On 14 February 2023, the German Federal Financial Supervisory Authority (Bundesanstalt für Fi-nanzdienstleistungsaufsicht – “BaFin”) updated its Guidance Notes (Merkblatt) on the Payment Ser-vices Supervision Act (Zahlungsdiensteaufsichtsgesetz – “ZAG”). Hereby, BaFin replaces the previ-ously valid Guidance Notes from 2017, which had been issued in view of PSD2’s implementation. We have taken a look at the changes that have been made and classify them below.
In addition to editorial amendments regarding the previous Guidance Notes, BaFin took the oppor-tunity at various points to disclose changes in its administrative practice.
Expansion of the definition of payment accounts
According to the amendments to the Guidance Notes, it is clarified that the term payment account from Section 1 (17) ZAG also includes e-money accounts, provided that these can be approached (ansteuern) by third parties. It is noteworthy that BaFin mentions a company by name in a Guidance Notes (outside the BaFin Journal). However, it remains unclear what BaFin means by “approach” – especially since it only mentions this term in quotation marks in its Guidance Notes.
Expansion of the definition of payment instrument
The clarification that non-personalised procedures agreed between the payment service provider and the payment service user can also constitute a payment instrument is to be welcomed. BaFin has thus supplemented the Guidance Notes with the ECJ’s DenizBank-decision, bringing it into line with developments in European case law. The background to this was, among other things, an ambiguity in the definition of ‘payment instrument’: It is not clear from the ZAG definition whether the word ‘personalized’ refers only to the payment instrument directly following it or if it should also include the term ‘procedure’. The different language versions of PSD2 are ambiguous here and differ significantly in their wording. The ECJ clarified this wording in its DenizBank-decision, which has now also been reflected in BaFin’s ZAG Guidance Notes.
Explanatory notes on money remittance business
Much attention is currently being paid to the particularly extensive amendments to the paragraphs on Money Remittance Business pursuant to Section 1 (1) Sentence 2 No. 6 ZAG.
– Delineation issues from the technical service provider and re-location
In particular, BaFin deals here in more detail with delineation issues between the Money Remittance Business and technical services in the meaning of Section 2 (1) No. 9 ZAG, which do not quali-fy as payment services. The former Guidance Notes in terms of technical service providers already addressed that a service provider to whom a power of attorney for account access is granted can no longer make use of the (technical service provider) exemption. BaFin previously stated: “The technical service provider must ensure that it is not, even not only temporarily, granted a power of attorney for an account through which the funds to be transferred can be routed” because this would qualify the service provider having possession of the funds and the exemption for technical service providers does not apply. With the revision of the Guidance Notes, this part was deleted from the comments on the exception for technical service providers and new criteria for an account power of attorney were defined in the comments on the Money Remittance Business, which does not pre-vent the qualification as a technical service provider.
This re-location of the commentary in the Guidance Notes (away from the exemption provisions and towards the payment service facts) is to be welcomed. It is not explained in detail why BaFin is making this change. Nevertheless, it only makes sense to discuss the scope of application of an exemption if a (regulated) payment service is provided.
However, BaFin seems to overlook the fact that powers of attorney can also be of great im-portance for payment initiation services and account information services. For these “new” pay-ment services, the Money Remittance Business (unlike for the “old” payment services) does not function as a catch-all provision. This means that the comments made under the Money Remit-tance Business cannot (without further ado) be applied to payment initiation services and account information services. It would have been very welcome to see explanations on powers of attorney over accounts and similar arrangements in relation to payment initiation services and account in-formation services.
– Access to Accounts / Account Powers of Attorney – Teleological Reduction
With regard to the existence of powers of attorney over accounts, BaFin concretizes its determination as of when possession of customer funds has been obtained. In this respect, BaFin now states that the linking of the service provider to a third-party payment account of the payer or the third party – e.g. by means of a power of attorney – can constitute a regulated Money Remittance Busi-ness pursuant to Section 1 (1) Sentence 2 No. 6 ZAG. Whether, in the case of such a connection, it is actually a money remittance transaction depends on the type and scope of the power of attorney and must be determined on a case-by-case basis.
BaFin states that it would like to teleologically reduce the definition of a financial transfer transaction (i.e. restrict its applicability in certain cases). This teleological reduction is intended to exclude the facts of the financial transfer transaction if an account power of attorney is used that meets the five criteria defined by BaFin. However, if there is only the “theoretical” possibility of money laundering or terrorist financing relevance, as well as the case of collusive, abusive cooperation between the principal and the agent, the obligation to obtain a license remains.
– Exclusion of transport authorization in the E-BICS payment procedure
BaFin classifies the transport authorization type “T” in the E-BICS payment procedure as “regularly unproblematic in terms of payment service law” and excludes it from the facts of the financial transfer transaction. This is only a forwarding, which is in line with its other assessment.
Adoption of the EBA guidelines in administrative practice
At various points in the Guidance Notes, there are statements that BaFin will adopt certain guide-lines of the European Banking Authority (EBA Guidelines) in its future administrative practice. This statement appears to be unfortunate, since BaFin, according to its own statements elsewhere, automatically incorporates EBA Guidelines and Q&As into its administrative practice, unless BaFin expressly declares that it will not (fully) adopt a guideline.
By now explicitly stating that it will adopt certain EBA guidelines, BaFin is leaving unanswered whether it intends to give up the previous practice in general or whether this is just a special case. This may cause uncertainty in the market. It is also noteworthy that BaFin previously announced that it would incorporate the affected EBA Guidelines (which have already been known since 24 February 2022 and have been valid since 1 June 2022) into its administrative practice and, if neces-sary, make adjustments to its administrative practice (see our Article here). It can be assumed that it has now done so with the integration into its ZAG Guidance Notes and that the explicit statement in the ZAG Guidance Notes can also be understood as the announcement of the end of the adjustment period.
Limited networks exemption
One of the cases where BaFin announces the explicit adoption of the EBA Guidelines is under the section on limited networks. These are for example platforms that offer a limited number of prod-ucts or traders or are limited in their geographic reach and thus create a uniform presence on the market. According to Section 2 (1) No. 10 ZAG, these are not considered payment services.
BaFin adheres to its previously announced administrative practice and states that operators of an Internet marketplace may still not invoke the exemption of Section 2 (1) No. 10 ZAG (for BaFin’s previous announcement, see our Article here). As in its announcement last year, BaFin does not provide any explanation for this re-exception in the revised ZAG Guidance Notes.
Missing but desirable changes
Many concepts of the ZAG remain difficult to grasp (such as the understanding of processing in the context of acquisition business). A more specific definition of the group exemption with regard to so-called payment factories would also have been welcome. In this regard, BaFin has been in agreement with industry associations for several years, the disclosure of which in the revised ZAG Guidance Notes seems necessary (see our Article here).
Conclusion
Overall, the changes made are to be welcomed. Even if ambiguities remain in certain individual cases, the adaptations of the Guidance Notes to the current legal situation create more legal certainty. With a view to future updates of the Guidance Notes on the ZAG, it is to be hoped that the points raised will be clarified.
With the kind assistance of Manuel Traub, research assistant.
