Publication date: December 12, 2023
The following fictional case scenarios illustrate the obligations of registered payment service providers (PSPs) to declare their agents and mandataries. They also describe the situations when agents of exempted PSPs must register with the Bank of Canada.
The examples provided are not a replacement for the Criteria for registering payment service providers supervisory policy, but rather they are meant to complement the policy. They should be read in conjunction with the policy.
These examples build off each other. We recommend reading them in the order they appear.
Case scenario: Registered PSPs must declare their agents or mandataries under the RPAA
Company A is a registered PSP specializing in international money transfer services. Agent 123 Inc. is a retailer that does not directly provide any retail payment services itself but is contracted to provide payment services on behalf of Company A through its stores. Consumers who wish to make or receive an international money transfer through Company A can transfer or receive cash at one of Agent 123 Inc.’s retail locations.
Company A’s software records these inflows and outflows of cash and corresponding information on the sending and receiving parties. Though the end users interact with Agent 123 Inc. to make or receive payments, they are aware that they are in fact using Company A’s service.
Agent 123 Inc. is acting as an agent of Company A by providing retail payment activities on its behalf. This means that, when submitting its application for registration, Company A must identify Agent 123 Inc. as its agent and provide all required information as set out in the Retail Payment Activities Act (RPAA) and associated regulations.
As a registered PSP, Company A is also liable for any violations committed by Agent 123 Inc. when it acts on behalf of Company A.
Since Agent 123 Inc. is not directly performing retail payment services on its own behalf and instead is an agent of Company A, Agent 123 Inc. does not need to register with the Bank of Canada.
Case scenario: Registered PSPs must declare all their agents or mandataries under the RPAA
In addition to its relationship with Agent 123 Inc., Company A also has relationships with other agents to provide payment services on its behalf, including Agent ABC Inc.
Agent ABC Inc. has multiple locations that perform payment services, while Agent 123 has only a single location.
A registered PSP is responsible for all agents or mandataries that perform retail payment activities on its behalf. Therefore, when submitting its application for registration, Company A must identify both Agent 123 Inc. and Agent ABC Inc. (including its multiple locations), and provide all required information as set out in the RPAA and associated regulations.
Company A is also liable for any violations committed by these agents when they act on its behalf.
Agent ABC Inc. does not need to register because it does not directly perform additional retail payment activities but instead is only acting on behalf of Company A.
Case scenario: Agents or mandataries of registered PSPs who also carry on their own businesses must register with the Bank
In addition to acting as an agent for Company A, Agent ABC Inc. offers other retail payment services directly to its customers on its own behalf. These services are separate from those that it offers as an agent to Company A.
- The RPAA does not apply to an agent of a registered PSP if the agent performs retail payment activities only on behalf of the registered PSP.
- The RPAA does apply to the retail payment activities an agent provides on its own behalf.
In this scenario, Agent ABC Inc. is not solely an agent of Company A, and the RPAA applies to the retail payment activities that Agent ABC Inc. provides on its own behalf. Company A is still responsible for Agent ABC Inc.’s compliance with the RPAA in respect to the retail payment activities that Agent ABC Inc. performs on Company A’s behalf. However, Company A would not be responsible for Agent ABC Inc.’s compliance with the RPAA in relation to Agent ABC Inc.’s own retail payment activities.
Since Agent ABC Inc. is performing its own retail payment activities and is not solely an agent of Company A, it meets the definition of a PSP. Agent ABC Inc. needs to assess whether it meets the other registration criteria and therefore must register with the Bank of Canada.
Case scenario: An agent or mandatory of an excluded PSP must register as a PSP
Bank B is a bank that falls under section 9 of the RPAA and therefore does not need to register with the Bank of Canada.
Bank B contracts with a retailer, Mandatary DEF, to provide Bank B’s customers with access to payment services at Mandatary DEF’s retail locations. Bank B’s end users interact with Mandatary DEF, but they are aware that they are obtaining payment services from Bank B.
Section 10 of the RPAA states that the RPAA does not apply to an agent or mandatary of a registered PSP. However, agents and mandataries of PSPs that are themselves excluded from the RPAA still need to register with the Bank of Canada if they meet the definition of a PSP.
In this example, Mandatary DEF is acting as an agent of Bank B. Bank B is excluded from the RPAA and does not need to register with the Bank of Canada. However, Mandatary DEF meets the definition of a PSP and needs to assess whether it meets the other registration criteria and therefore must register with the Bank of Canada.
Disclaimer
The case scenarios are illustrative examples reflecting the Bank of Canada’s interpretation of certain requirements set out in the Retail Payment Activities Act (RPAA). All names, facts and descriptions in these scenarios are entirely fictitious and do not reflect any real or actual individuals or entities.
Additionally, they do not represent legal advice and should not be used as a replacement for seeking such advice if an individual or entity is unsure about whether they are required to register with the Bank of Canada as a payment service provider. The nature of the products and services offered by each individual or entity will vary, as will the circumstances around offering these products and services. Therefore, any individual or entity that may be subject to the RPAA should assess their own situation on a case-by-case basis according to their own facts and circumstances. Any entity or individual that may be subject to the RPAA is ultimately responsible for determining whether they are required to register with the Bank.
The examples provided are not a replacement for the Criteria for registering payment service providers supervisory policy, but rather they are meant to complement the policy. They should be read in conjunction with the policy.