Updated Notes On Regulating Branchless Banking Russia
January 2010
This update of CGAP’s 2008 “Notes on Regulation of Branchless Banking in Russia”1 incorporates research conducted by CGAP in January 2010 regarding relevant legal and policy changes through the end of 2009.2 It is one of 11 country updates produced by CGAP as a part of the G-20 Access through Innovation (ATI) Sub-Group’s workplan.3

There are currently no laws, regulations, or policies defining e-money or specifically governing e-money and the transfer of or payment by e-money. However, as noted, regulations on e-money are expected, perhaps as soon as the coming year. The Ministry of Finance and Russian Central Bank are leading the initiative to craft e-money regulation for the vibrant industry that has grown up in this space. Some argue that nonbank entities should be prohibited from issuing e-money. Yet others urge consideration of a special regulatory status that would permit both bank-issued and qualified nonbank-issued on e-money, along the lines permitted in the European Union’s new E-Money Directive.23 Another question, as yet not finally determined, is whether e-money regulation will be incorporated into the planned law on the national payment system (which is already far along in development) or adopted later as free-standing regulation.

In the meantime, e-money issuers argue that e-money may be issued over the Internet and by mobile service operators, relying on a variety of laws. For example, WebMoney, which describes the transfer of e-money as an “agreement on property rights transfer by means of digital units,” has invoked a 1929 Russian decree as the legal basis for issuing e-money. Others have argued that a bank may issue e-money only as a “virtual” card pursuant to a 2004 Central Bank instruction that permits a bank “to issue a bank prepaid card (or other card) in electronic form.”24

1 The 2008 “Notes on Regulation of Branchless Banking in Russia” was based on an analysis of existing legislation and regulations relevant to branchless banking approaches and on the CGAP research team’s insights from interviews with a range of stakeholders. The original diagnostic assessment was carried out under the auspices of CGAP’s Technology Program,  which is co-funded by the Bill & Melinda Gates Foundation. The Russian diagnostic assessment was one of seven that provided evidence for CGAP & DFID’s Focus Note 43, Lyman, Timothy, Mark Pickens, and David Porteous. 2008. “Regulating Transformational Branchless Banking: Mobile Phones and Other Technology to Increase Access to Finance.”  Washington, D.C.: CGAP & DFID, January.”
2 The research involved a review of new laws and regulations and interviews with Mikhail Mamuta (Russian Microfinance Centre), Oleg Ivanov (vice-president of the Association of Regional Banks of Russia, expert of the State Duma of Russia), and Victor Dostov (chairman, Russian Electronic Money Association).
3 In September 2009, the G-20 called for the establishment of a Financial Inclusion Experts Group with two subgroups, one of which is the ATI Sub-Group. CGAP is a member of an experts group assembled to assist the ATI Sub-Group in its work, which includes updating information previously published on the policy and regulatory framework for branchless
banking in various developing countries.

23 It is in part to explain the benefits of the latter approach and debate risk mitigation, that nonbank e-money issuers have formed the “Electronic Money Association” described in Section 2.3, to engage in dialogue with the Central Bank and other interested policy makers and regulators.
24 Regulation No. 266-P, “On the Issuance of Bank Cards and on Transactions Carried Out with Payment Cards,” 24 December 2004, as amended through 21 September 2006.