Licensing electronic payment and wallets under Regulation 2 of 2024
The Law Office of Ali Barakat in Baghdad sets out the framework for licensing an electronic-payment service provider, including emerging services such as digital wallets and mobile payments, under Regulation No. 2 of 2024 on electronic payment services for funds, issued under Cabinet Decision No. 24276 and published in the Official Gazette, issue 4771 of 29/4/2024. The page presents the licensing conditions as they appear in the Regulation.
Who grants a licence, and what may not be done without one?
Article 6, first, provides that electronic payment services may not be provided except after a licence from the Central Bank of Iraq. A legal person wishing to obtain a licence to act as an electronic-payment service provider, and holding the qualifications the Bank specifies, must submit an application to the Bank in the proper form, under paragraph second. Licensed banks may provide electronic payment services after obtaining the Central Bank’s approval, and must comply with the instructions and controls the Bank specifies, under paragraph third.
The Bank decides an application for a licence within ninety working days of its submission, by accepting it or by refusing it if the Bank’s requirements are not met or if the Bank’s Board of Directors has decided to suspend the acceptance of licence applications, and the applicant is informed of the reason for refusal. The Bank may extend the period by a like period for study, under article 6, fourth. Providers are given a preliminary approval for a limited period in which to complete the requirements for the grant of a licence, and they may not carry on the activities or provide the services during that period, under paragraph fifth. The final licence is granted after all the licensing requirements specified by the Bank have been completed. The licence runs for ten years from the date it is granted, and may be renewed in accordance with the procedures the Bank specifies. A person seeking renewal must apply at least ninety days before the licence expires, under paragraphs sixth and seventh. The Bank may, in accordance with its policy, grant licences or suspend the grant of licences, and may amend a licence by adding a service or changing its type on the provider’s application. It may accept or refuse that application and must inform the applicant of the reason for refusal, under paragraphs eighth and ninth.
The Regulation applies to electronic payments issued by State institutions, the public, private and mixed sectors, and legal and natural persons through financial institutions; to electronic payment transactions and instruments; to electronic funds transfers; to all operations, activities and related electronic records of the Iraqi payments system; and to new innovations in electronic payment, under article 3.
Among the activities a licensed provider may offer, after the Bank’s prior approval and after meeting the requirements the Bank sets for each activity separately, are those listed in article 4. They include issuing and managing electronic payment instruments within the scope of the licence; managing electronic-money deposits and withdrawals through channels the Bank authorises; emerging services such as digital wallets and mobile payments, and any modern financial techniques the Bank’s controls and standards allow; and any other activities connected with the provision of payment services that the Bank approves under special controls.
What must a licence application contain, and how is a decision challenged?
Article 7 requires a licence application to include the requirements the Central Bank specifies. At a minimum these include a copy of the company’s certificate of incorporation, its articles, and the minutes appointing its managing director, authenticated by the Companies Registration Department; the company’s name and address; the name of the managing director and the names, nationalities, permanent addresses and curricula vitae of the founders and shareholders; title to the building, or the lease of the premises taken as the company’s seat; the company’s capital as specified by the Bank; financial soundness; experience in electronic payment and its services; the company’s objects; and a comprehensive feasibility study covering at least three years, in the detail the article sets out, including the measures that will be taken to protect users’ funds, among them the opening of separate accounts for those funds. Licence fees are not refundable, as the Bank determines. Evidence that there is no security obstacle to the grant of the licence is also attached, under item 11 of the same article.
A provider must, at a minimum, be an accredited legal person; have the financial capacity and the technical and organisational skills to operate and manage payment systems efficiently; have a fixed and known place of business; and meet the technical and financial requirements for participation in the payment system that the Bank specifies, under article 8.
If the Bank suspends or revokes a licence, the licence-holder is notified, and the Bank may publish its decision. The licence-holder must take the measures needed to protect customers’ interests and rights, including notifying them at once, and must submit a plan to ensure continuity of services or to direct customers to suitable alternatives, in coordination with the Bank, under article 9. Suspension or revocation does not prevent the completion of electronic payment transactions submitted before the decision was issued, under article 10.
Decisions of the Central Bank issued under this Regulation may be challenged before the Financial Services Court in accordance with the law, under article 11. A provider must inform the customer clearly of his or her rights and obligations, disclose the details of services and their commissions, conclude clear service contracts on paper or electronically, compensate the customer if a transaction is delayed beyond the agreed period or if funds are lost or reduced through negligence or mismanagement, and protect the privacy of the customer’s information, under article 13. Commission amounts are read from the terms that apply to the provider and from the Regulation.
Legal basis and sources
- Regulation No. 2 of 2024 on electronic payment services for funds, issued under Cabinet Decision No. 24276 (Official Gazette No. 4771 of 29/4/2024)
- Central Bank of Iraq Law No. 56 of 2004
Frequently asked questions
May a digital wallet be operated without a Central Bank licence?
Article 6 prohibits the provision of electronic payment services except after a licence from the Bank. Digital wallets are among the services article 4 lists as being offered after the Bank’s approval and after the requirements are met.
How long does a decision take, and how long does a licence last?
The decision is made within ninety working days, extendable by a like period for study. A final licence runs for ten years, and renewal must be sought ninety days before it expires, under article 6.
Where is a Bank decision on a licence challenged?
Before the Financial Services Court in accordance with the law, under article 11.