Will payment factories be shut down?
The new year isn't yet one month old and already panic is spreading among German corporates that operate a payment factory and/or payment transactions centrally through a shared service centre or their treasury. Since word got around about the German Federal Financial Supervisory Authority [BaFin]'s new Guidelines – 'Information on the German Payment Services Supervision Act [ZAG]' from late November 2017, which overturn the group privilege for payments 'into the group' or 'out of the group', some consultants, lawyers and the specialist press have started to talk about the end of the payment factory.
That the group privilege for the corresponding payments has been overturned is correct. This means that a law has been formally violated if payment factories continue to be operated.
To assess and clearly define the matter, however, it should be noted that the goal of simplifying the setup of payment and collection factories is stated explicitly in Recital 17 Directive (EU) 2015/2366 (PSD II), which the German ZAG 2018 is based on. ('The Single Euro Payments Area (SEPA) has facilitated the creation of Union-wide ‘payment factories’ and ‘collection factories’, allowing for the centralisation of payment transactions of the same group. In that respect payment transactions between a parent undertaking and its subsidiary or between subsidiaries of the same parent undertaking provided by a payment service provider belonging to the same group should be excluded from the scope of this Directive. The collection of payment orders on behalf of a group by a parent undertaking or its subsidiary for onward transmission to a payment service provider should not be considered to be a payment service for the purposes of this Directive').
With organisations having now pointed out this discrepancy between the objective of the underlying EU directive and the German regulator's interpretation of its transposition into national law, the BaFin wishes to discuss with ESMA the aim of PSD II, i.e. particularly whether the exemption for the 'collection of payment orders on behalf of a group by a parent undertaking or its subsidiary for onward transmission to a payment service provider' concerns the role of a payment factory. Therefore, it can be expected that the BaFin – as it has done with other regulations that impact on corporates (e.g. EMIR) – will initially pursue 'regulation with a sense of proportion'. Until the open items are clarified, operating a payment factory is not expected to be classified as a violation of the BaFin guideline or the EU's payment transactions guideline.
In short, we are left with legal uncertainty. It is anyone's guess as to what extent this will lead to a sanction risk. Or to the payment factory being shut down. But that then would be suicide through fear of dying.
Source: KPMG Corporate Treasury News, Edition 75, January 2018
Author: Carsten Jäkel, Partner, Finance Advisory, firstname.lastname@example.org
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