(2022.11.01-ний өдрийн орчуулга)                                 Unofficial translation

LAW OF MONGOLIA

May 31, 2017                                                                                            Ulaanbaatar city

ON NATIONAL PAYMENT SYSTEM

CHAPTER ONE

GENERAL PROVISIONS

Article 1.Purpose of the Law

1.1. This law shall regulate the relations with respect to managing, organizing, regulating and overseeing the national payment system of Mongolia.

Article 2.Legislations on National Payment System

2.1.Legislations on the national payment system consist of the Constitution of Mongolia, the Law on Central Bank /Mongol bank/, this law and other legislative acts enacted in compliance therewith.

2.2.If an international treaty, to which Mongolia is a party, provides otherwise than the law on national payment system, the provisions of the international treaty shall prevail.

Article 3. Scope of the Law

3.1.This law applies to the national payment system of Mongolia and its activities.

3.2.Activities related to provision of payment services by entity within a limited scope are subject to this law.

Article 4.Principles of National Payment System and Its Activities

4.1.The following principles shall apply to the national payment system of Mongolia and its activities:

4.1.1.ensure the integrated national payment system;

4.1.2.ensure stability, continuity, reliability and efficiency of the national payment system;

4.1.3.avoid delaying payment settlement;

4.1.4.ensure payment finalization and non-refundable payment;

4.1.5.manage risks of the national payment system appropriately;

4.1.6.protect the interests of user;

4.1.7.ensure equal and inclusive participation of participants;

4.1.8.ensure the confidentiality and security of the national payment system.

Article 5.Definitions of legal terms

5.1.The following terms used in this law shall be understood as follows:

5.1.1."national payment system" means services related to processing, remittance, transmission and reception of transfers and payment orders made in MNT and foreign currency, activities of payment instruments, payment, clearing and settlement systems, and system operators, participants and third parties providing payment services on their behalf in whole or in part in the territory of Mongolia and their complete combination;

5.1.2."payment system" refers to a complex structure including procedures, rules, technology, software, and payment instruments related to transfer of funds between participants;

5.1.3."payment settlement system" means the infrastructure established and operated by the Bank of Mongolia in order to perform the function of cash and securities payments between participants that are determined by the system and clearing system authorized by the Bank of Mongolia;

5.1.4."clearing system" means the infrastructure with operations, technical technology, and software solutions for calculating results of participants' settlements and exchanging information related to the transfer of funds or securities from one participant to another through the clearing center;

5.1.5."system" means a payment, clearing and settlement system;

5.1.6."operator" means the Bank of Mongolia and a legal entity authorized by the Bank of Mongolia to operate the system;

5.1.7."participant" means an entity that has the right to provide clearing and payment settlement services and send and receive payments directly or indirectly to the system;

5.1.8."direct participant" means a participant who is responsible for payments of an indirect participant on the basis of customer's or its contract;

5.1.9."indirect participant" means a participant who performs payment settlements through a direct participant on the basis of the contract;

5.1.10."customer" means any person receiving services from a payment service provider;

5.1.11."entity authorized to perform centralized commercial settlement" means a legal entity participating in the centralized settlement system, assuming the role of a buyer for each seller of securities and financial instruments, and a seller for each buyer, and an entity who runs activities specified in articles 43 and 44 of the Law on Securities Market;

5.1.12."clearing center" means a legal entity authorized by the Bank of Mongolia that provides clearing services and does not maintain the participant's account;

5.1.13."settlement agent" means a direct participant authorized by the Bank of Mongolia who has maintained their settlement account for the purpose of payment settlement between participants;

5.1.14."payment service provider" means a legal entity authorized by the Bank of Mongolia to provide payment services;

5.1.15."contract agent" means a legal entity that provides payment services based on a contract made with a payment service provider;

5.1.16."payment service" means cash deposit or withdrawal or transfers, payment remittance, issuing and receiving payment instruments, making remittance, issuing electronic money, making electronic fund transfers and other services related to the transfer of funds determined by the Bank of Mongolia;

5.1.17."activities related to the provision of payment services" shall mean a provision of payment service providers with technical technology, professional personnel and other support determined by the Bank of Mongolia and any activities authorized by the Bank of Mongolia;

5.1.18."transfer" means an activity of transferring funds from any person through a payment service provider;

5.1.19."credit transfer" means an activity of transferring funds to the payee's account through the payment service provider as per the instructions of the transmitter;

5.1.20."debit transfer" means a transfer of funds initiated at the payee's request based on the permission granted by the payer to the payment service provider;

5.1.21."electronic fund transfer" means a transfer of funds initiated by a customer to a payment service provider via electronic device;

5.1.22."money remittance" means a service of transferring money authorized by the Bank of Mongolia through a payment service provider without creating an account in the name of the payer or payee;

5.1.23."payment instrument" means tangible and intangible instruments authorized by the Bank of Mongolia, such as payment cards and electronic money for transferring, receiving, and paying cash and funds;

5.1.24."payment card" means a payment instrument enabling cardholders to make payments that meet both or either of the standards of internationally accepted card organizations and the requirements of the Bank of Mongolia;

5.1.25 "e-money" means non-cash payment instrument issued with the approval of the Bank of Mongolia that have the same value as the Mongolian currency-tugrik;

5.1.26."settlement" means a process of recording payments of money and securities made between two or more parties in the account;

5.1.27."settlement account" means the participant's account placed at the Bank of Mongolia, or at an entity authorized to centralize commercial settlement, or a settlement agent used for settlement between participants;

5.1.28."clearing" is a process of transmitting, adjusting and confirming the transfer of money or securities before settlement, which includes the calculation of transaction results and the determination of final settlement amount;

5.1.29."calculation of results" means an activity of determining the closing ratio of the calculation of results, which is the net amount of mutual payment obligations of two or more participants;

5.1.30."closing ratio of calculation of results" means the settlement amount resulting from clearing the amount of payables and receivables between the participants according to the rules of settlement and creating a single net receivable or payable;

5.1.31."settlement of result " means a process of calculating the results of transfers made between participants on that day in one or more specified periods in the relevant account;

5.1.32."calculation of results at the time of termination of duty" means a special type of calculation of results performed by the operator in order to complete the settlement of the participant who is no longer able to perform his/her duties;

5.1.33."calculation of results at the time of transfer of duties" means a calculation of results after termination of the contractual obligations of the parties through mutual calculation and transfer to the new obligor;

5.1.34."calculation of results of multiple parties" means an activity of calculating the results of obligations arising between three or more parties;

5.1.35."payment finalization" means a payment that cannot be refunded under any circumstances;

5.1.36."settlement rules" mean the rules approved by the Bank of Mongolia, which define the basic principles for calculating payment obligations, calculating results, and executing payments.

CHAPTER TWO

POWER AND PARTICIPATION OF THE BANK OF MONGOLIA
IN NATIONAL PAYMENT SYSTEM

Article 6.Powers of the Bank of Mongolia

6.1.The Bank of Mongolia shall manage, regulate and oversee the national payment system and its activities.

6.2.The Bank of Mongolia shall protect the interests of public and consumers and promote a competition in the payment service market while regulating and overseeing the entire national payment system and its components as specified in article 6.1 of this law.
6.3.The Bank of Mongolia shall exercise the following powers in relation to the management and regulation of the national payment system and its activities:

6.3.1.determine the policy of the national payment system;

6.3.2.grant a permit specified in article 10.1 of this law;
6.3.3.approve rules and regulations and make a decision related to the regulation of the national payment system and its activities and introduction of payment services and issuing new payment instruments;
6.3.4.approve the conditions and requirements for activities of the authorized entity and its payment system, and/or  rules, regulations, and instructions issued thereunder, and/or make decisions and oversee the implementation thereof;

6.3.5.perform other activities related to payment, clearing and settlement systems and issuance of  payment instruments.

Article 7.Participation of the Bank of Mongolia

7.1.In order to ensure continuous and reliable operation of the payment system, the Bank of Mongolia may create conditions for the operation of the system, system operator and participant as well.

7.2.If the conditions specified in 7.1 of this Law are formed, the Bank of Mongolia will participate as follows:

7.2.1.establishing, owning, co-owning, operating the system or participating in the system;

7.2.2.acting as an entity authorized to centralize commercial settlements in connection with the open market operations of the Bank of Mongolia;

7.2.3.placing the clearing and settlement accounts of debit and credit transfers sent to the system by operators or participants;

7.2.4.pledging securities used in system activities;

7.2.5.perform the following activities for securities:

7.2.5.a.to digitize the transfer of the name of a holder of tangible securities, to transfer securities into intangible form, and to create the possibility of issuing securities in an intangible form;

7.2.5.b.to keep records of securities transactions;

7.2.5.c.to provide securities custodian services;

7.2.5.g.to deposit securities in electronic or tangible form.

7.3.The Bank of Mongolia may grant payday loans to participants based on collateral.

Article 8.Cooperation

8.1.The Bank of Mongolia may cooperate with the following organizations within the framework of this law:

8.1.1.entity directly or indirectly participating in payment services and their activities;

8.1.2.foreign central bank or other international organization which is responsible for defining and monitoring payment system policies.

8.2.The Bank of Mongolia may enter into a memorandum of understanding with the entity specified in article 8.1 of this law.

Article 9.National Payment System Council

9.1.The Bank of Mongolia will establish a National Payment System Council.

9.2.The National Payment System Council shall be responsible for advising on regulation and oversight of the national payment system, including, but not limited to, setting operational and technical standards and other matters affecting payment services and the clearing and settlement of payments and securities.

9.3.The structure, composition, organization, operating procedures and rules of the National Payment System Council shall be approved by the Bank of Mongolia.

9.4.Representatives of participants may be included in the composition of the council specified in 9.3 of this law, and representatives of the Bank of Mongolia, organizations which is responsible for supervising and regulating financial institutions, and representatives of the central state administration body in charge of finance and budget issues should be included.

CHAPTER THREE

AUTHORIZATION

Article 10.Permit to be issued by the Bank of Mongolia

10.1.The Bank of Mongolia shall grant permits for engagement of the following activities:

10.1.1.payment service;

10.1.2.activities related to the provision of payment services;

10.1.3.system operation;

10.1.4.issuing payment instruments;

10.1.5.acting as a settlement agent;

10.1.6.provision of payment services through contract agents;

10.1.7.receiving outsourcing services;

10.1.8.providing remittance services;

10.1.9.making electronic transfer of funds;

10.1.10.issuing electronic money;

10.1.11.Others specified by the Bank of Mongolia.

/This provision was deemed invalid by the law of June 17, 2022, and will be in effect from January 1, 2023/

10.2.Permits for activities specified in 10.1.4-10.1.10 shall be granted to entity authorized as set out in 10.1.1 of this Law, and permits specified in Section 10.1.7 shall be granted to entity authorized as set out in 10.1.2 and 10.1.3 of this Law.

/In this section, "Articles 10.1.4-10.1.11" were changed to "Articles 10.1.4-10.1.10" by the law dated June 17, 2022, and shall be in effect by January 1, 2023/

10.3.The Bank of Mongolia shall register and maintain records of legal entities that provide audit services that meet the conditions and requirements set by the Bank of Mongolia and conduct audits in operators, participants, payment service providers, and entities authorized to conduct activities related to the provision of payment services.

Article 11.Application for permit

11.1.An applicant for a license to provide payment services and activities related to the provision of payment services shall submit the following documents to the Bank of Mongolia:

11.1.1.state registration certificate and permission issued by the competent authority;

11.1.2.presentation and relevant documents of payment services to be provided;

11.1.3.documents proving the source and origin of the shared funds to be used for the provision of payment services and activities related to the provision of payment services;

11.1.4.documents proving the ability to use systems and resources necessary to provide appropriate, reliable, and stable payment services, and business plans for the first five years of payment services, and/or charter and regulations;

11.1.5.documents for measures to be taken to protect the user's cash assets;

11.1.6.documents regulating management organization and internal control with appropriate governance, risk management, and accounting methods;

11.1.7.documents proving the establishment of an internal control system to combat money laundering and terrorism financing;

11.1.8.organizational structure and organization, if required, any decision to engage contract agents or receive outsourcing services, documents related to participation in the national or international payment system;

11.1.9.information of an entity related to the applicant;

11.1.10.information of a manager of the unit in charge of management and payment services;

11.1.11.receipt of service fee payment;

11.1.12.other information deemed necessary by the Bank of Mongolia.

11.2.The applicant for permission to issue a payment instrument shall prepare and documents specified in the regulations approved by the Bank of Mongolia and submit them to the Bank of Mongolia.

11.3.The applicant for a license to operate the system shall submit the following documents to the Bank of Mongolia:

11.3.1.state registration certificate and permit issued by the competent authority;

11.3.2.introduction and rules of the operating system;

11.3.3.documents proving the source and origin of the shared capital used for system operation;

11.3.4.business plan for the first five years of system operation;

11.3.5.documents regulating management organization and internal control with appropriate governance, risk management, and accounting methods;

11.3.6.organizational structure and organization, if required, any decision to receive outsourcing services, documents related to participation in the national or international payment system;

11.3.7.information technology system and technical specification, and the related following documents:

11.3.7.a.system structure and operation;

11.3.7.b.emergency and continuous and reliable operation plan to be implemented in case of malfunction of the main system;

11.3.7.c.measures to protect against any damage such as information disclosure, misuse, deletion, alteration, theft, or loss of information during the processing and storage of transaction information in the system.

11.3.8.measures and risk analysis to limit and manage the risk to the system due to the participant's inability to make payments promptly or its insolvency;

11.3.9.information of the person related to the applicant;

11.3.10.information on manager of the unit in charge of management and system;

11.3.11.receipt of service fee payment;

11.3.12.other information required by the Bank of Mongolia.

11.4.If documents submitted in accordance with clauses 11.1, 11.2, and 11.3 of this law are deemed to be incomplete or unclear, the Bank of Mongolia has the right to request additional documents, and may request clarifications and inquiries from the relevant authorities on issues related to the applicant, his/her activities, and authorized officials.

Article 12.Requirements for payment service applicants

12.1.Applicants for payment services must meet the following requirements:

12.1.1.Was established in accordance with the laws of Mongolia;

12.1.2.Have ensured the appropriate ratio of equity determined by the Bank of Mongolia;

12.1.3.Have an ability to meet the technical and organizational requirements for providing payment services that have an appropriate internal control and risk management system;

12.1.4.has a system that protects the funds received from the user or other payment service providers from being used for other purposes or combined with the funds of third parties, and has the ability to keep the service provider free from any claims of other obligees in the event of insolvency;

12.1.5.have a five-year strategy and business plan;

12.1.6.have human resources with the necessary knowledge, experience, professional ethics, and professional skills to provide payment services;

12.1.7.ensure the ability to quickly make payments necessary for the transactions permitted in the system and to protect against credit risk;

12.1.8.ensure other conditions deemed necessary by the Bank of Mongolia.

12.2.The Bank of Mongolia shall determine the amount of equity capital and the appropriate ratio of equity capital specified in article 12.1.2 of this law in consideration of the following factors, and shall clearly reflect it in the approval conditions of the person obtaining the approval:

12.2.1.Type of payment service to be provided;

12.2.2.Average payment amount;

12.2.3.Other related factors.

12.3.Additional requirements for entities authorized to engage in activities related to the provision of payment services shall be determined by the procedure approved by the Bank of Mongolia.

Article 13.Requirements for applicants to issue payment instruments

13.1.The Bank of Mongolia shall approve the requirements for applicants to issue payment instruments.

Article 14.Requirements for applicants to operate the system

14.1.The applicant applying for system operation shall meet the following requirements:

14.1.1.Was established in accordance with the laws of Mongolia;

14.1.2.Have ensured the appropriate ratio of own capital and equity determined by the Bank of Mongolia;

14.1.3.Have an ability to meet the technical and organizational requirements for operating a system that have an appropriate internal control and risk management system;

14.1.4.Ensure the unified national payment system, and regular, reliable and efficient operation of the system;

14.1.5.Be capable of not delaying payments, finalizing payments, and ensuring non-refundable payments;

14.1.6.have human resources with the necessary knowledge, experience, professional ethics, and professional skills to operate the system;

14.1.7.provide opportunities for equal participation of participants of their own system;

14.1.8.has a risk management system to control credit, quick payment ability, and settlement risk;

14.1.9.have an emergency and continuous and reliable operation plan to be implemented in the event of a malfunction of the main system;

14.1.10.ensure fulfillment of other conditions deemed necessary by the Bank of Mongolia.

14.2.The Bank of Mongolia shall determine the amount of equity capital and the appropriate ratio of equity capital specified in article 14.1.2 of this law in consideration of the following factors, and shall clearly reflect it in the approval conditions of the person obtaining the approval:

14.2.1.Type of operating system;

14.2.2.Forecast calculation of the amount, and amount of payments to be processed by the system;

14.2.3.Other related factors.

Article 15.Issuance of permits

15.1.The Bank of Mongolia shall grant permission to the applicant to provide payment services, engage in activities related to the provision of payment services, issue payment instruments, and operate the system if such applicant meets the requirements specified in Articles 12, 13 and 14 of this law.

15.2.The issue of whether to issue a permit shall be decided within 60 days after the applicant submits all the documents set forth in this law, and the applicant shall be notified of such decision within three days.

15.3.The total period for deciding whether or not to issue a permit specified in article 15.1 of this law shall not exceed 180 days from the date of the first receipt of a request for a permit.

15.4.Issuance of permission in accordance with article 15.1 of this law is consistent with the purpose of protecting financial stability and public interests.

Article 16.Prohibition of unauthorized activities

16.1. It is prohibited for any person to provide payment services, to engage in activities related to the provision of payment services, to issue payment instruments, or to operate systems specified in 5.1.5 of this law without consent of the Bank of Mongolia.

Article 17.Transfer of permission to others

17.1.Any rights or permits granted under this law shall not be transferred to others in whole or in part in any cases other than the consent of the Bank of Mongolia. Licenses transferred in violation of this law shall be revoked.

17.2.Articles 12, 13, and 14 of this law shall apply to an applicant who submits a request on whole or partial transfer of the permit granted in accordance with this law.

Article 18.Permit conditions and requirements for the license holder

18.1.The Bank of Mongolia shall determine the conditions of approval specified in article 10.1 of this law.

18.2.Managers, employees, contractual representatives of the license holder, or any persons providing outsourcing services must have the necessary knowledge, experience, professional ethics and skills to perform duties of the position or engage such operation.

18.3.A license holder shall regularly fulfill the requirements specified in articles 12, 13, and 14 of this law.

18.4.A license holder shall establish and operate a fund with the purpose of guaranteeing the payment.

18.5.Any relations with respect to the establishment and management of the fund specified in article 18.4 of this law shall be regulated by the procedure approved by the Bank of Mongolia.

Article 19.Suspension and revocation of license

19.1.The Bank of Mongolia shall suspend a license or permit on the following grounds, taking into account the characteristics of the license holder's activities and the nature of the violation:

19.1.1.Has failed to ensure the amount of equity and the appropriate ratio of equity up to 80 percent;

19.1.2.Has failed to fulfill other requirements specified in this law.

19.2.The Bank of Mongolia will cancel the license on the following grounds and announce it to the public:

19.2.1.The license holder has been declared bankrupt or insolvent, or a decision on liquidation has been taken by the competent authority;

19.2.2.It was discovered after obtaining the license that the false or forged documents were prepared;

19.2.3.Has not started to engage in the license activity for more than six months after obtaining the permit from the Bank of Mongolia;

19.2.4 Has failed to ensure the amount of equity and the appropriate ratio of equity specified in the license condition up to 80 percent;

19.2.5.Created false documents when making changes to the amount and structure of the joint stock.

19.3.A license holder has the right to submit a claim to court within 10 days regarding the decision of the Bank of Mongolia to suspend or cancel the license, and such submission of a complaint shall not be grounds for suspending the decision of the Bank of Mongolia.

CHAPTER FOUR

RECEIVING OUTSOURCING SERVICES AND PROVIDING PAYMENT SERVICES THROUGH CONTRACT REPRESENTATIVES

Article 20.Requirements and responsibilities of outsourcing service providers and contract agent

20.1.In the event that a certain part of the operation is performed by a third party /hereinafter referred to as "Outsourcing services", the operator shall sign a contract with a legal entity that meets the requirements set forth in article 14 of this law.

20.2.If the payment service provider has received an outsourcing service for specific part of payment services, it shall enter into a contract with a legal entity that meets the requirements specified in article 12 of this law, or if it is provided through a contract agent, it shall enter into a contract with a legal entity that meets the requirements specified in the procedure approved by the Bank of Mongolia.

20.3.The operator payment service provider shall be responsible for the operations related to the payment system of a legal entity or contract agent providing outsourcing services.

Article 21.Receiving outsourcing services

21.1.Operators, payment service providers, or entity authorized to conduct activities related to the provision of payment services shall receive outsourcing services with the approval of the Bank of Mongolia. When applying for permission to receive outsourcing services, they shall provide information related to the service required by the Bank of Mongolia.

21.2.If the Bank of Mongolia considers that any requests or information specified in article 21.1 of this law will not have impacts on the following activities after reviewing such requests, it will decide whether to grant permission for outsourcing services:

21.2.1.internal control of operators, payment service providers, or entity authorized to engage in activities related to the provision of payment services;

21.2.2.control by the Bank of Mongolia on whether operators, payment service providers, or entity authorized to engage in activities related to the provision of payment services meet the requirements set forth in this law;

21.2.3.confidentiality, security, continuity and reliability of user's information or data.

21.3.In the event that an operator, payment service provider, or person authorized to engage in activities related to the provision of payment services receives outsourcing services for operations of special importance, the Bank of Mongolia shall set the following requirements:

21.3.1.management duties and responsibilities shall not be transferred upon outsourcing services;

21.3.2.it shall not affect obligations or responsibilities of the issuer of payment instruments to customers and their relationship;

21.3.3.operators, payment service providers, or entity authorized to engage in activities related to the provision of payment services shall regularly meet the requirements set forth in this law;

21.3.4.any grounds or conditions for providing payment services, issuing payment instruments or operating the system shall not be changed.

21.4.If any failure or delay significantly affects the conditions of approval, financial indicators of service continuity and reliability of operators, payment service providers or entity authorized to engage in activities related to the provision of payment services, such activity is considered to be of special importance.

Article 22.Provision of payment services through contract agent

22.1.If the payment service provider provides payment services to customers through a contract agent, the required documents must be submitted to the Bank of Mongolia together with the receipt of service fee payment.

22.2.The Bank of Mongolia shall review any documents specified in article 22.1 of this law and decide whether or not to grant permission to provide payment services through contract agents.

22.3.The payment service provider shall register a contract agent at the Bank of Mongolia. The Bank of Mongolia will keep a record of contract agent and inform it to the public.

22.4.The payment service provider is prohibited from providing payment services through contract agent without the permission of the Bank of Mongolia.

22.5.The payment service provider shall be responsible for the payment services provided through the contract agent.

22.6.The payment service provider is obliged to inform the user that the contract agent is providing services on his/her behalf.

CHAPTER FIVE

PAYMENT SYSTEM RULES AND REGULATIONS

Article 23.Establishing Payment System Rules and Regulations

23.1.The operator has rules and regulations for proper system governance, management and operation. The rules shall include the following:

23.1.1.fast payment ability, credit and settlement risk management;

23.1.2.the conditions and time for considering payment orders and settlements as final;

23.1.3.rights and obligations of participants and operators, risk of system operation, proper governance of the company, engagement in system and regulation of measures to be taken in the event of potential situations.

23.2.The rules and regulations specified in 23.1 of this law are consistent with the recommendations, methods, procedures, and rules approved by the Bank of Mongolia in connection with requirements of this law, proper governance, management, and operation of the system.

23.3.The rules and regulations shall become effective after the operator has reviewed the rules specified in 23.1 of this law by the Bank of Mongolia and a registration number is obtained.

Article 24.Amendments to the system and its rules and regulations

24.1.The Bank of Mongolia shall take measures to amend, modify or cancel the system rules and regulations for the following issues:

24.1.1.protect public interests;

24.1.2.protect the interests of participants;

24.1.3.protect the rights of an entity participating in the system;

24.1.4.other issues deemed necessary by the Bank of Mongolia.

24.2.Except as mentioned below, the operator shall not make any amendments or changes to the system or its rules and regulations that may affect its structure, operation, or management:

24.2.1.obtained a written permission from the Bank of Mongolia;

24.2.2.notified a participant 30 days prior to the effectiveness of amendments after obtaining a written permission from the Bank of Mongolia.

24.3.The Bank of Mongolia may give a permit to the operator to make changes to the system in order to protect monetary policy, financial stability, or public interests, and ensure a system security, and this shall not apply to 24.2.2 of this law.

Article 25.Participation in the system

25.1.The system rules and regulations shall ensure equality, non-discrimination and balance of participants.

25.2.In order to protect against the following risks, the operator may not limit the participant's participation in the system beyond the required level:

25.2.1.credit, fast payment ability and system;

25.2.2.payment settlement;

25.2.3.incur losses that could not have been known in advance due to failure of information system or internal control.

CHAPTER SIX

PROTECT CONSUMERS

Article 26.Terms of service and its transparency

26.1.The payment service provider shall present the terms of service and obligations of the parties to consumers clearly when entering into a contract or transaction with customers.

26.2.The following information shall be included in the service conditions specified in 26.1 of this law:

26.2.1.obligations and responsibilities of customer regarding the immediate notification in case any payment instrument, its secret code and account access code is lost, destroyed, misplaced, or used by an unauthorized person, or may be suspected to be known by a third party, or payment service is performed without the user's permission;

26.2.2.measures to receive or confirm notifications from the user that payment services have been performed without the user's permission or may have been performed;

26.2.3.period for execution of the payment made by the user;

26.2.4.restrictions of amount of value or type and frequency of payment services that the user can perform;

26.2.5.payment service fee;

26.2.6.the user's right to stop payment within the scope of the pre-authorized payment service and related regulations;

26.2.7.the user's right to obtain information related to payment services;

26.2.8.regulation of correction in the event of an error and related user rights;

26.2.9.obligations and responsibilities of a payment service provider for the user;

26.2.10.condition for the user to provide any information considered confidential to an authorized third party;

26.2.11.information on potential fees in case of a transfer using an electronic device operated by a person other than the payment instrument issuer.

26.3.If the payment service provider or operator collects a service fee or charges from the user, they shall inform it to public in accordance with article 26.4 of this law.

26.4.Any information related to fees or charges of a payment service provider specified in article 26.3 of this law shall be posted transparently and visibly at the place where the user receives a service.

26.5.Any information of the payment service provider specified in 26.3 of this law should meet the requirements of the Bank of Mongolia.

26.6.If the payment service provider or operator fail to fulfill the requirements specified in article 26.3 of this law, they shall not collect fees or charges from a customer.

26.7.The terms of service shall be simple and clear.

26.8.In the event that the payment service provider changes the conditions for ensuring the confidentiality of the user's account, the user shall be notified in the form and time specified in the regulations approved by the Bank of Mongolia.

Article 27.Services to be provided within limited scope

27.1.A person who meets all or any of the following conditions shall be considered a limited service provider:

27.1.1.The total amount of transactions made during the previous 12 months did not exceed the amount set by the Bank of Mongolia;

27.1.2.The total number of users does not exceed the number set by the Bank of Mongolia.

27.2.In order to protect the interests of consumers, the Bank of Mongolia shall supervise activities of entity providing services within a limited scope.

27.3.The Bank of Mongolia shall determine the requirements for service providers and the procedures for monitoring their activities specified in article 27.1 of this law.

CHAPTER SEVEN

NATIONAL PAYMENT SYSTEM MONITORING

Article 28.Monitoring national payment system and its operation

28.1.The Bank of Mongolia will monitor or exercise control over the national payment system and its operations.

28.2.The Bank of Mongolia shall approve, make decisions and implement any regulations and rules governing the proper governance, management, operations, communications or system relations of payment service providers, payment instruments issuers or entity authorized to engage in payment service activities, and operators.

28.3.The Bank of Mongolia shall have the right to review or monitor activities of payment service providers, payment instrument issuers or entity authorized to engage in payment service activities, and operators within the framework of the implementation of legislations on the national payment system, and to take measures specified in article 44.1 of this law.

28.4.An auditor appointed by the Bank of Mongolia shall conduct an inspection of the Bank of Mongolia.

28.5.If required by the Bank of Mongolia, operators, participants, payment service providers, or entity authorized to engage payment service activities shall be audited by an audit service provider registered with the Bank of Mongolia as specified in article 10.3 of this law.

Article 29.Implementation of the Law on Combating Money Laundering and Terrorist Financing

29.1.Operators, payment service providers, or entity authorized to conduct payment service activities shall comply with the Law on Combating Money Laundering and Terrorist Financing.

29.2.Operators, payment service providers, or entity authorized to conduct payment service activities shall be responsible for the enforcement of the law specified in article 29.1 of this law by contract agents or persons providing outsourcing services.

Article 30.Storage and Protection of Operational Documents Related to License Holder's Payment System

30.1.Operators, payment service providers, or entity authorized to conduct payment service activities shall keep any documents created in the course of activities related to the payment system for at least 15 years from the date of receipt or creation.

30.2.Any documents specified in article 30.1 of this law shall be stored and protected in accordance with the regulations jointly approved by the Bank of Mongolia and relevant government agencies.

Article 31.Obtaining Information

31.1.As required by the Bank of Mongolia and its inspectors or auditors, operators, payment service providers, or entity authorized to conduct payment service activities shall provide documents, account records, reports, balance sheets, financial documents, explanations, references related to their activities or other necessary documents within the specified time.

31.2.Operators, payment service providers, or entity authorized to conduct payment service activities shall be responsible for an accuracy of information specified in article 31.1 of this law.

Article 32.Confidentiality

32.1.The Bank of Mongolia, its official or employees shall not directly or indirectly disclose the confidentiality of information that is known or obtained in the course of performing their duties specified in this law, except for the following:

32.1.1.perform the functions specified in this law;

32.1.2.any condition is generated where it is necessary to ensure the efficiency, reliability, security and financial integrity of the national payment system;

32.1.3.the management of the court or prosecutor's office has made a request, or the prosecutor has approved a request of their management as per the requirements of the anti-corruption or police organization's case registration and investigation, as well as the requirements of intelligence agencies to check information related to money laundering and financing of terrorism;

32.1.4.a court decision has been issued;

32.1.5.fulfill obligations of Mongolia under international agreements.

Article 33.Service Fees and Charges

33.1.The Bank of Mongolia will receive service fees or charges from Operators, payment service providers, or entity authorized to conduct payment service activities. An amount of fees or charges will be determined by the Bank of Mongolia.

33.2.The Bank of Mongolia shall approve the conditions and maximum rates of fees or charges related to activities of the national payment system.

CHAPTER EIGHT

ELECTRONIC FUNDS TRANSFER AND ELECTRONIC MONEY

Article 34.Implementation and Proof of Electronic Funds Transfer

34.1.Electronic funds transfer or its registration entries shall be carried out in accordance with relevant laws and regulations approved by the Bank of Mongolia.

34.2.The Bank of Mongolia shall approve the regulations and instructions for the electronic funds transfer and payment orders made according to electronic information, and make decisions and monitor their implementation.

Article 35.Electronic Money and Requirements for Issuers of Electronic Money

35.1.An entity authorized to issue payment instruments shall issue electronic money as specified in 2 of article 8 of the Law of Mongolia on Central Bank /the Bank of Mongolia.

35.2.Electronic money has the following features at the same time:

35.2.1.Amount is stored electronically;

35.2.2.Amount is guaranteed by money;

35.2.3.Payment is accepted by a third party other than the electronic money issuer or its customer;

35.2.4.Free conversion of electronic money into monetary assets, and monetary assets into electronic money.

35.3.One e-money is equal to one MNT. The minimum unit of electronic money is one e-money.

35.4.If an applicant requests a permit to provide payment services for the purpose of issuing electronic money, the following conditions must be met in addition to the requirements specified in article 13 of this law:

35.4.1.Electronic money shall not be a source of credit;

35.4.2.E-money issuer shall reflect the amount of electronic money, that is in circulation or withdrawn, in the financial statement, and provide accurate information necessary for the Bank of Mongolia to monitor and analyze the amount of electronic money supply and its circulation speed in the economy;

35.4.3.Clearing and settlement operations can be finalized as soon as a payment order is created in the participant's settlement system;

35.4.4.Be responsible for conversion of electronic money and MNT at the first request of the user.

35.5.Cash received for the purpose of conversion to electronic money or converted to electronic money shall not be considered as funds collected from others.

CHAPTER NINE

PAYMENT SETTLEMENT, CALCULATION OF RESULT, AND PAYMENT FINALIZATION

Article 36.Payment Settlement

36.1.Payment settlement to be made between participants of each transaction transmitted through the settlement system shall be made in accordance with payment settlement rules.

36.2.The payment settlement rules shall include measures to be taken in the event that a participant is able or unable to perform any settlement obligations to the payment system, clearing center, or an entity authorized to perform centralized commercial settlement, or other participants, or such condition is likely occurred.

36.3.A direct participant shall place the settlement account at the Bank of Mongolia.

36.4.Payment settlements between participants shall be made through settlement accounts at the Bank of Mongolia.

36.5.The Bank of Mongolia shall determine the requirements for payment settlement representatives.

36.6.A participant may engage a settlement agent as a direct participant who meets the requirements specified in article 36.5 of this law.

36.7.If the participant engages a settlement representative to perform the settlement duties in accordance with article 36.6 of this Law, a notice and approval of an appointment of such settlement representative shall be delivered to the operator before any settlement duties are performed for the participant.

36.8.In case the participant rejects the settlement representative, he/she shall notify the operator in writing 30 days in advance.

Article 37.Calculation of Results

37.1.Amounts of the participant's payables and receivables from other participants will be clearing out, and the results of bilateral or multilateral payments at the time of termination of obligations, or at the time of inability to perform obligations shall be calculated, or their mixed results will be estimated, and the closing amount of results calculation shall be determined.

37.2.Transfers made within the framework of the legislations of Mongolia and the calculation of their results is valid before third parties.

Article 38.Payment Finalization

38.1.The payment finalization shall become effective if the participant's payment is entered into the system.

38.2.The operator shall include provision of finalization or non-refundable payments in the rules of the system.

38.3.In the event that the finalization of payment becomes effective in accordance with article 38.1 of this law, it is prohibited to call back, or withdraw, or set aside payments.

Article 39.Deposit for Payment Settlement

39.1.In order to ensure the reliability and security of payments and to guarantee the fulfillment of obligations in the system, the operator or direct participant shall place a deposit at the Bank of Mongolia.

39.2.Clause 39.1 of this law shall not be subject to the central state administrative organization in charge of financial and budgetary matters that executes government payments and related settlements.

CHAPTER TEN

MEASURES FOR LIQUIDATION AND RECAPITALIZATION

Article 40.Submission of Decision to the Bank of Mongolia

40.1.Operators, participants, and entity authorized to engage payment services activities is obliged to deliver a copy of the decision to the Bank of Mongolia as soon as a decision on liquidation or commencement of recapitalization is issued or the participant receives the decision of the court in accordance with article 119.4 of the Law on Reviewing and Investigation Civil Cases at Court.

Article 41.Restriction and Prohibition of System Operation and Participation in System

41.1.In the event of a decision of the authorized entity to liquidate the operator or participant, the Bank of Mongolia shall prohibit the operator or participant from participating in the payment settlement system from the date of receipt of such decision.

41.2.In the event of a decision to recapitalize an operator or participant, an entity concerned is prohibited from operating the system or participating in the system until the Bank of Mongolia approves such decision.

Article 42.Payment Finalization not affected by Liquidation and Recapitalization Measures

42.1.Any decision related to liquidation or recapitalization of the participant will not affect the payment finalization or refundable payment condition made in accordance with article 38 of this law before the Bank of Mongolia accepts such decision.

Article 43.Measures to be taken by Executor

43.1.In the event that the participant is liquidated, or the recapitalization process is begun, or the court considers the participant is insolvent, the executor shall ensure the payment and settlement obligations of the debtor to other participants in accordance with the rules of the system in the following cases:

43.1.1.the closing amount of the calculation of results determined before commencement of liquidation or recapitalization process, or before the Bank of Mongolia receives the court decision on insolvency;

43.1.2.the closing amount of the calculation of the results to be performed on the day the Bank of Mongolia receives a decision on liquidation or recapitalization, or on the day after such decision.

CHAPTER ELEVEN

MISCELLANEOUS

Article 44.Liability for Violation of Legislation

44.1.If an operator, participant, payment service provider, or entity authorized to engage in payment service activities, or their official violates the legislations on national payment system, the Bank of Mongolia shall take the following measures, taking into account the nature of the violation:

44.1.1.give an official written warning;

44.1.2.give a task with time limit to eliminate such violation;

44.1.3.impose administrative responsibility specified in article 44.2 of this law;

44.1.4.notify the board of directors of any suspension or dismissal of the executive management of operators, participants, payment service providers, and entity authorized to engage in payment service activities;

44.1.5.restrict or suspend activities of operators, participants, payment service providers, and entity authorized to engage in payment service activities in part or in whole;

44.1.6.cancel the permission of operators, participants, payment service providers, and entity authorized to engage in payment service activities.

44.2.If the act of an official who violates this law is not criminal, a guilty entity shall be imposed a penalty by an auditor of the Bank of Mongolia as specified in the Infringement law.

44.3.Penalty income specified in article 44.2 of this law shall be collected in the state budget.

44.4.Property damage caused by violation of the law on national payment system shall be compensated in accordance with the Civil Code.

44.5.If the punishment specified in article 44.2 of this law is deemed unreasonable, it shall be resolved in accordance with the procedure specified in the Law on Procedure for Administrative Cases.

Article 45.Validity of the Law

45.1.This law shall be entered into effect on January 1, 2018.

THE CHAIRMAN OF THE STATE GREAT KHURAL OF MONGOLIA M.ENKHBOLD