European Bank for Reconstruction and Development



ConsultantSupport with the Regulation of Mobile and Digital Banking in KazakhstanTerms of ReferenceBackgroundMobile and digital banking is growing at a remarkable speed, with branchless banking schemes sprouting across the world. The distribution of affordable equipment makes it possible to offer a range of financial services even without a conventional bank account and card, because the mobile phone or tablet can serve as a virtual bank card and store information related to customers and financial institutions. Undoubtedly, this presents significant potential for financial inclusion as financial services are provided in otherwise unbanked locations. Moreover, the recently launched five-year programme for “Digital Kazakhstan” is looking to provide ample support to address the challenge of large distances and improve competitiveness of Kazakhstan’s economy and quality of life through the progressive development of the digital ecosystem. This programme also includes the development of financial technologies, non-cash payments and electronic commerce, as well as progressive regulations that create a vibrant environment to promote greater inclusion and innovation.Given that the number of internet users in Kazakhstan has increased remarkably recently thanks to a large number of modern telecom infrastructure investments, this presents a solid infrastructure basis for the development of mobile banking schemes. Notably, however, mobile and digital banking products create uncertainty about the appropriate regulatory response to this newly emerging service.Against this background, the Astana Financial Services Authority (the “AFSA”) – the regulatory authority for the financial activities of the Astana International Financial Centre (the “AIFC”) – is looking to develop regulation aimed at regulating mobile and digital banking activities. The Constitutional Statute of Kazakhstan on the AIFC entitles the AFSA to develop banking services, financial technologies and innovations in the country. In addition, as a new driver of economic and financial growth not only for Kazakhstan, but also for the region, the AIFC seeks to become a centre of excellence, providing high quality services to facilitate regional economic growth.To that end, on 18 March 2019, the AFSA sent the Request Letter to the LTT requesting our assistance with the regulatory framework for mobile and digital banking. It is therefore proposed to initiate a technical assistance project with the objective of assisting the AFSA with such regulation (the “Project”). EBRD seeks to retain an international legal law firm (the “Consultant”) highly experienced in payments, mobile and digital banking and open banking regulation in the United Kingdom (the “UK”) to support the EBRD in carrying out the tasks foreseen under this Project.Objective of the assignment and scope of workThe general objective of the assignment for the Consultant is to support the EBRD in assisting the AFSA with drafting a regulation for mobile and digital banking activities. In order to do this, the Consultant shall undertake the tasks set forth below.Develop stand-alone rules on mobile and digital banking with the necessary amendments to the existing AIFC regulations and rules (specifically, the Financial Services Framework Regulations, the General Rules, the Banking Business Prudential Rules, the Conduct of Business Rules and the AFSA Glossary, all of which will be provided in English) to incorporate provisions related to the regulation of mobile and digital banking (the “Mobile and Digital Banking Framework”), which will cover the following:Defining the regulated activities that can be undertaken by a mobile and digital banking institution (including, for example, accepting deposits, providing loans, maintaining payment accounts, placing or withdrawal of cash on/from payment accounts, execution of payment transactions and remittances).Specifying the regulatory requirements for undertaking the digital banking business (either through a full-scope authorisation or through the simplified regulatory regime, depending on the scale of business, risks posed and other parameters).Introducing the open banking regime, analogous to the UK model, to enable authorised or registered payment institutions to get access to individual entrepreneurs’ and SMEs’ account information with their informed consent, in order to offer new products and services such as credit reports and scoring, financial dashboards and mobile contactless payment systems. Establishing the conduct of business and prudential requirements (including consumer protection and anti-money laundering measures). The provisions included in the Mobile and Digital Banking Framework shall be based on discussions with the AFSA (such discussions to be organised by the AFSA and EBRD and conducted by way of a videoconference or similar), taking into account the operational, commercial and technological needs of mobile and digital banking providers, as well as the solutions implemented mainly in the UK, and other jurisdictions. Agree the principles with respect to each of the above issues with the Working Group established by the AFSA and/or EBRD prior to drafting the contents of the proposed Mobile and Digital Banking Framework.Present the contents of the Mobile and Digital Banking Framework before EBRD, the AFSA and the Working Group, explaining the rationale behind the adopted solutions, answering all questions that may be raised and provide additional information which may be required. Make itself available for calls and actively participate and clarify findings (no more than during four calls), and propose enhancements and modifications of the proposed legal solutions necessary to accomplish desirable effects.For the avoidance of doubt, the communication with the AFSA and the Working Group will be conducted in English and translation services will be provided by EBRD or the AFSA, if necessary and will be conducted by telephone or other remote communication method (or at the offices of the Consultant). Moreover, the Consultant is not expected to travel. 3.Implementation arrangementsThe expected maximum duration of the assignment is ten (10) months. The Consultant will be supervised and report directly to the Operation Leader at EBRD. The Consultant will be required to update the Operation Leader and the Project Team on a regular basis on the Project’s progress. The EBRD will facilitate access by the Consultant to local stakeholders and will endeavour to provide the Consultant with any relevant information and/or documents that are not otherwise publicly available. The AFSA will be consulted during the course of this project, since its support is essential for future implementation of any recommendations.The Consultant is responsible for providing own office space and equipment.4.Deliverables and timingList of deliverables expected to be produced by the Consultant:Prepare the roadmap (the “Roadmap”) for the Mobile and Digital Banking Framework based on a call with the AFSA and the AFSA Internal Policy on Legislation Development within 2 (two) weeks from the call (2.2);Prepare the draft Policy Paper (the “Policy Paper”) on Mobile and Digital Banking Framework and provide it to the Operation Leader within 3 (three) weeks from receiving the confirmation of agreement to the Roadmap from the AFSA (2.1);Present the draft Policy Paper to the AFSA and the Working Group within 2 (two) weeks from the receipt of the Operation Leader’s comments on the first draft Policy Paper (2.1);Prepare the first draft of the Mobile Digital Banking Framework and provide it to the Operation Leader within 6 (six) weeks from receiving the approval of the Policy Paper from the AFSA (2.1);Present the Mobile and Digital Banking Framework to the AFSA and the Working Group within 5 (five) weeks from the receipt of the Operation Leader’s comments on the Framework (2.3); and Provide clarifications/further information to the recommendations, as requested by the AFSA, during approximately 12 (twelve) weeks from the date on which the recommendations were first presented to it, which may be extended with the agreement of the Consultant, EBRD and the AFSA, provided, however, that the maximum duration of the project shall not exceed ten (10) months (2.4). The Consultant shall receive payment in instalments based on deliverables and satisfactory completion of the above tasks.All written deliverables shall be in English language. Deliverables shall be provided in paper and electronic form. No deliverable will be considered as final before being approved by the Operation Leaders as being of an acceptable quality. ................
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