New Regulations Ahead: Reporting Obligations for Payment Companies and License Holders

The reporting obligations would apply to these companies immediately upon receipt of a payment company license from the ISA.

Request for Public Feedback

Alongside the publication of the draft for public comment, the ISA invited specific feedback on several proposed obligations expected to impose a regulatory burden on payment companies, particularly those with small- to medium-scale operations. Feedback is requested by October 9, 2024.

Key Points of the Draft

Annual Reports

Payment companies and holders of basic initiation licenses or approvals would be required to submit annual reports by March 31 each year, covering the following:

• Activity Data Report:
  • Number of customers and data on the scope of activity.
  • Number of payment accounts managed by the company and their balances.
  • Details of the five largest customers, including their activity relative to the company’s total activity.
  • Audited annual financial statements.
• Capital Requirements Report :
  • Credit portfolio.
  • The amount and composition of equity, together with a detailed calculation.
  • Data on the company’s activity according to the capital requirement directive.
• Technological and Information Security Measures Report:
  • An auditor’s opinion based on an annual audit plan in accordance with the information security directive.
  • A risk assessment, including a list of business processes, associated risks, and risk mitigation measures.
• Corporate Governance Report:
  • Updated details of senior officers, the organizational structure, and company holdings.
• Compliance and Risk Management Report:
  • The annual report of the compliance officer and the updated risk map.
• Outsourcing Report
  • New outsourcing arrangements.

Quarterly Reports

• Activity Data Report:
  • The number of customers and data on the scope of activity.
  • The number of payment accounts managed by the payment company, their balances as of the report submission date, and changes during the reporting period.
  • The number of payment accounts accessed to provide initiation services, the number of initiation instructions executed, and their total value.
  • Characteristics of the five largest customers and their activity as a percentage of the company’s total activity.
  • Total interest accrued from holding customer funds and total interest paid to customers, including details of future interest payments and their funding sources, as well as the average and range of interest rates paid during the reporting period.
  • For payment companies providing credit services, details of credit activity, including total credit provided during the reporting period, the credit balance at the end of the period, unused credit limits, and the average credit transaction amount, among other data.
  • For payment companies providing currency exchange services, ATM services, or other regulated financial activities, the scope of those activities, expressed both in value and as a percentage of the company’s total payment services, together with the revenue generated. For currency exchange services, the types of currencies held must also be reported.
• Equity, Insurance, and Other Securities:
  • Credit portfolio and its calculation method.
  • The amount and composition of equity, together with a detailed calculation, including primary capital, total equity, additional capital, and a breakdown of equity by tier.
  • Data on the company’s activity under the capital requirement directive, categorized by payment service type and activity multiplier.
  • Payment companies providing credit services or interest-bearing services, as well as those with significant activity (over ILS 100 million annually, or over ILS 150 million for account management services), would be required to submit quarterly reports on equity, insurance, or other securities. These reports would be based on reviewed quarterly financial reports, which would also need to be submitted.
• Assets in Which Customer Funds Are Held:
  • Balance of assets as of the last day of the reporting period, categorized by asset type, quantity, and currency.
  • Details of the fund custodians with which the payment company has agreements, the scope of assets held with each custodian, and the company’s accounts with them.

Semi-Annual Reports

The draft would require semi-annual reporting on abuse, including the number of payment orders executed in connection with such abuse, their relative share of payment orders, and their financial value.

Immediate Reports

The draft would also require immediate reporting in the following circumstances:

• Events specified in Section 20(a) of the Law.
• Events that materially affect the license holder, its clients, or payment services.
• Changes in contact information or other details provided when submitting the license application.
• Significant changes concerning the license holder’s business or senior officers.
• Actual or highly probable operational or information security failures.

Feedback may be submitted to the ISA until October 9, 2024. The final rules are expected to be published after that.

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