Article

Quebec's proposed money-services industry regulations elicit strong reactions

The Act will require ATM operators to pay licensing fees.

July 25, 2011 by Kim Williams — Reporter, NetWorld Alliance

Legislation currently published for comment in Quebec will require operators, owners and lessees of ATMs, including lessors of a commercial space intended as a location for an ATM, to be licensed by the government and pay related licensing fees.

Opponents of the Act, as it is currently written, believe the fees are exorbitant and will negatively impact smaller businesses and ISOs.

The Money-Services Businesses Act, which was released for comment in June by the Autorité des marchés financiers (the AMF) and is set to go into effect in April 2012, is meant to work as a safeguard against money laundering and tax evasion schemes.

“While the Quebec Money Services Act seeks to reduce the likelihood of money laundering and other crimes, the unintended consequence of its cost-prohibitive licensing fees will force many ISOs out of business and make cash accessibility in Quebec far less convenient,” said Sam M. Ditzion, CEO of Boston-based ATM industry consulting firm Tremont Capital Group.

Additionally, another Act, the federal Proceeds of Crime and Terrorist Financing Act, appears to cover some of the same ground as the Quebec Act, which has many asking how the two Acts will mesh.

"It's a very convoluted Act. We've had several meetings with the AMF, and another item that came out was a requirement to post a $10,000 bond on every device that a company owns in case of fraud," said Curt Binns, executive director of ATMIA Canada. "I received a screen full of e-mails from members immediately asking what was going on."

The ISOs in Canada make up 62 percent of the market, with the remaining 48 percent controlled by six major banks, Binns said. The act does not apply to banks, which are already governed by other specified legislation.

When introducing any changes, whether it's software or hardware related, smaller ISOs feel the pressure in regards to the bottom line because many operate under a slim profit margin to begin with, so imposing additional hefty fees could feasibly put many out of business.

The licensing fee to operate an ATM is $350, and while that initial fee may not seem excessive, the costs associated with getting all employees that handle the ATM security checked and certified, as the Act requires, can add up quickly.

For example, if a gas station has an ATM on premises and is responsible for keeping the machine supplied with cash, every employee must complete a criminal background check and "must be of good moral character and show the integrity needed to carry on their activities and perform their functions."

"It's going to be cost-prohibitive to keep an ATM on premises for many businesses," Binns said.

Overlapping regulatory bodies?
 
Binns said that when the legislation passed in December, 2010, the government was not aware of the Interac Association, a not-for-profit member association that is responsible for the development and operations of the Inter-Member Network (IMN), a national payment network that allows Canadians to access their money through ATMs and POS terminals across Canada.

"Interac writes regulations, and any ATMIA operator has to abide by those regulations, so that is another fee," Binns said. "Interac already has very stringent rules on new and existing entrants into the market. This Act is a duplication."

Interac sets standards and requirements for both devices and cards, and everyone connected to the IMN must meet those requirements or face any number of sanctions depending upon the severity of the issue.

"The Act is the Quebec government's response to perceived concerns with respect to money-services businesses in general that aren't under any type of government regulation already," said Caroline Hubberstey, director, public and government affairs at Acxsys Corporation/Interac Association. "A number of businesses are subject to licensing issues in states and provinces."

Hubberstey said the discussion regarding the fees is ongoing and the numbers are not set in stone yet, and Interac is in discussions with the AMF regarding overlap on compliance issues. 

"They have certainly looked at our rule structure to try to avoid duplication of what is already required under our rules, and we continue to talk. We're trying to ensure as much synergy as possible," Hubberstey said.

For more information on this topic, visit our regulatory issues research center.

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ATM Industry Association (ATMIA)

The ATM Industry Association, founded in 1997, is a global non-profit trade association with over 10,500 members in 65 countries. The membership base covers the full range of this worldwide industry comprising over 2.2 million installed ATMs.

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