The Bank of Ghana is the sole statutory governmental body that regulates banking business in Ghana. The condition precedent for Bank of Ghana licence for operation as a financial institution is first and foremost the company must be registered with the Registrar-General Department.[1] External Companies, though regulated under the Companies Act, Act 179, have different requirements just as a company whose object is to engage in Banking Support Services and not stricto sensu banking business. The burden of this research is to find out how an external company can provide Banking Support Services in Ghana and whether or not it needs Bank of Ghana licence to operate.
EXTERNAL COMPANY
According to the Companies Act, Act 179, an external company “is a body corporate formed outside Ghana which, at or subsequently to, the commencement of this Act has an established place of business in Ghana.”[2] The law goes ahead to define “established place of business” as a “branch, management, share, transfer, or registration office, factory, mine, or any other fixed place of business…”[3] In essence, an external company is a body corporate formed outside Ghana but with a fixed place of business in Ghana.[4]
In order to do business in Ghana, the external company must register with the Registrar of Companies. The documents to be delivered to the Registrar are as follows;[5]
- A certified copy of the regulations, memorandum and articles of association of the external company, parent company.
- A statement in duplicate in a prescribed form giving information on the company as follows;
- Its name
- Nature of its business
- The present forenames and surnames and former forenames or surname and address and business occupation of person(s) authorised to manage the business of the company in Ghana;
- Where the company has shares, the number and nominal value of its authorised and issued shares stating the paid and unpaid shares
- The address of its registered or principal office in the country of its incorporation
- The address of its principal place of business in Ghana and postal address
- The name and address of the authorised person to accept service of process and other documents on its behalf
- The particulars and copies of the charges on the property of the company in Ghana acquired by the external company.
The Registrar upon receipt of the above documents shall register the documents in the register of external companies and publish the particulars contained in the statement in the Ghana Gazette.[6]
EXTERNAL COMPANY PROVIDING BANKING SUPPORT SERVICES
As earlier stated the registration of the external company with the Registrar of Companies is the condition precedent for application for Bank of Ghana licence. However, for the purposes of this research the banking support services to be provided by the external company are the following;
- ATM services
- Cash Management Services
- Master/Visa/Prepaid Card Services
- Money Transfer Agent
- Mobile Location Services
- Issuance of Local cards with Banks brands
- Service other Bank Customers.
From the above services listed, it is apparent that the external company will not be engaging in the strict banking services. For an external company to provide the above listed banking services do not require Bank of Ghana licence to operate. The operation of the external company with banking support services are solely predicated on contract or agency relationship with banks or Regulated Financial Institutions (RFIs). This is duly captured under the Banking (Amendment) Act, 2007 (Act 738) where a bank can outsource any of its functions to any other with approval from the Bank of Ghana.[7] The outsourcing is regulated by the Bank of Ghana Agent Guidelines (July, 2015) which requires the principal bank to apply for and obtain written authorization before commencing the agency business.[8] The guidelines provides that such approval may be sought from the Banking Supervision Department of the Bank of Ghana except where the agency is e-money approval is obtained from Banking Department from the Bank of Ghana.[9]
In addition, the guidelines provide that the agency contract or agreement must include at minimum the following;
- Define the rights and responsibilities of both parties;
- Specify that the principal is wholly responsible and liable for all actions or omissions of agents providing services on its behalf, even if said actions have not been authorised in the contract, as long as they relate to agency business or matters connected therewith;
- Set the scope of work to be performed by the agent and specify actions that are not permissible;
- Specify that e-money agents shall operate against pre-funded accounts only;
- Set the agent and master-agent remuneration and any revenue sharing structure, including all incentives and bonuses;
- State that the outsourced services are subject to regulatory review by the Bank of Ghana;
- State that an agent will not perform management functions, make management decisions, or act or appear to act in a capacity equivalent to that of a member of management or an employee of the principal;
- State that an agent or master-agent or employees of an agent or master-agent have no claim to be treated as equals to employees of the principal;
- Specify that the agent must ensure safe-keeping of all relevant records not already captured on the platform and ensure that such records are, at regular pre-specified intervals, moved to the principal who will then ensure safe-keeping of these records for at least six years;
- State that records and data relating to a principal’s customers and their transactions that are collected or generated by the agent or master-agent whether from the customers, the principal or from other sources, are the property of the principal and must be kept confidential;
- State that the agent or master-agent is further bound to complete confidentiality regarding all customers and their transactions;
- Establish the full and unrestricted access of the Bank of Ghana to all internal systems, information, data and documents of the agent or master-agent relating to the agency business;
- State that an agent or master-agent may not subcontract any or part of its contractual obligations to a third party;
- Establish a protocol for changing the terms of the service contract, stipulations for default and termination of the contract as well as for dispute resolution.
From the above an external company duly registered with the Registrar-General’s Department as an external company in Ghana may enter into agency relationship to provide banking support save that such agency relationship is authorised by the Bank of Ghana.
MONEY TRANSFER AGENT
Notwithstanding the above, the Bank of Ghana Guidelines for E-Money Issuers in Ghana (July, 2015) stipulates that an entity, other than a financial institution, who wish to issue e-money is required to be licenced by the Bank of Ghana as a Dedicated E-Money Issuer (EMI).[10] The criteria for the application by such entity are as follows;[11]
- The person is established and incorporated as a limited liability company under the Companies Code, 1963 (Act 179);
- The person shall include in their Articles of Incorporation language to the effect that e-money owed to their customers are purely held in trust and will not be encumbered in the case of insolvency or liquidation of the DEMI.
- The significant owners and ownership structure are suitable;
- The board of directors adequately reflects the balance of interests represented by the Dedicated EMI, in particular that the company will hold funds in trust on behalf of e-money holders;
- The person engages only in the business of e-money and other activities related or incidental to the business of e-money, such as money transfer/remittance. A person engaged in activities not related or incidental to e-money but wishing to be authorised to conduct e-money services must do so through a separate entity duly incorporated exclusively for this purpose, which requires a licence under these Guidelines as a Dedicated EMI;
- The person is financially sound;
- The individuals proposed to manage or control the Dedicated EMI are fit and proper and have the necessary experience and qualifications to perform their functions;
- Any other requirement that the Bank of Ghana may prescribe.
In addition to the above, the application by an entity for licence to operate as a Dedicated EMI shall include the following:[12]
- An application shall set out the nature and functionality of the proposed e-money operations that will be made available to e-money holders and shall contain sufficient information to enable the Bank of Ghana to evaluate the requirements.
- A list of the current or proposed significant owners of the applicant and the percentages of shares owned or to be owned by each;
- Biographical information on the board of directors and executive officers;
- Proposed e-money services to be offered;
- A business plan covering at a minimum the subsequent three years and indicating the intended initial geographical coverage of the service, including agent coverage, as well as its expansion over time;
- Identifying information for any and all bank accounts to be used in the conduct of e-money operations;
Further, e-money issuer, thus a financial institution or an entity may outsource to a third party to provide services relating to e-money business.[13] These services include;
- Technology platform
- Internal Audit and Risk Management functions
- Recruitment and registration of customers;
- Selection and/or training of agents;
- Management of agents, e.g. monitoring, branding or liquidity management;
- Sales and marketing;
- Provision and/or maintenance of equipment.
It follows that where an external company wants to engage in e-money business as Dedicated EMI, it must obtain licence from the Bank of Ghana.
CONCLUSION
In conclusion, an external company that wants to provide banking services including money transfer services may partner with a Bank or financial institution as an agent of the bank or financial service with written authorization from the Bank of Ghana. However, where an external company’s sole objective is to provide e-money services, it must be licenced by the Bank of Ghana as a Dedicated EMI. It is imperative to note that the external company licenced as Dedicated EMI will be restricted to the provision of e-money issuing services and other services incidental to it.
With the foregoing, it sound to suggest that since the external company wants to provide a myriad of services which includes money transfer agent services it will be appropriate to enter into agency agreement with bank(s) to provide such service without the need for Bank of Ghana licence.
[1] Banking Act, 2004 (Act 673) as amended s. 3.
[2] Companies Act, 1963 (Act 179) s. 302 (2)
[3] S. 302(3) n 1
[4] Philip E. Bondzi-Simpson, Company Law in Ghana, (2nd edn, Avant Associates Ltd 2009) p.33
[5] S. 303(1) n 1
[6] S. 303(3) n 1
[7] Banking Act, 2004 (Act 673) as amended s. 40(8).
[8] Bank of Ghana Agent Guidelines (2015) para 6(2).
[9] Para 6(3) n 8
[10] Bank of Ghana Guidelines for E-Money Issuers in Ghana (2015) para 7.
[11] Para 7(4) n 10
[12] Para 7(2)-(3) n 10
[13] Para 18 n 10
