REPRESENTATION IN THE PROVISION OF PAYMENT SERVICES

Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers ("Regulation") prepared based on the Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions (Article 18) regulates the representation in the provision of payment services. 

Payment institutions and electronic money institutions ("Institution") may use representatives when providing payment services to their customers. 

1. Requirements for the Representative 

The representative who will be an intermediary in the performance of payment services must meet certain conditions. The Institution is responsible for checking the existence of these conditions. These conditions are as follows:

• Providing the information and documents necessary for the evaluation of the representatives referred to in Article 18, paragraph 13 of the Regulation,

• The representative must not pose a risk to the smooth and compliant provision of payment services,

• Registration in the list created by the Association of Payment and Electronic Money Institutions of Turkey ("Association"),

• A written contract must be made between the Institution and the representative.

Representatives may be natural persons or legal entities. The natural person representative and the partners of the legal entity representative must also meet the conditions specified in subparagraph "d" of paragraph 1 of Article 8 of the Banking Law No. 5411. The conditions are as follows:

• Have not been sentenced to heavy imprisonment or imprisonment of more than five years pursuant to the repealed Turkish Penal Code No. 765 or other laws, even though pardoned, with the exception of negligent offenses, have not been sentenced to imprisonment of more than three years pursuant to the Turkish Penal Code No. 5237 or other laws or have not been convicted of the violation of the provisions, that require imprisonment, of the repealed Bank No. 3182, of the Banks Law No. 4389 which is repealed by this Law, of this Law, the Capital Market Law No. 2499 and of the legislation on lending transactions, or have not been convicted of infamous crimes such as embezzlement, extortion, bribery, theft, swindling, forgery, breach of trust, fictitious bankruptcy, smuggling offenses other than those arisen by the acts of using and consuming fraudulent acts in official tenders and trades, money laundering or crimes committed against the prestige of the State and unveiling State secrets, offenses committed against the sovereignty of the state or the prestige of its organs, offenses committed against the security of the State, offenses committed against the constitutional order or the functioning of the constitutional order, offenses committed against the secrets of the State and espionage, offenses committed against relations with other states as well as tax evasion or have not been engaged in such offenses under the repealed Turkish Penal Code No.765 or other laws. 

Persons who have engaged in unauthorized foreign exchange trading activities within the framework of the Decree No. 32 on the Protection of the Value of Turkish Currency and the relevant legislation cannot be representatives. If the Institution determines that its current representative is engaged in such activities, it shall immediately notify the Ministry of Treasury and Finance of the Republic of Turkey. Persons operating under the names such as goldsmith, chopchurch and jewelers engaged in the purchase and sale of processed precious metals and precious stones listed in Article 2 of the Decree No. 32 on the Protection of the Value of the Turkish Currency and authorized institutions defined in subparagraph “o” of the first paragraph of Article 3 of the Communiqué on the Decree No. 32 on the Protection of the Value of the Turkish Currency (Communiqué No: 2018-32/45) cannot be representatives under this article. The Bank is authorized to determine other natural or legal persons who cannot be a representative on the basis of field of activity.

However, since those who only carry out electronic money distribution and fund conversion transactions are not considered as representative, they are not subject to the provisions of Article 18 of the Regulation regulating the representation.

2. Agreement to be Signed with the Representative and Provision of Payment Services by the Representative 

In order to establish a representative relationship between the Institution and the representative, the contract to be signed must be in writing. The agreement to be signed is subject to the legal form requirement, therefore, the representation agreement that is not in writing is invalid. 

The representation agreement should clearly define all responsibilities, rights and obligations arising from the representation relationship and the legislation, as well as the criminal liabilities of the parties in case of breach of the legislation in the fulfillment of the responsibilities and obligations determined by the parties. 

In the representation agreement to be signed, the criminal liabilities of the parties as a result of violation of the legislation in the fulfillment of the responsibilities, rights and obligations arising from the legislation and determined by the parties must be clearly determined. The representative must be clearly informed about the existence of the conditions in the contract and must be provided with the opportunity to learn their content.

Representatives are the only intermediaries that the Institution may use in the provision of payment services. The Institution is prohibited from authorizing third parties other than the representatives for the provision of payment services and signing contracts with third parties under any other name other than the representation contract. However, outsourcing of services under Article 21 of the Regulation is not covered by the prohibition as it cannot be considered as the provision of payment services. Nevertheless, in order to remain outside the scope of the prohibition, the outsourced companies should not intermediate the transfer of funds in any way. The issuance of electronic money by the representatives of electronic money institutions is also prohibited by paragraph 8 of Article 18 of the Regulation.

The representative must perform the payment services subject to the contract itself. It is not possible for the representative to provide the payment services undertaken to be provided by the representative by using sub-representatives under agency, dealer or similar names. Even with the representation agreement, the authority to appoint a sub-representative cannot be given to the representative. It should also be mentioned here that an Institution may be the representative of another Institution. Institutions may appoint representatives as well as represent each other. In order for an Institution to be the representative of another Institution, the service to be provided must be within the scope of its own activity permit. 

In order for the Institution to appoint a new representative, its capital must be at the level specified in Article 33 of the Regulation. Pursuant to paragraph 6 of Article 36 of the Regulation, the Institution is also required to hold additional collateral in the amount of five hundred thousand Turkish Liras for each thousand representative it will use while performing its activities.

According to paragraph 18 of Article 18 of the Regulation, the Institution shall ensure that the appropriate Annex-13 or Annex-14, which are informative on payment services and foreign exchange trading, are appropriately announced in the workplace of the representatives within the scope of the Institution's activities. The announcement to be made must have the following qualifications: 

• At the entrance of the workplace, at least A3 size and 28 font size

• Cashier's section, at least A4 size and 18-point font size

• At least A3 size and 28 font size in an area that can be seen by customers in the workplace

The notices to be placed at the workplaces of the representatives must not be in violation of the prohibition in Article 18, paragraph 15 of the Regulation that "no foreign exchange symbols shall be kept at the workplace and no words, phrases or signs that may give the impression that foreign exchange is being traded".

The conditions set by the law and the regulation regarding workplaces shall also be sought for online environments such as websites and mobile applications of representatives to the extent appropriate to their nature.

3. Responsibility of the Institution and the Representative

The Institution should exercise due diligence in the selection of the representative and provide the necessary information and documents when evaluating the representative. The documents to be submitted to the Institution by the representative under Article 18 of the Regulation and other information and documents to be provided by the Institution regarding the representative should be kept by the Institution. Such information and documents shall be kept by the Institution for at least ten years as long as the representation relationship continues and after the termination of the representation relationship, and shall be made available for audit. 

According to Article 13 of the Regulation, the Institution should obtain the following documents from the representative candidates to be used in its assessments of the representative candidates: 

1. Application form, the format and scope of which will be determined by the Association,

2. In case of a legal entity, the Turkish Trade Registry Gazette showing the latest situation indicating the partners, members or founders of the legal entity and the officials in the management of the legal entity, if all of this information is not available in a single Turkish Trade Registry Gazette, the relevant issues of the Turkish Trade Registry Gazette to show all of this information or documents showing these issues and a copy of the notarized signature declaration of the persons authorized to represent and bind the legal entity,

3. In case he/she is a natural person, the original of the registration certificate obtained within the application year from the chamber of commerce or the chamber of tradesmen to which he/she is registered, if any, or a copy certified by the Directorate or the relevant registry office and a copy of the notarized signature declaration,

4. Tax plate and documents to be obtained from the relevant tax offices and Social Security Institution that there is no outstanding tax debt and insurance premium debt,

5. Documents showing the physical addresses in cases where the representation activity will be carried out in physical channels, and electronic access addresses in cases where it is carried out in electronic channels,

6. Photocopies of the partners' identity cards and documents showing their criminal records including archive records,

7. In cases where the representation activity will be carried out in physical channels, sufficient number and quality of photographs of the enterprise taken within the last month and showing the general condition of the enterprise, and in cases where it will be carried out in electronic channels, screenshots of the electronic environment,

8. A copy of the corporate tax return for the last period, if any, and a copy of the financial statements, if possible,

9. Current Findeks reports of the applicant and, if the applicant is a legal entity, of the controlling shareholders,

10. A declaration from the representative candidates stating that they have not engaged in unauthorized foreign currency trading activities in the past and will not engage in foreign currency trading activities during the period of the representation relationship within the framework of the Decree No. 32 on the Protection of the Value of Turkish Currency, which was put into effect by the Decree of the Council of Ministers dated 7/8/1989 and numbered 89/14391, and the relevant legislation.

Although the representative is responsible for the compliance of the payment services with the legislation and the fulfillment of the payment services, this responsibility of the representative does not eliminate the responsibility of the Institution; moreover, the Institution cannot claim that it has taken due diligence in the selection of the representative in order to get rid of this responsibility.

The responsibility of the Institution to regularly supervise the representative is set out in the Regulation. In order to fulfill this responsibility, the Institution is required to establish a "central system". Through this system, the Institution checks whether the representative performs its activities in accordance with the legislation and whether it engages in illegal activities. The Institution keeps the activities of the representative under surveillance and basically closely monitors the following issues and terminates the representative relationship in case it detects a breach:

• Fulfillment of the activities of the Representative Office in accordance with the legislation, especially the Law and this Regulation. 

• Fulfillment of the obligations under Law No. 5549 while carrying out the activities under the Law. 

• Not engaging in unauthorized foreign currency trading activities within the framework of the Decree No. 32 on the Protection of the Value of the Turkish Currency and the relevant legislation. 

• No board or similar document or device showing exchange rates shall be kept in the workplace under any circumstances. 

• No foreign currency symbols shall be kept in the workplace and no words, phrases or signs shall be used to give the impression that foreign currency is being traded.

In addition to this central system to be established, the Institution should also take necessary measures to fulfill its obligations under the Law No. 5549 on Prevention of Laundering Proceeds of Crime. Furthermore, the Institution is also responsible for establishing internal control methods to be used by its representatives to prevent fraud according to the Regulation. 

The Law and the Regulation set out certain conditions regarding workplaces. To the extent appropriate to their nature, these conditions will also be sought in terms of online environments such as representatives' websites and mobile applications.

4. Establishing a Representative Relationship with Persons Residing Abroad

The Institution may establish a representative relationship with natural or legal persons residing abroad for its activities abroad. The Institution is obliged to notify the Bank at least 30 days before the signing of the representation agreement together with a report explaining separately and in detail the reasons and benefits of opening a representation office for each country in which it wishes to establish a representation relationship with natural or legal persons residing abroad. As a rule, this representative relationship to be established by the Institution is also subject to Article 18 of the Regulation. As an exception to this rule, the representation relationship to be established for activities abroad is not subject to the thirteenth, fourteenth, fifteenth, sixteenth, seventeenth, eighteenth, twenty-second and twenty-sixth paragraphs, except for the ninth, tenth, eleventh, eleventh, subparagraphs (a) and (f) of Article 17. 

The obligation to hold assurance in the amount of five hundred thousand Turkish Lira for each thousand representatives set forth in Article 36 of the Regulation also applies to the number of natural or legal person representatives of the Institution residing abroad. 

The Bank has supervisory authority over Institution’s representative relations and representatives established with real or legal persons residing abroad. Therefore, in order to establish a representative relationship, there should not be any obstacle for the Bank to obtain the information and documents required by the Bank in the regulations and practices of the country where the representative office is located or operates, and to conduct audits on such representative offices. In the event that the Institution appoints a payment service provider residing abroad as a representative, the representative to be appointed must not have any restrictions on operating in the field of payments in the country where it operates. In addition, the Bank is authorized to determine the countries where the representative relationship cannot be established.

5. List of Representatives to be Established by the Association

Information on the business owner of the Institution and the representative, the field of activity, address and notification information of the Institution and the representative, and the website address of the representative providing services electronically are recorded in the list created by the Association. The list kept by the Association are published on the Association's website for public access. It is the responsibility of the Institution to keep the list up-to-date. The Institution must notify the Association of the representative to be registered in the list kept by the Association within fifteen workdays following the signing of the representation agreement. Payment services cannot be provided through the representative who is not registered in the said list.

If the Institution determines that it is against the legislation for the representative to provide payment services, it is obliged to terminate the representative relationship and notify the Association to delete the representative from the list within five workdays.

The Institution shall prepare a list of its representatives based on the list established by the Association and publish this list on its website. The Institution must inform the customer that the representative provides services on behalf of and on account of the Institution and his/her place of work in a clear and unambiguous manner.