Legal Aspects of “White-Label” Banking in the European, Polish and German Law

Grabowski, Michał

doi:10.3390/jrfm14060280

Cited by 3 publications

(2 citation statements)

References 3 publications

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“…These wallets were initially based on cooperation models with Mobile Network Operators [5]; currently, they largely use Payment Initiation Services and account information services as the basis for providing services to customers and have been covered by the PSD2 regulation [6]. Another possibility of using Account Information Services and Payment Initiation Services are the so-called Banking as a Service models, also called white-label banking [7,8].…”

Section: Methodsmentioning

confidence: 99%

Account Information and Payment Initiation Services and the Related AML Obligations in the Law of the European Union

Grabowski

2024

FinTech

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The Second Payment Services Directive introduced new services into the European Union legal system—Payment Initiation and Account Information Services. These services are based on payment accounts already opened and maintained for customers by the Account Servicing Payment Service Provider (bank, payment institution, electronic money institution). The Account Services Payment Service provider performs AML/CFT verification of the account holder and applies customer due diligence measures to the account holder, such as identifying beneficial owners, obtaining information on the purpose and intended nature of the business relationship, and ongoing monitoring of the business relationship. Payment Initiation and Account Information services are therefore provided to a previously verified client and based on the payment account currently maintained for him. European Union law does not clearly specify whether a Third-Party Service Provider offering Payment Initiation or Account Information Services is obliged to re-apply financial security measures to customers. The aim of this article was to perform a legal analysis of the regulations and soft law acts in force in the European Union and to answer the question. The purposive (teleological) and linguistic–logical (grammatical) methods of interpretation of regulations were used for the analysis. The structure of the legal system of the European Union as a civil law (code law) system was taken into account. This article shows that in the current legal situation, there is no doubt that Third-Party Service Providers are obliged entities in terms of AML/CFT law and are obliged to apply the AML/CFT to customers using Payment Initiation and Account Information services. However, the degree to which customer due diligence measures have to be applied varies depending on the adopted model of providing Payment Initiation and Account Information services. Third-Party Service Providers will be obliged to apply financial security measures in cases where the relationship between the customer and the service providers will have a continuing character. In the case of occasional provision of services, when the transaction value does not exceed a certain threshold, the supplier may only perform simplified customer verification. In particular, this applies to Payment Initiation service models, where the Payment Initiation Service Provider works for merchants, enabling them to accept payments for goods and services sold. In such a model, the Service Provider has a continuous relationship with the merchant but only performs an occasional transaction for the user. The analysis also allowed for the conclusion that European Union law, including that in the draft phase, does not regulate in a sufficiently precise manner when a given model of Account Services and Payment Initiation Services may be treated as based on an occasional transaction. This made it possible to formulate a de lege ferenda request to include this issue in the proposal for an EU Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.

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Section: Methodsmentioning

confidence: 99%

Account Information and Payment Initiation Services and the Related AML Obligations in the Law of the European Union

Grabowski

2024

FinTech

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“…Currently, vIBAN services are not explicitly regulated. They are considered to be a service which falls under the larger category of Banking-as-a-Service or White Label Banking (Grabowski 2021). There is also limited research related to this topic.…”

Section: Introductionmentioning

confidence: 99%

Virtual IBAN as a Service in the Law of the European Union and Poland

Grabowski¹

2022

JRFM

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The purpose of this paper is to present the two existing virtual account models functioning in the European Union, examine their legal validity and identify the legal challenges related to the functioning of these models. The first model, Mass Payment Accounts, which is related to virtual accounts rather than to virtual IBANs, is the model where the licensed financial institution only provides a business payment (settlement) account, with technical subaccounts, to one of their business clients. The functionality of the subaccounts is limited to reflect and distinguish the incoming payments. The second and more complex model is the vIBAN solution, where the licensed payment institution provides, to another licensed financial institution, indirect access to local payment schemes (hereinafter referred to as “vIBAN”). To confirm the legal validity and identify the potential risks of vIBAN services, EU law was analysed with some insights from Polish law. The reason for introducing vIBAN services is the difficulty for certain payment service providers to participate in so-called designated payment systems. Designated payment systems are usually the most widespread local payment systems. The reason for the different treatment of these designated systems is banking systemic risk, understood as a situation where a default by a system participant may result in a default by other participants. Consequently, even if a given payment service provider can obtain its own IBAN number, there is often no possibility for it to participate in designated payment schemes. Bearing in mind the different rules in the case of designated payment systems, the legality of vIBAN services in the EU law is justified by the principle of free movement of services, the principle of equal access to payment schemes and the obligation of the credit institutions to provide banking and non-banking participants with credit institution payment account services on an objective, non-discriminatory and proportionate basis. However, there are various challenges related to the functioning of vIBAN services, such as the overlapping of certain AML/CFT obligations, enforcement of administrative and court seizures, AML-related blocking of vIBANs and consistency of money transfer sender data with the Fund Transfer Regulation. The most pressing challenges requiring prompt regulation on the European level are related to the applicable deposit protection scheme, as well as to specific Member States’ administrative restrictions, which can cause difficulties in offering vIBAN services to business entities.

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Cyber Security and Cloud Outsourcing of Payments

Ciet

Verdier

2022

SSRN Journal

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Legal Aspects of “White-Label” Banking in the European, Polish and German Law

Cited by 3 publications

References 3 publications

Account Information and Payment Initiation Services and the Related AML Obligations in the Law of the European Union

Account Information and Payment Initiation Services and the Related AML Obligations in the Law of the European Union

Virtual IBAN as a Service in the Law of the European Union and Poland

Cyber Security and Cloud Outsourcing of Payments

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