Section Three: Agent Banking Contract
Article 7: Key Requirements
a. After obtaining SAMA’s non-objection, the Bank must enter into a written contract for a specified period with the Agent for the provision, on the Bank’s behalf, of any of the banking services for which SAMA’s non-objection was issued.
b. The Agent Banking contract must clearly specify the rights and responsibilities of all parties without prejudice to this Regulation and must be signed by the relevant parties prior to the commencement of Agent Banking services by the Agent.
Article 8: Contract
At a minimum, the Agent Banking contract must incorporate provisions that address the following:
1. The appointment of a third party as the Bank’s Agent to provide a clearly defined scope of banking services.
2. Capacity and nationality of the parties and the necessity of all parties having the authority to enter into this Agent Banking contract.
3. The Agent’s personal and business details, including the Agent’s business hours and any other important information.
4. The services provided by the Agent in detail, subject to the provisions of Article 20 hereof.
5. The Agent’s responsibilities, including, at a minimum, the following:
a. Dealing with Customers in a professional way and avoiding any prohibited activities as specified herein.
b. Exercising customer due diligence when conducting transactions, including:
1. Specifying a Customer authentication mechanism for transactions executed through the Agent; and
2. Using an ICT device with a screen of proper size for Customers to review and verify the details of transactions executed.
c. Taking consumer protection measures as follows:
1. Providing proof of transactions to Customers;
2. Facilitating channeling of complaints by Customers to the contracting Bank; and
3. Disclosing mandatory information as specified in SAMA regulations, instructions, and Consumer Protection Principles.
d. Compliance with all applicable laws, instructions and internal policies of the Bank, including the Bank’s codes of ethics and conduct.
e. Exercising due care in handling the Agent Banking systems and devices.
f. Maintaining records, documents, files and proof of transactions for a period not less than 10 years. The Agent must provide the Bank with these records regularly in previously determined periods. The Bank shall then maintain these records to facilitate supervision, control and verification as specified in Article 27 hereof.
g. Fulfilling reporting requirements necessary to enable the Bank to effectively monitor the performance of the Agent on a monthly basis and reporting incidents that may materially affect the efficiency of service delivery.
h. Allowing access upon receiving notification for the contracting Bank to carry out examination or on-site inspection and investigation on the Agent’s premises, and cooperating when the Bank requires information from the Agent as stipulated in Article 29 hereof.
i. Having a description of prohibited activities that the Agent cannot practice on behalf of the Bank, as indicated in Article 20 hereof.
j. Keeping confidential the Customers’ information and not disclosing any information obtained by virtue of work.
k. Conforming to legal and regulatory requirements.
6. Mechanisms for dispute resolution and indemnities, which cover disputes between Customer and Agent, disputes arising between the Agent and the Bank, and non-compliance of the Agent that is detrimental to the Bank. Such mechanisms shall also encompass recourse to other methods of compensation, procedures and period for resolution, indemnities, and obligations of the respective parties in the event of a dispute.
7. Terms of termination or expiration of the Agent Banking contract, which may include failure to meet obligations of the contract or comply with provisions hereof.
8. Measures to mitigate risks associated with Agent Banking services.
9. Compliance with AML/CFT and KYC requirements, including providing SAMA, by the Bank, with all requested documents and periodic reports on AML/CFT.
10. A statement that all information or data that the Agent collects in relation to Agent Banking services, whether from the Customers, the Bank or other sources, is the property of the Bank and that such information must be kept confidential and no unauthorized third party will have access to Customer information. The statement shall also indicate that the aforementioned provisions shall survive termination of the Agent Banking contract.
11. Changing the contract terms for default and contract termination.
12. A transition clause on the rights and obligations of the parties upon termination or cessation of the Agent Banking contract.
13. Stating that the banking services indicated are subject to regulatory review and that SAMA must be granted full authority to inspect and request information, data and documents at any time and full access to the internal systems, reports and records of the Bank and Agent. In addition, the Agent Banking contract must include a statement indicating that SAMA has the power to interrogate the Agent’s staff.
14. SAMA power to cancel or suspend its non-objection as it deems appropriate pursuant to this Regulation.
15. Stating that the 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 Bank.
16. Any other terms or provisions that the Bank or the Agent considers necessary without prejudice to the provisions of laws, regulations, rules and instructions issued by SAMA.
Article 9: Agent Eligibility
1. The Agent must be licensed to practice its commercial activity before the Bank applies for SAMA’s non-objection to the Agent to be contracted as a banking Agent.
2. The following entities are eligible for appointment as Agents under this Regulation:
a. Companies, except for commercial banks and finance companies, without prejudice to Companies Law;
b. Post offices;
c. SME businesses, such as chain stores;
d. Mobile network operator agents;
e. Foreign licensed companies registered through SAGIA; and
f. Any other entities that SAMA may prescribe.
3. The entity must not have been classified as a non-performing borrower by any banks in the last 12 months preceding the date of signing the contract (such information having been obtained from a licensed credit bureau). The Agent must maintain this status for the whole period of engaging in Agent Banking business.
4. It is necessary to have appropriate physical infrastructure and human resources to provide the Agent Banking services required.
Article 10: Renewal of Agent Banking Contract
Banks wishing to extend Agent Banking contracts must renew their contracts with Agents, whether ‘Exclusive’ or ‘Multiple’, at least one month prior to the expiration date of the banking Agent contract, following a comprehensive assessment of outsourcing risks.
Article 11: Termination of Agent Banking Contract
1. SAMA may withdraw or suspend licenses granted to Banks to engage in Agent Banking business in any of the following cases:
a. Violating any provisions hereof as may, in the opinion of SAMA or the contracting Bank, warrant termination of the agency contract; or
b. Furnishing contracting Bank(s) with false or inaccurate information under this Regulation.
2. Subject to the provisions for termination of the agency contract set out in the contract, the Bank must terminate an agency contract in any of the following cases:
a. if the Agent is guilty of a criminal offense involving fraud, dishonesty or any other forms of financial impropriety;
b. if the Agent, where it is a legal person, is being dissolved or wound up through a court order or otherwise;
c. if the Agent, where it is a sole proprietor, dies or becomes mentally incapacitated;
d. if the Agent transfers, relocates or closes its place of agency business without the prior written consent of the contracting Bank;
e. if the Agent carries on Agent Banking business when the Agent’s principal commercial activity has ceased;
f. if the Agent sustains a financial loss or damage to such a degree that, in the opinion of the Bank, makes it impossible for the Agent to gain its financial soundness within three months from the date of the loss or damage; or
g. if the Agent fails to hold or renew its valid business license.
3. Where a dispute arises between a Bank and its Agent, the parties must exert every effort to settle the dispute within a period of 10 (ten) business days from the date of such dispute. If the dispute is not resolved within this stipulated period and the litigation is sought, then the Bank must begin preparations to terminate the agency within the timeframes mentioned herein before litigation starts.
4. Where an Agent Banking contract is terminated, the Bank must publish a notice of the termination in the locality where the Agent was operating or in any other manner, such as SMS messages, to adequately inform the general public of the cessation of the Agent Banking contract.
5. Upon termination of the Agent Banking contract, the Bank may not re-contract with the Agent, whose agency contract was cancelled, after changing its commercial name.
Article 12: Record Retention
The Agent shall maintain records and documents of its contracting Bank’s Customers for a period not less than ten (10) years. The Bank shall specify the mechanism for their retention and transfer to its possession.
Article 13: Fit & Proper Assessment
1. Prior to arranging a contract with a third party for Agent Banking, the Bank must carry out a ‘fit and proper’ assessment. The assessment is aimed at ensuring that the Agent, its proprietors, and persons involved in the management of the Agent Banking business are sufficiently competent, ‘fit and proper' and that the management structures and funding sources are adequate. The key components of Fit and Proper Assessment, at a minimum, must take into consideration the following:
a. The moral, business and professional suitability of the entities to be contracted as Agents;
b. Negative information obtained from a credit bureau or other credible sources;
c. Criminal records, especially in relation to issues of ML/TF, fraud, or integrity;
d. Business or work experience;
e. Sources of funds necessary to finance the establishment of the Agent Banking business; and
f. Any other information that may negatively or positively affect the prospective Agent.
2. Any Agent, its proprietors, partners, officers or any other individuals that has/have been vetted and approved by SAMA within the previous 12 months may be exempted from vetting under this Regulation.
Article 14: Agent Due Diligence
1. The Bank must establish clear agent due diligence policies. Minimum contents must include methods of identifying Agents, initial due diligence, regular due diligence checks to be performed at specified periods, check list of early warning signals, and corrective actions to ensure proactive agent management.
2. The Bank must clearly specify roles/responsibilities of functions/departments within the Bank with regard to agent management in the agent due diligence procedures.
3. The Bank must ensure that proper monitoring processes for AML/CFT and combating embezzlement and financial fraud in the area of Agent Banking are in place. The necessary actions to be taken by Agents in this regard must be communicated to the Agents, and the Agents’ compliance must be monitored regularly.
4. Due Diligence must, at a minimum, cover the following:
a. Verification of legal status of the Agent;
b. Verification of address and location of all prospective Agents;
c. Establishing that there is no conflict of interest between the Bank and the Agent;
d. Verification of the adequacy of the prospective Agents’ resources for Agent Banking business, including financial and infrastructure resources (especially information security, technology and personnel);
e. Agent’s trustworthiness and likelihood of good behavior;
f. Clear credit history of Agent with a licensed credit bureau;
g. The Bank’ approval for the Agent’s procedures to ensure compliance with security risk management processes; and
h. Any other measures deemed necessary by the Bank.
Article 15: Customer Due Diligence
1. Each Bank engaging in Agent Banking must develop a ‘Customer Due Diligence (CDD)’ program that is tailored to its individual circumstances, type of Agents and risk level. The CDD program should include policies and procedures for the following, as a minimum:
a. Know Your Customer (KYC);
b. Information security; and
c. Data privacy and confidentiality.
2. The Bank must be responsible for ensuring compliance of its Agents with its CDD program and the CDD requirements provided herein.
3. Agents must establish the identity of their Customers as deemed appropriate by the Bank, including through ID, fingerprint, etc., and must verify the purpose and nature of making any banking activities or any banking relationship through Agents.
4. If an Agent has reasons to doubt the credibility of information provided by the Customer, it has to use all the possible reliable means to validate such information. In such cases, the Agent must stop dealing with the Customer and report findings to the Bank’s Money Laundering Reporting Officer (MLRO).