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Small Payment Institution in Poland – new requirements
From 29 September 2023 to 1 January 2024 and until 29 March 2024, new rules regarding the requirements for Small Payment Institutions (SPI) licenses come into force in Poland. These changes significantly amend the Polish Payment Services Act, introducing stricter rules for small payment organizations. The updated rules concern:
- The registration process for Small Payment Institutions now includes newly defined formal requirements.
- Reporting obligations of the Small Payment Institution.
The new process of registration of Small Payment Institutions: What new documents are required?
The procedure for a Polish company to register as a Small Payment Institution (to obtain an SPI license in Poland) has undergone significant changes. Now, when applying for an SPI license, the applicant must submit the following documents together with the application:
- The list of payment services that the Small Payment Institution intends to provide, including the presentation of these services in the form of a graphic diagram with a description of these services and the indication of the types of services listed in the Polish Payment Services Act to which these services belong;
- Description of organizational solutions, which allow:
a) calculation of the total monthly amount and payment transactions,
b) fulfillment of obligations related to anti-money laundering and counter-terrorism financing as per the Polish AML Act. - Business activity program and financial plan covering a full 12-month period of SPI’s operations, taking into account the transaction value limit requirement;
- Risk management procedures to which SPI may be exposed;
- Description of any business activity other than providing payment services;
- Description of the method for safeguarding clients’ monetary funds.
Strategic business plan and financial forecast for a 12-month period of operation of a Small Payment Institution (SPI), taking into account the transaction value limit
Pursuant to Article 117h(2)(1) of the Polish Payment Services Act, a small payment institution must have a business program and a financial plan for the first 12 months of its operation.
The program should ensure that the SPI’s average payment transactions during the previous 12 months do not exceed the equivalent of EUR 1,500,000. It is important to have a well-drafted business plan that is correct from a formal, factual, and accounting point of view.
Formal correctness refers to the completeness of essential elements and the layout of the content according to minimum standards. Substantive correctness is primarily the accuracy of the data and assumptions made, as well as their plausibility.
This means that the initial data should correspond to the actual state of affairs, and the assumed values. Should align with the rational, probable scenario of the company’s development in the given market and macroeconomic conditions.
Accuracy in accounting involves the correct, orderly, and error-free presentation of financial statements. That show input data, output data, and the indicators and measures resulting from the compilation of these data.
1. Strategic assumptions. Identify the fundamental assumptions that drive strategic direction.
2. Marketing plan covering:
- Characterisation of the services provided.
- Characterization of the target customer group.
- Analysis of services offered by competing providers.
- Pricing strategy.
- Description of the proposed distribution and promotion channels.
3. Operational plan, including information on:
- Capital expenditures and sources of financing.
- Sources of funding for operations.
- Compliance with legal and supervisory requirements.
- Payment services outsourcing policy specifying contractual rights and obligations.
- Use of technology, including IT system architecture, security features, transaction monitoring, data flows, software, and overall data and system security.
- Information flows between parties involved in payments and the flow of funds between accounts, indicating the sequence of services.
- An organizational and management plan including organizational structure, authority of bodies and managers, labor policies. Also internal regulations relating to corporate governance, internal control, accounting, and auditing.
4. A work schedule indicating the planned timeframes for achieving the key business milestones and strategic objectives set out in the business plan.
5. A financial plan includes:
- Revenues, expenses, profits and losses.
- Capital expenditures and needs.
- Sources of funding for operations.
- Cash flow, balance sheet and financial evaluation.
- Evaluation based on financial plan approvals and performance measurement.
These integrated elements contribute to a well-designed and detailed framework for SPI’s operations and financial success.
Description of organizational solutions
Pursuant to Article 117h(1)(1) of the Polish Payment Services Act, a small payment institution is entitled to carry out activities provided that it has organizational arrangements that enable it to:
- Calculating the total monthly amount of payment transactions.
- Meeting obligations related to the prevention of money laundering and terrorist financing, as per the prevailing legislation.
These measures must involve the establishment of a secure and comprehensive record, either written or electronic, for each individual transaction.
This record should include the transaction amount and all relevant details crucial for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) obligations, supported by necessary documentation.
Furthermore, these organizational solutions should streamline the processing of compiled data, enabling the instantaneous generation of summaries.
These summaries are designed to not only support the activities of the Small Payment Institution (SPI) but also enhance the supervisory efforts of the Polish Financial Supervision Authority.
Risk management procedures to which SPI may be exposed
The Small Payment Institution must maintain a current procedure for managing the risks it might encounter. This procedure should specifically outline and elaborate on the principles of:
- Risk identification;
- Risk analysis;
- Risk response planning;
- Risk monitoring and control.
Description of the method for safeguarding clients’ monetary funds
In accordance with Article 117o of the Polish Payment Services Act, the Small Payment Institution is required to safeguard funds received from users, which includes funds acquired through agents or other providers for the execution of payment transactions.
This obligation is governed by the stipulations outlined in Articles 78 and 80 of the Polish Payment Services Act, as well as the regulations implemented on the foundation of Article 79 of the Act. (Regulation of the Minister of Finance of 13 August 2012 on the categories of assets and the maximum proportion of cash invested by national payment institutions)
Summary
Starting September 29, 2023, until January 1, 2024, and March 29, 2024, Poland introduced new regulations for Small Payment Institutions (SPI). These changes, impacting the Polish Payment Services Act, bring stricter guidelines for SPIs, focusing on the registration process, reporting obligations, and document requirements for acquiring an SPI license.
The revised registration process requires additional documentation. When applying for an SPI license, applicants must submit a detailed list of payment services to be provided, an organizational description, a business activity program, and a financial plan covering a 12-month period. This plan should take into account the EUR 1,500,000 limit on the average total amount of payment transactions as set out in Article 117h(2)(1).
In summary, the new regulations emphasize comprehensive documentation, strategic planning, and adherence to financial limits for SPIs, aiming to enhance transparency, risk management, and client fund protection.
Reporting obligations
The recent amendments to the Polish AML Payment Services Act introduce new reporting requirements for Small Payment Institutions (SPIs).
Under these updates, SPIs must now provide the Polish Financial Supervision Authority (KNF) with their IBAN number and a copy of the bank account agreement.
Furthermore, effective March 29, 2023, SPIs must establish a dedicated bank account exclusively for services facilitating cash withdrawals from a payment account and all associated operations.
In addition, the pre-existing reporting obligations of SPIs, specifically concerning the quantity and value of rendered payment services. Must be itemized according to each type of payment service offered.
This modification aims to create a more detailed and specific reporting structure.
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