National Payment System Act

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The National Payment System Act which regulates the operation of payments systems, clearing systems, settlement systems (collectively “Systems”) and payment services was gazetted on 18 May 2021. The National Payment System is broadly defined as all activities related to sending, receiving, and processing payment instructions and transfer of money, whether in Maldivian currency or a foreign currency.

Licensing Requirements

  1. The Act requires all payment service providers to obtain a license or permit from the Maldives Monetary Authority (MMA) before providing a payment service in Maldives. Such license or permit is to be issued only:
    • to Companies registered under the Companies Act of Maldives; and
    • if the Authority is of the opinion that a public benefit can be obtained from the granting of the license or permit and the financial stability of the country is not affected.
  2. Exemptions to the licensing requirement are provided for the operation of certain types of systems including in-house payment systems operated by banks. MMA may determine additional systems to grant the exemptions.
  3. The basic procedures related to the licensing applications for payment services and operation of Systems are provided under the Act.
  4. The Act further stipulates the conditions for the issuance of the license or permit. In addition to the statutory conditions, MMA is granted the discretion to issue licenses with additional conditions and has the discretion to reject licensing applications.
  5. The license or permit obtained by a party is non-transferable unless authorised by the MMA.
  6. Providing a payment service or operating a System or advertising such services/operations without a license or permit are prohibited under the Act. Fines varying from MVR 100,000-10,000,000 are stipulated for infringements.

Interim Arrangements for Existing Service Providers

The Act provides interim arrangements for service providers providing payment services or operating Systems at the Effective Date of the Act (stated below). Such parties may provide services or continue the operation for 6 months from the Effective Date, however, application for licensing must be submitted within 3 months from the Effective Date.

Minimum Standards for System Rules

Systems rules are to be formulated for the operation of the Systems. The Act stipulates minimum standards which must be present in the system rules. Operation of the systems may only be initiated following the approval of the system rules by the MMA. Subsequent changes to the system rules are also to be endorsed by the MMA. Further, the MMA is vested with the authority to vary or revoke the system rules.

Overseeing Mandate of MMA

MMA is vested with powers to oversee the Systems and the activities of the payment service providers with authority to initiate inspections. Further, information, documents or reports may be requested by the MMA.
In addition to the general oversight duties, the Act stipulates the auditing requirements of the service providers. The external auditor is to be appointed for a 1 year term and may only be renewed up to 3 consecutive years. In certain circumstances, the MMA is granted the authority to initiate a special audit.

Effective Date

The Effective Date of the Act is 18 September 2021. MMA is required to publish all requisite regulations under the Act within 1 year from the enactment date.

 

Photo by Towfiqu barbhuiya on Unsplash