State-owned commercial banks; joint-stock commercial banks; Shanghai Branch of Postal Savings Bank of China; Bank of Shanghai; Shanghai Rural Commercial Bank; foreign banks in Shanghai operating RMB business; payment institutions with legal person status in Shanghai; and Shanghai branches of payment institutions that are not based in Shanghai:
In accordance with the Opinions of the People’s Bank of China on Financial Sector Support for the China (Shanghai) Pilot Free Trade Zone, the Administrative Measures for the Payment Services Provided by Non-financial Institutions and other relevant regulations, a notice entitled Implementation Opinions on Cross-border RMB Payment Service by Payment Institutions in Shanghai is issued upon the approval and authorization of the People’s Bank of China (PBC), with an aim to facilitate the cross-border e-commerce, expand the cross-border use of RMB, standardize and promote the cross-border RMB services by payment institutions in Shanghai, and enhance the development of the PFTZ. In case of any emerging questions during the implementation of this notice, please notify the Shanghai Headquarters of the People’s Bank of China (PBS) – Financial Services Department (I).
Annex: Implementation Opinions on Cross-border RMB Payment Service by Payment Institutions in Shanghai
Shanghai Headquarters of the People's Bank of China
February 18, 2014
Annex
Implementation Opinions on Cross-border RMB Payment Service by Payment Institutions in Shanghai
These Implementation Opinions are formulated in accordance with the Opinions of the People’s Bank of China on Financial Sector Support for the China (Shanghai) Pilot Free Trade Zone, the Administrative Measures for the Payment Services Provided by Non-financial Institutions and other relevant regulations, with an aim to facilitate the cross-border e-commerce, expand the cross-border use of RMB, and standardize and promote the cross-border RMB services by payment institutions in Shanghai.
General Principles
1. Supporting the construction of the China (Shanghai) Pilot Free Trade Zone (referred to hereafter as “the PFTZ”), further expand the scope of opening up, and building up replicable and widely applicable experience as soon as possible.
2. Developing real economy in the financial service sector in a consistent manner, striving to meet the need of domestic and foreign markets, and strengthening efforts to promote the cross-border use of RMB.
3. Focusing on risk control in a consistent manner and developing cross-border RMB payment services in an active, progressive and stable manner.
II. Eligible Entities
The following entities are eligible to provide cross-border RMB payment service:
Payment institutions which are registered in Shanghai and possess the Online Payment Service License, including payment institutions registered in the PFTZ and those registered outside the PFTZ but within Shanghai;
Shanghai branches of the payment institutions registered outside Shanghai which possess the Online Payment Service License (Institutions aforementioned are referred to hereafter as “payment institutions”).
The branches set up in the PFTZ by payment institutions registered outside Shanghai shall submit a report to the PBS (or PBC Shanghai Branch) as required by the Administrative Measures for the Payment Services Provided by Non-financial Institutions and other relevant regulations.
III. Eligibility Criteria
Eligible entities shall:
1. Be legally authorized to provide payment services, including online payment services;
2. Develop robust internal control systems and risk management measures for the operation of cross-border RMB payment business;
3. Possess adequate infrastructure and facilities, including technological support for online cross-border RMB payment business operation;
4. Develop specific mechanisms and measures for anti-money laundering, counter-terrorist financing and anti-tax evasion in the operation of cross-border RMB business;
5. Be in business in compliance with laws and regulations since the acquisition of the Payment Service License, possess strong risk-control capability, and engage in no severe violation of rules and laws in the last two years;
6. Meet other requirements stipulated by PBC.
IV. Required Filing Documents
Payment institutions eligible to provide cross-border RMB payment services shall provide the following filing documents to theAnchor PBS (or PBC Shanghai Branch) within 7 days as of the launch of the services:
1. Filing reports;
2. A copy of Payment Service License;
3. Details about the procedures of the cross-border RMB payment business operation;
4. Details about the internal control schemes and risk management measures for the operation of cross-border RMB payment services, including those concerning payment, technology support and anti-money laundering;
5. Business cooperation agreements signed with reserve banks;
6. Declaration of authenticity of the submitted documents.
V. The Scope of Business
Payment institutions are authorized to provide payment services through internet for payers and payees both at home and abroad, and make RMB transfers according to the actual need by non-FTAs. Cross-border RMB payment services include both outbound payment from China and inbound payment to China. Payment netting is prohibited.
Payment institutions are prohibited to provide cross-border RMB payment services for the following transactions or entities:
1. Those involving commodities or services without actual transaction request;
2. Those involving trade in commodities or services that fails to meet China’s import and export management regulations;
3. Enterprises which are not qualified to operate import and export business under the item of tangible goods trade;
4. Enterprises whose import and export settlement of tangible goods trade is identified by the six relevant ministries and committees under the State Council, including PBC, as requiring special attention and supervision;
5. The object of transaction under the item of trade in services involving goods with no market-recognized consideration, or other intangible goods with ambiguous pricing scheme or potential risks;
6. Transactions under the item of capital;
7. Business projects or operations which might bring harm to the country, social security and public interests of the society;
8. Business projects prohibited or not permitted by relevant laws and regulations, including rules and regulations stipulated by PBC and the State Administration of Foreign Exchange.
VI. The Management of Reserves
The payment institutions’ management of the reserves of cross-border RMB clients shall be subject to the Measures for the Custody of the Reserves of Payment Institutions' Clients and other relevant supervision requirements of PBC for the clients’ reserves.
Payment institutions shall effectively identify domestic and cross-border RMB payment services by adding new business types and other measures, and report information in this respect according to relevant requirements of Anchorthe PBS (or PBC Shanghai Branch).
VII. Risk Management
1. Before submitting an application to reserve banks for providing cross-border RMB payment services, payment institutions shall sign the Cooperative Agreement on Handling Cross-border RMB Payment Business, including but not limited to the following clauses:
(1) Payment institutions shall open a specialized cross-border RMB account within the designated reserve account system so as to use the reserves separately without occupying or misappropriating the client's reserves in any form;
(2) Payment institutions shall establish and implement a sound identity recognition mechanism, avoid providing cross-border RMB payment services for transactions without a real trade background, and keep all the proof of the authenticity of the trade for inspection;
(3) Payment institutions shall establish a monitoring model targeting suspicious transactions such as those involving large sum and split operations, and include relevant clients in the focus list for inspection. Where a transaction is determined as abnormal after inspection, the payment institution concerned shall stop providing payment services for the relevant client;
(4) Payment institutions shall agree with reserve banks on the transaction details, including the information on transactions, logistics and funds, and submit in a timely manner these details to reserve banks. Reserve banks shall inspect whether the details are complete and meet the requirements;
(5) After finishing the cross-border RMB payment transactions for the payment institutions, reserve banks shall report to the RMB cross-border receipt and payment information management system in an accurate, complete and timely manner, and shall process relevant information for corresponding international payment statistics reporting in accordance with the requirements of the PBS (or PBC Shanghai Branch); and
(6) Payment institutions and reserve banks shall specify the approaches to handle errors, disputes and accidents as well as measures to guarantee the clients' rights and interests; identify risks and responsibilities; and clearly state the termination of the agreement and liability for breach of agreement.
2. Payment institutions shall inspect the authenticity of the trade based on the information available on the transaction, logistics and funds, and avoid providing cross-border RMB payment services for transactions without a real trade background.
3. Payment institutions shall select the right transaction type according to the real situation of the trade, correctly record the transaction information, ensure that the information is complete, authentic and traceable, and keep all the proof of the authenticity of the trade for inspection and verification.
4. Payment institutions shall establish and implement a sound identity recognition mechanism. Payment institutions shall adopt a real-name system and access verification system for contractual merchants; inspect whether the commodities and services provided by such merchants and their terms of service comply with relevant laws and regulations; and check their background, status and credibility. Payment institutions shall record the information of their clients, including the name, gender, nationality, occupation, address, contact information as well as the type, number and validity period of their effective identity documents. They shall also verify the authenticity of such basic information as the name, gender and the type and number of effective IDs.
5. Payment institutions shall strictly follow the requirements of PBC on the limit of cross-border RMB payment services.
6. Payment institutions shall include clients dealing with suspicious transactions such as those involving large sum and split operations in the focus list for inspection. Where a transaction is determined as abnormal after inspection, the payment institution concerned shall stop providing payment services for the relevant client;
7. After finishing the cross-border RMB payment transactions for the payment institutions, reserve banks shall report to the RMB cross-border receipt and payment information management system in an accurate, complete and timely manner, and shall process relevant information for corresponding international payment statistics reporting in accordance with the requirements of the PBS (or PBC Shanghai Branch).
8. Payment institutions shall provide cross-border RMB payment services in line with relevant laws and regulations. In case any payment institution is found to have violated relevant laws and regulations, the PBS (or PBC Shanghai Branch) shall take legal action against the institutions concerned.
