Skip to content

Bank of Canada Announces Supervisory Framework for Retail Payments Activities Act

By Kevin Landry and Colton Smith

The Bank of Canada (“BoC”) has announced the supervisory framework (the “Framework”) it will use to oversee payment service providers under the Retail Payments Activities Act.

The Retail Payments Activities Act was enacted by the federal government in June 2021 with the objective of regulating retail payment providers in Canada. See our previous update about it here.

The Role of the Bank of Canada

Under the Retail Payments Activities Act, the BoC has been provided a supervisory authority over payment service providers performing retail payment activities. The BoC’s objectives pursuant to the legislation are to (a) supervise payment service providers to determine their compliance with the Retail Payments Activities Act (b) promote the adoption by payment service providers of policies and procedures intended to ensure compliance, and (c) monitor and evaluate developments and issues in the world of retail payment activities.

How the Bank of Canada’s Supervisory Framework is Outlined

The Framework focuses on three activities: (1) registration, (2) risk monitoring, and (3) enforcement. Supervisory expectations will be informed by the Retail Payments Activities Act, its regulations, and additional guidance that is expected to be published by the BoC to help payment services providers understand their obligations.

(1) Registration

Certain individuals or entities will be required to register with the BoC by submitting an application along with a registration fee. Information regarding the BoC’s approach to fees can be found here.

Under the Framework, the criteria for registration are:

Under the geographic scope criteria, an individual or entity must either have a place of business in Canada or perform retail payment activities for an end user in Canada and direct retail payment activities at individuals or entities that are in Canada.

Individuals and entities excluded from registration include banks and authorized foreign banks (under the Bank Act), credit unions, insurance companies, trust and loan companies, provincially regulated loan companies, payment service providers agents and mandataries and Payments Canada. Transactions involving automatic teller machines and internal transactions between affiliated entities are also excluded activities under the Retail Payments Activities Act.

The BoC is currently developing a web application allowing payment service providers to register, pay fees, update information, and comply with legislated reporting requirements. Registration decisions will be posted on the BoC website, including those where registration is refused or revoked and the reasons why.

Applicant information of individuals and entities who meet the criteria for registration will be shared with the Department of Finance Canada to conduct a national security review and with Financial Transaction and Reports Analysis Centre of Canada (FINTRAC).

Applicants will be responsible for responding to requests for information during the applications process as well as keeping their information up to date. Once registered, payment service providers are required to comply with the Retail Payments Activities Act and pay an annual assessment fee.

(2) Risk Monitoring

Under the Retail Payments Activities Act, payment service providers must establish, implement and maintain an operational risk management and incident response framework. Additionally, payment service providers have an obligation to implement certain measures to safeguard end-user funds, if applicable.

The BoC will monitor and assess registered payment service providers performance of the above noted obligations. To do so, payment service providers will be required to submit annual reports, significant change or new activity reports, and incident reports. The BoC will use these reports, along with responses to requests submitted to payment service providers, to assess a payment service providers compliance. Assessment may include, desk reviews, on-site visits, or a special audit, each being more onerous than the last.

(3) Enforcement

The BoC will use a variety of tools to address non-compliance with the Retail Payments Activities Act. These include:

  • A compliance agreement with a payment service provider to rectify non-compliance;
  • A notice of violation accompanied with a monetary penalty;
  • A notice of violation accompanied with an offer to enter into a compliance agreement (which would cut the monetary penalty in half);
  • A compliance order, ordering a payment service provider to stop an action, refrain from taking an action, or to remedy the situation.

The BoC may also apply for a court order requiring a payment service provider to: 1) stop an action that violates the Retail Payments Activities Act, 2) comply with a provision of the Retail Payments Activities Act, or 3) comply with the terms of a compliance order. If a payment service provider disagrees with a notice of refusal of registration, notice of intent to revoke registration, a notice of violation or a notice of default, the payment service provider may appeal the decision to the Governor. If the Governor upholds the decision, a payment service provider may then appeal to the Federal court.

Anticipated Developments

The BoC notes that it may update the supervisor framework before or after the Retail Payments Activities Act comes into force in order to respond to regulations published by the Department of Finance Canada, changes in the retail payments sector, and to respond to lessons learned through the implementation of the Framework. Draft regulations and further guidance are expected to be published by the Department of Finance Canada in 2023.


This update is intended for general information only. If you have questions about the above, please contact the author(s) to discuss your needs for specific legal advice relating to the particular circumstances of your situation.

Click here to subscribe to Stewart McKelvey Thought Leadership

SHARE

Archive

Search Archive


Search
Generic filters

 
 

Change to Ontario Employment Standards: IT Consultants and Business Consultants Excluded from ESA

January 19, 2023

Mark Tector and Ben Currie Effective January 1, 2023, amendments to Ontario’s Employment Standards Act, 2000 (“ESA”) took effect, excluding “business consultants” and “information technology consultants” from the application of the ESA. This is a…

Read More

Land Use Planning in Prince Edward Island – The Year in Review

January 13, 2023

By Perlene Morrison, K.C. and Curtis Doyle Once again, the time has come to review the year that was and to chart the course for the year ahead. For municipalities and planning professionals in Prince…

Read More

Trends in Employment Law: A look forward in 2023

January 13, 2023

By Grant Machum ICD.D, Sean Kelly & Ben Currie As the window for “Happy New Year” wishes winds down, our Labour and Employment Group has compiled an overview of emerging trends and issues in workplace…

Read More

Regulations and other considerations: further impacts of the Prohibition of Residential Property by Non-Canadians Act

January 6, 2023

Wednesday’s Thought Leadership piece from our Immigration Group detailed the impacts of recent Federal legislation limiting housing purchases by non-Canadians on Foreign Nationals, international students and temporary and permanent residents. Today, lawyers from our Real…

Read More

Prohibition on the Purchase of Residential Property by Non-Canadians

January 4, 2023

By Brendan Sheridan Residential housing prices in Canada have been a major area of concern for many Canadians who have been looking to purchase a home in recent years. While the market for residential homes…

Read More

Statutory Snapshot: 2022 Legislative Updates In Corporate Law And Privacy Law

December 21, 2022

By Levi Parsche As 2022 winds to a close, it’s a good time to review some of the legislative changes that have impacted Atlantic Canada in the last year — and consider what’s ahead for…

Read More

Bank of Canada Announces Supervisory Framework for Retail Payments Activities Act

December 16, 2022

By Kevin Landry and Colton Smith The Bank of Canada (“BoC”) has announced the supervisory framework (the “Framework”) it will use to oversee payment service providers under the Retail Payments Activities Act. The Retail Payments Activities…

Read More

The Winds of Change (Part 6): Place your bids – Crown lands soon to be available for wind energy projects

December 15, 2022

By John Samms, Stuart Wallace and Dave Randell On December 14, 2022, the Newfoundland and Labrador Department of Industry, Energy and Technology announced the launch of a Crown land call for bids for wind energy…

Read More

Beyond the Border: A Year End Immigration Wrap-Up

December 13, 2022

We are pleased to present Beyond the Border: A Year End Immigration Wrap-Up. Compiled by lawyers from our Immigration team, this 2022 update covers topics including a look back at the end of pandemic restrictions…

Read More

Update: New trust reporting and disclosure requirements under the Income Tax Act

November 29, 2022

Note: this is an update to a previously posted Thought Leadership piece from November 2020 to reflect the delayed coming into force of these proposed changes, as well as additional information that has become available. …

Read More

Search Archive


Search
Generic filters

Scroll To Top