Banxico Publishes Rules Regarding Indirect Participation Services

On March 23, 2022, the Central Bank of Mexico (Banxico) published in the Federal Register (DOF) the following: (i) RULES 1/2022, addressed to the participants of the Interbank Electronic Payments System and others interested in acting with such character, regarding the modifications to Rules 14/2017 (expanded SPEI, indirect participation in the SPEI and Miscellaneous Issues).

In general terms, Rules 1/2022 regulates the indirect participation of financial institutions in the Interbank Electronic Payments System (SPEI), considering that in the last few years, the number of transfers processed through such systems has increased. Likewise, Banxico considered it relevant to establish new measures in favor of the customers who use SPEI, as well as its participants so that such systems continue to be efficient, through operational continuity schemes and improvement of the Digital Collection platform (“CoDi”) and finally, strengthening remittance processing.

Rules 1/2022 define Indirect Participation as: those services that a Participant agrees to provide to its Customer so that the latter acquires the character of Indirect Participant and that such Participant carries out: (a) the reception and processing of Transfer Orders and CoDi Transfer Orders addressed to Indirect Beneficiary Customers, and (b), where applicable, the dispatch and clearing of Transfer Orders generated at the request of such Customer on the instruction of its Indirect Issuing Customer, as well as CoDi Transfer Orders generated as a result of the acceptance, by the respective Indirect Issuing Customers, of Collection Messages, in addition to the settlement, reconciliation and other services related to such orders. The services that the Central Bank of Mexico, in its capacity as Participant, provides to its Customers shall not be included in this definition.

In other words, indirect participation services are those services that a SPEI Participant renders to its Customers, which by virtue of such Indirect Participation Services agreement acquire the character of Indirect Customers, so that they:

1. carry out the receipt and processing of Transfer Orders and CoDi Transfer Orders to Indirect Beneficiary Customers;

2. perform sending and clearing of Transfer Orders generated at the Customer’s request by instruction of its Indirect Issuer Customers and CoDi Transfer Orders, in addition to the settlement, reconciliation and other services related to such orders.

It is important to mention that these services may only be provided to Customers who:

1. are financial institutions regulated and supervised by a national financial authority (v.gr. National Banking and Securities Commission); and

2. who are duly empowered and authorized to provide services of sending or receiving transfers of funds on a regular and professional basis to their respective customers or users.

In addition to the above, Banxico excluded certain financial institutions to which indirect participation services may be provided, which are: (i) entities that are credit institutions considered systemically important in terms of the General Provisions applicable to credit institutions, as well as institutions for the deposit of securities, clearing houses and central counterparties of securities and derivatives; and (ii) those entities that exceed the volume limits or amount of transfers of funds or Indirect Customer Accounts.

According to Rules 1/2022, indirect participation services may only be provided by those interested parties who obtain authorization from Banxico to operate as clearing houses for transfers of indirect participation funds in terms of the general provisions issued by Banxico. It should be noted that there is no deadline that orders Banxico to publish these provisions. However, it grants 180 days for all interested parties to obtain authorization after the issuance of the provisions.

In addition to the foregoing, the participant of the SPEI interested party who intends to provide Indirect Participation Services must, with at least 10 working days prior to beginning the provision of such services, submit to Banxico, through the Directorate of Operation and Continuity of Payment Systems and Market Infrastructures, an express statement by its representative stating that the board of directors or equivalent body is aware of the intention to provide such services. However, the interested party must declare that he has the operational and technical capacity to provide the Indirect Participation Services. 

Considering the above, having operational capacity implies:

1. Implementing all connection schemes to the SPEI in contingency;

2. Maintaining connection with the SPEI at the applicable times and with the availability indexes established in Appendix AN of the Manual;

3. Processing the operations subject to the Indirect Participation Services intended to be provided.

On the other hand, having technical and operational capacity entails the following:

1. Having connections to the SPEI and its Customer that can handle the volume of processing that is expected when providing the services;

2. Keeping encrypted, at all times, communications, and the communication channel with their Customers;

3. Monitoring the information that comes from their Customers and identifying the alteration of such information made by third parties or by the Indirect Participant itself on the information that comes from the Indirect Customer;

4. Maintaining and verifying compliance with vulnerability identification policies in computing and telecommunications infrastructure, measurement and management of operational risks, and;

5. Maintaining the appropriate infrastructure to ensure the traceability of information during the operational process corresponding to transfers of funds.

Likewise, the interested party must enter into an Indirect Participation Services Agreement with the customer that has the minimum content established in Rule 9 Bis 4 of Rules 1/2022, which in general terms must provide: (i) the services, as well as guidelines and characteristics that the Indirect Participant must comply with for the connection to the systems through which it will provide the services; (ii) rights and obligations of the parties; (iii) how the Indirect Participant will credit customer accounts; (iv) minimum number of operators for the proper operation of the services; (v) fees and commissions; (vi) contingency schemes; (vii) payment of compensation for delay, etc. In addition to the foregoing, Participants shall be responsible for verifying compliance with the terms and conditions set forth in such agreement by their Indirect Participants. 

In relation to the entry into force of the obligations for indirect participation, Banxico established Dec. 15, 2022, as the date by which the Participants must comply with the requirements indicated to provide the services of indirect participation. However, this remains unclear, since as noted above, Banxico will have to publish the provisions to obtain authorization as a clearing house for compensation of transfers of funds of indirect participation, which today have not been issued. 

(a) more than one hundred thousand Indirect Customers Accounts corresponding to deposits of cash on demand, electronic payment fund accounts or any other of the financial products set out in Appendix D of the Manual, which they have registered positive balances, at any time, or that have been sent from such accounts, a transfer of funds in the last 12 calendar months; (b) within a maximum period of 12 consecutive calendar months send or receive one million two hundred thousand or more transfers of funds, or (c) en a maximum period of 12 consecutive calendar months send or receive transfers of funds, through the SPEI or any other system, including those between accounts opened in the same Indirect Participant, for an aggregate amount greater than the equivalent of three million six hundred thousand UDIS, calculated according to the value of said unit of account of the úlast calendar day of the calendar month prior to the first month of the twelve-month period for which the calculation of said amount is made.

[2]  It refers to the document called “SPEI’s Operation Manual”, that the Administrator -Banxico- elaborates and makes available to the Participants, to describe the operational processes and the requirements and technical conditions that the Participants need to observe to carry out the actions related to the operation in the SPEI, as well as in terms of the modifications that, where appropriate, the Administrator makes to said document and makes them known to the Participants.