services providers in Iraq.

Instructing technical and financial providers for electronic payment of funds services
Version controls to participate in the infrastructure of the retail payment system.

We are currently reviewing all the paragraphs of the Iraqi Central Bank Law Pmaatanasb the current work and developments.

The granting of licenses to companies licensed Kmzoda electronic payment services by the Bank:
                 - Spectrum Financial convertible (source of cards).
                 - Iraq Gate Company (source collector cards and processor).
                 - Arab Technology Company (source collector cards and processor).
                 - Company Asia Money payment services via mobile phone.
                 - Iraq 's portfolio of payment services company by mobile phone.
                 - global smart card (source) in the process of completing licensing requirements.
           - money company (collector) in the process of completing the requirements Altrechay

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Orange partners on biometric epayments solution for Iraq

point-of-sale
By Stephen Mayhew  
February 2, 2016 -
Orange Business Services has signed an agreement with Canny Quest International, the Dubai-based technology partner of International Smart Card (ISC) in Iraq, to provide SIMs for connectivity to support ISC’s 6,000 payment terminals at points of service (POS) across Iraq.
An additional 8,000 POS locations are planned to be online by mid-2016.
ISC’s new model for e-payment services uses smart cards with sophisticated biometrics to authenticate customer ID and counter the risk of fraud.
ISC provides government employees and private sector organizations access to salary and pension e-payment services through terminals at points of service across the country. ISC customers can access a broad range of virtual financial account management services to access their money including smart cards (closed and open loop), mobile apps and wallets, and the Internet.
The ISC POS terminals are connected to the card management system and validates transactions through the Orange network. Orange interconnects with all the country’s mobile telecoms operators to ensure country-wide coverage and optimized signal quality.
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Dr Hasan Alkhatib, managing director of Canny Quest International, said, “Iraq is an attractive greenfield market for innovation, and the country’s banking sector is underdeveloped, creating an opportunity for the deployment of new technology.”
“Orange Business Services provides a business-critical part of our solution and enables us to monitor and control our POS terminals. It’s a technical and business partnership that allows us to access Orange’s technical competence, geographical presence and global expertise, along with local contacts and service. This service has the potential to grow and develop and positively impact the country’s GDP. Orange’s ability to connect and deliver services seamlessly and reliably is essential to our success.”
Philippe Koebel, senior vice president, Emerging Markets and Indirect, Orange Business Services, said, “This new strategic partnership with Canny Quest International is supporting real innovation and a digital transformation leading to a new model for the banking sector in Iraq. It’s our first M2M application in the Middle East but more significantly, it’s making a real difference to people’s lives and we look forward to rolling it out to other countries through our extensive presence in the region.”

Middle East Payments Services (MEPS)
Middle East Payments Services (MEPS) was founded in 2009 and owned by more than seven local and regional leading banks and companies, MEPS is an innovative, regional payment services provider, offering payment card services, ATM management, secure point-of-sale (POS) devices, e-commerce payment gateway solutions, fraud monitoring and loyalty programs. Additionally, MEPS is a payment processor, card issuer and merchant acquirer.
Given its adoption of cutting-edge secure technology, MEPS is regarded as a trusted partner for financial institutions and other major international credit card companies. It seeks to meet the demands of different sectors, offering customers the latest in the field of secure payment card services.
MEPS holds top quality certifications in POS management, providing distinctive and secure services to merchants and card users in Jordan, Iraq and Palestine. MEPS is PCI Data Security Standard (PCI DSS) certified for the third consecutive year, MEPS is the first and only PCI Security Standards Council (PCI SSC) Board of Advisors representative from the Pan-Arab region, as a result of its commitment to the stringent security standards that guarantee payment and credit card holders reliability and protection.

Money’s Electronic Payment in Iraq

Al Tamimi & Company - Advocates and Legal Consultants logo Iraq May 30 2016
Electronic payments are processed through an integrated system of plans and programs offered by banking and financial institutions in order to facilitate secure electronic payment transactions.

Such a system operates under certain rules and laws that aim to guarantee the confidentiality of secure and protected procurement procedures which ensure the delivery of the service. This system has achieved great success in many countries and is considered a globally applicable system.

In Iraq, and despite the development which has occurred in the accredited mechanism of the payment of money globally, the banks and companies specialised in this field are not up to the level of payment processing. The only bank which issues internationally accredited electronic payment cards is the Trade Bank of Iraq. Further, another example of e-payment in Iraq is a prepaid credit card private company which is licensed by the Central Bank of Iraq and associated with the Iraqis’ Al Rafidain and Al Rasheed banks (public sector banks) to provide Iraqi employees with their pensions. Taking into consideration the aspiration of the Iraqi market to adopt electronic payments, in both the public and the private sector, and for the importance of keeping up with developments in this field, the Council of Ministers issued Regulation No. (3) of 2014 (“Regulation”), based on the provisions of subsection (iii) of Article (80) of the Constitution and Article 27 of the Electronic Signature and Electronic Transaction Law, in order to clarify the steps for setting up companies specialised in electronic payment processing. Thus, it is important to take into account the following:

Expanding Knowledge on the Activities of the Electronic Payment Company

Pursuant to the Regulation, the activities which an e-payment company can conduct in Iraq, are specified as follows:

issuance of tools for the electronic payment of monies;
management of cash deposits and withdrawals through automated teller machines (“ATM”) and point of sale (“POS”) terminals;
implementing the electronic payment of debtors and creditors’ operations so that the funds are guaranteed by a credit limit;
the execution of electronic debt and credit payment operations by any means of digital communications, information technologies, or network operators that act as an intermediary between the user of electronic payment and the provider of equipment and services, or any receipt of funds including transactions through mobile phones; and
the execution of electronic payment operations in accordance with the total settlement immediacy system or securities settlement system or automated clearing system.
To obtain an electronic payment licence for conducting electronic payment services, it is important to note the following:

it is not permissible to conduct electronic payment services without obtaining a licence from the Iraqi Central Bank (“CBI”);
on the request of the licensee, CBI can modify a licence by adding the electronic payment services activity or changing the type of service listed on the licence – the licence will be valid for five (5) years and renewable upon the request of the provider of electronic payment services within ninety (90) days of the licence’s expiration;
it is a condition for the provider of electronic payment services to be a legal entity and have the technical and organisational skills to run such a service;
the service provider must have a permanent work location for carrying out the services and meet the technical and financial requirements required by CBI;
continuous practice of the licensed activity is required; engaging with other parties or total or partial waiver of the license to others during the licence’s duration is not permitted without obtaining CBI approval; and
the provider is required to adopt the necessary systems and mechanisms for the control, internal audit, and risk management related to operating and managing electronic payments, which includes:
appointing individuals to manage the payment processing system who are technically qualified and not convicted of a crime, offence, or misdemeanour involving moral turpitude;

ensuring that the standards of accessing the system are safe and do not inappropriately differentiate between the system’s users;

ensuring a continuity of availability and operation of the system;

implementing measures that reduce the risks related to the payment processing system and manage such risks;

implementing measures to secure and protect the electronic transactions, and saving and storing the operations that relate to the system in such a way as to deter disclosure, misuse, loss, damage or theft; and

ensuring the access of the CBI to the payment processing system for the purpose of supervision and surveillance.

The Submission of the Request to Obtain the Licence

To obtain a licence from the CBI to conduct such activities, the following are required:

a copy of the certificate of incorporation, the articles of incorporation, and the minutes of appointing the managing director certified by the registrar of companies;
the company’s name and address;
the names of the company’s managing directors, founders, shareholders, and their nationalities and permanent addresses;
the title deed or lease agreement for the building which is taken as the head quarter for the company;
the capital assigned by the bank from time to time; and
an economic feasibility study with the following information:
the work plan and projected outcome and the financial estimates for the first three (3) years of operating the system;

the aim of incorporation;

the services to be performed;

the operating costs;

a contingency plan for any unexpected circumstances;

the procedures to be taken to manage and control the risks to which the service provider may be exposed; and

the procedures to be taken to protect the electronic payment service users, including the creation of separate accounts for such money.

the payment of licence fees; and

a confirmation letter from the relevant authorities confirming that there is no security objection impediment in granting the licence the company.

Suspension of the licence

Suspension of such an electronic payment provider’s licence may occur in the following circumstances:

failure of the electronic payment service provider to provides electronic payment services within one hundred and eighty days (180) from the issuance of the licence;
denial of entrance of CBI representatives for the purpose of inspection or obstructing their work;
violation of the related laws or regulations, instructions or orders;
failure to provide electronic payment services within the agreed standards and specifications or providing unqualified services;
engaging in activities which threaten the stability of the financial system in the country;
disadvantaging users from utilizing the service.adjudication of the company’s manager or owner of a felony or misdemeanor involving moral turpitude;
stopping electronic payment services for a period exceeding thirty (30) days.
failing to maintain any of the conditions of the granted licence; or
obtaining the licence through false documentation or any other illegal ways.
Conclusion

The development of this Regulation strongly indicates that Iraq is a promising market for electronic payment systems. The Iraqi market is in need of such services which can be used by governmental departments and private companies, for the payment of salaries for example, as well as in malls and trading shops for the processing of consumer payments.