Amendments to the Regulations on Electronic Money (E-money) and the operations of Electronic Money lssuers (EMl) in the Philippines (Reuploaded with Appendices)

BANGKO SENTRAL NG PILIPINAS OFFICE OF THE COVERNOR CIRCULAR NO. 1166 Series of 2023 Subject: Amendments to the Regulations on Electronic Money (E-money) and the operations of Electronic Money lssuers (EMl) in the Philippines The Monetary Board, in its Resolution No. 122 dated 26 January 2023, approved the amendments to the pertinent provisions of the Manual of Regulations for Banks and Manual of Regulations for Non-Bank Financial Institutions on the regulations governing the issuance of electronic money and the operations of e-money issuers in the Philippines. Section l. Sec. 7O2 on lssuance and Operations of Electronic Monev shall be amended to read as follows: 7O2 TSSUANCE AND OPERATTONS OF ELECTRONTC MONEy (E-MONEyl The following guidelines shall govern the issuance of E-money and the operations of E-money issuers. Policy Stoternent The Bangko Sentral aims to promote a safe, efficient, and inclusive digital finance ecosystem by espousing an enabling regulatory environment that recognizes the advances in digital technologies and fosters a responsive and effective management of attendant risks. The regulations governing E-money issuers and operations allow Bangko Sentral-Supervised Financial Institutions (BSFls) to adopt risk management systems commensurate to their size, risk profile, complexity of operations, and systemic importance. This enables BSFIs to provide financial services attuned to the evolving needs and behaviour of consumers and supported by safeguards and controls to ensure that risks remain within manageable levels. Scope. These guidelines shall cover BSFIs that issue E-money and engage in E-money business in the Philippines. E-money issued under closed-loop electronic wallet systems is not covered by this Section. Definition of Terms. For purposes of this Section, the following definitions shall apply: a. E-money shall refer to an electronically-stored monetary value that is: 0) maintained in a non-interest-bearing non-deposit transaction account; (2) denominated in or pegged to Philippine Peso or other foreign currencies; (3) pre-funded by customers to enable payment transactions; (4) accepted as a means of payment by the issuer and by other persons or entities incl uding merchants/sellers; (5) issued against receipt of funds of an amount equal to the monetary value issued; (6) represented by a claim on its issuer; and

(7) withdrawable in cash or cash equivalent or transferable to other accounts/instruments that are withdrawable in cash. b. Electronic instruments or devices shall refer to cash cards, prepaid cards, stored value cards or any digital wallet accessible via mobile phones or other access device, and other similar products within the scope of electronic payments and financial services as defined under Sec. TOl; c. Transaction account shall be as defined under Sec. TOl: d. Closed-loop electronic wallet system shall refer to an arrangement wherein the electronic wallet is accepted as a means of payment only by the merchant-issuer. Merchant-issuers including their subsidiaries and affiliates shall be considered as one entity for purposes of determ i ning closed-loop electron ic wal let systems. g. Open-loop electronic wallet system shall refer to an arrangement wherein the electronic wallet is accepted as a means of payment by other persons or entities other than the merchant-issuer and their subsidiaries and affiliates. Merchants are physicalor electronic retailers or businesses that accept E-money as payment and may utilize electronic platforms in selling their qoods and services. Application for outhority to offer E-money services. Banks may offer E- money services subject to prior approval of the Bangko Sentral under Electronic Payment and Financial Services (EPFS) license and compliance with the prudential criteria provided under Sec. lll and requirements on licensing of EPFS under Appendix 136 of Sec. 7Ol. Covernance. The following guidelines shall govern the issuance and operations of E-monev: a. Minimum Systems ond Controls. Prior to issuance of E-money, BSFIs shall ensure that the followinq are in place: tl) Sound and prudent management, administrative and accounting procedures and adequate internal control mechanisms' (2) Properly-designed computer systems which are thoroughly and independently testedr prior to implementation; (3) Appropriate security policies and measures intended to safeguard the integrity, authenticity, and confidentiality of data and operating processes; (4) Robust selection criteria and due diligence process in accrediting E-money agents and merchant/business partners and criteria for periodic performance review; (5) Fraud risk management system that is commensurate to the risks associated with particular EMI classification or specific EMI activities; (6) Adequate business continuity and disaster recovery plan;and (7J Effective audit function to provide periodic review of the security control environment and critical svstems. rThese include independent testing of security controls by third-party service providers Paqe 2 of 12

b. E-money shall only be issued and redeemed at face value. lt shall not be purchased at a discount wherein the E-money credited to the customer's account balance is higher than the amount of fiat money used to purchase it. The issuance and operations of E-money denominated in foreign currency shall be subject to existing foreign exchange rules and regulations. Moreover, E-money is not considered a deoosit. lt shall not earn interest and other similar incentives convertible to cash that may be construed as earning of interest. BSFIs may offer promotional incentives that are not based on the outstanding balance of the e-wallet to encourage greater usage and attract new users. c. Consumer Protection. BSFIs are required to strictly adhere to Bangko Sentral regulations on Financial Consumer protection as prescribed under Part Ten. BSFIs shall adhere to the expectations provided under this regulation covering the following core principles: (l) Disclosure and transparency of E-money transactions; (2) Protection of client information; {3) Fair treatment of E-money customers; (4) Effective recourse in place for handling complaints and redress mechanisms; and (5) Protection of E-money Consumer Assets against Fraud and Misuse. d. Minimum Disclosure Requirements. BSFIs shall provide clear terms and conditions on the use of E-money, which should be made available through various channels, including the BSFI's website, brochures, and registration form (user's and merchant's copy). BSFIs must obtain acknowledgement from their users and merchants that they have read and understood the terms and conditions prior to their availment of E- money services. The terms and conditions shall include the following information, among others: 0) lssuer of the E-money who is ultimately responsible to the E- money holders; (2) Type of transactions that can be made using the E-money; (3) All applicable fees and charges; (4) FX risks and basis of applicable exchange rates for FX transactions using the application for multi-currency E-money wallets; (5) Availability of user's transaction history and/or statement of accounU (6) Procedures for reporting lost or stolen E-money and lodging a complaint, including the manner on how the losses and liabilities from security breaches, system failure, or human error will be settled between the BSFI and its customers; (7) Refund policy, including refund conditions, procedures, turn- around time and cost; (8) Rights and responsibilities of users and merchants; (9) User's and merchant's liability for damaged, lost, malfunctioned, or compromised e-wallet instrument or value, and fraudulent transaction; and (lO) Customer service contact number(s) as well as the details of the Bangko Sentral Consumer Assistance Mechanism. Users and merchants shall be notified at least thirty (3O) calendar days before any amendments/changes to the terms and conditions mav take effect.

e. lnteroperobility of Sysferns. BSFIs shall make its E-money products/services/platforms with fund transfer functionality interoperable by participating in an Automated Clearing House pursuant to the guidelines set under the National Retail Payment System (NRPS) Framework. f. Aggregote Limits. BSFIs shall adopt a client categorization process in order to implement pre-defined limits and thresholds based on institutional risk assessment and customer due diligence process. Provided, That: BSFIs participating in payment systems (PS) shall adopt limits and thresholds consistent with those applied by the PS. In case a BSFI issues several E-money instruments to a person (E-money holder), the total transactions and/or amount loaded in all the E-money instruments shall be aggregated in determining compliance with the EMls' established limit. g. Liquidity Requirement. BSFIs shall have sufficient liquid assets to meet E-money redemptions at all times and to protect the interest of the E- money holders. In this respect, BSFIs shall maintain liquid assets at least equal to the amount of outstanding E-money issued for each currency in which the E-money obligations are denominated. (l) BSFIs with outstanding E-Money balance of at least PIOO,OOO,OOO.OO, shall have unencumbered liquid assets comprised of the following: (a) At least 50 percent (50%) of the outstanding E-money balance2, shall be held in trustr for the specific purpose of E-money balance liquidation. The trust arrangement shall assure the preservation of principal amount and prudent management of funds. EMls shall ensure that the amount held in the trust account shall not fall below the required minimum trust account balance at any given day. Decline in required minimum trust account balance arising solely from marked-to-market losses shall not be considered a breach of the minimum requirement. Provided, That: the BSFI tops up the deficiency arising from aforesaid marked-to-market as of month-end within five (5) banking days after end of reference month. (b) The remaining percentage of outstanding E-money balance shall be held in any of the following assets: (i) bank deposits specifically earmarked for liquidity requirements of the E-money balances. This shall be maintained in accounts separate from other deposits of the BSFI; (ii) government securities earmarked and set aside for the purpose; (iii) balance in the settlement account with the BSP that is used by a non-bank EMI specifically for the settlement of its net clearing obligations arising from electronic payments; and 2 Required minimum trust account balance 3 Definition and requirements in accordance with Part lV of the MORB

(iv) such other liquid assets as the Bangko Sentral may allow. (2) BSFIs with outstanding E-Money balance below PIOO,OOO,OOO.OO may: (a) Hold liquid assets following the requirements under (l) above; or (b) Hold liquid assets equivalent to the total amount of outstanding E-Money balance as stated under l.b above;or (c) Hold such other liquid assets as the Bangko Sentral may allow. Provided, that:the liquid assets as prescribed in ltems "0)(b)(ii)", "(t)(b)(iv)" and "(2)(c)" meet the definition of High-Quality Liquid Assets under the Basel lll Framework on Liquidity Standards - Liquidity Coverage Ratio, pursuant to Appendix 72. BSFIs shall ensure that their current and prospective creditors understand that liquid assets maintained for safeguarding of outstanding E-money issued shall remain unencumbered and are not subject to attachment. Upon effectivity of this Circular, liquid assets being used to comply with the E-money liquidity requirements that are subject of encumbrances and attachments shall automatically lose their eligibility as a form compliance with the E-money liquidity requirements. Records pertaining to the above liquid assets shall be made available for inspection by the Bangko Sentral at any time. BSFIs shall have in place control mechanisms to ensure prompt accounting and recording of liquidity requirements particularly for m ulti-cu rrencv wa lets. I Clossificotions of EMIs. Electronic monev issuers shall be classified as follows: a. EMI-Banks;and b. EMI-Non-Bank Financial Institutions (EMl-NBFI), which includes cooperatives. Copitdl Requirements. The term capital shall be as defined under Sec. l2l. The required capital for EMI-Banks shall be the higher of: (a) the required minimum capitalization for banks depending on bank category or (b) the required minimum capitalization based on EMI category as follows: EMI Cateqorv Required Capital Larqe scale EMI-Bank PHp 200,ooo,ooo Smallscale EMI-Bank PHP tOO.OOO.OOO Review of aggregated transactions shall be done twelve (.l2) months after the commencement of EMI operations and quarterly assessment henceforth shall be done bythe appropriate supervising department of the Bangko Sentral to assess the volume/value of EMI transactions. Consequently, an EMl-Bank shall be classified as Large scale if the twelve (12) month average value of aggregated inflow and outflow transactions is equal to or greater than P25.O billion. Once classified as large scale, the EMI-Bank will no longer be classified as small scale unless approved by the Page 5 of l2

Bangko Sentral. EMI-Banks are expected to comply with the p2OOM capital requirement within one year from date of reclassification. Reporting Pequirements. BSFIs shall maintain records and submit the required reports enumerated in Appendix 7 to the supervising department of the Bangko Sentral. BSFIs shall ensure that transaction and due diligence records are maintained for a period of at least five (5) years4, unless a longer period is required by law or by legal orders/processes. They shall likewise adhere to other relevant guidelines issued by the Bangko Sentral and other regulating authorities on record keeping and retention, and digitization of records as well as the manner of submission of required reports. All changes and enhancements to the E-money platform shall be reported in accordance with the reportorial requirements of EPFS to the appropriate supervising department of the Bangko Sentral. Sonctions. Violations of the provisions of this Section shall constitute grounds for the imposition of sanctions on the BSFI and/or its directors/officers or a combination of the following in accordance with the Bangko Sentral supervisory enforcement policy under Sec.OO2: Monetary penalty - any amount as may be authorized by the Monetary Board not to exceed PIOO,OOO a day for each violation from the time the violation was committed until it is corrected. In the case of BSFIs with outstanding E-Money balance of at least PIOO,OOO,OOO.OO with trust account falling below the required minimum trust account balance, the amount of monetary penalty shall be at one percent 11"/o) of the deficiency to meet the required minimum trust account balance but not to exceed PIOO,OOO per day. b. Non-monetary sanction - any sanctions that the Monetary Board may deem appropriate and allowed by law considering the gravity of the offense. EMls without the oppropriote crpprovdl from the Bongko Sentrol. Any entity or person found to be engaging in EMI operations without prior approval of the Bangko Sentral shall be subject to appropriate enforcement action/s, without prejudice to the pursuit of any legal action against the owners and operators of the entity pursuant to Secs.lS and 19 of Republic Act No.ll2ll {The New Central Bank Act). Registrotion with the AMLC. In line with the authority of the Bangko Sentral to check compliance of BSFIs with Republic Act No. 9160, as amended, or the Anti-Money Laundering Act (AMLA), Republic Act No. 10168 or the Terrorism Financing Prevention and Suppression Act (TFPSA), their respective lRR, and other AMLC and Bangko Sentral issuances, BSFIs shall also secure a Certificate of Registration with the AMLC pursuant to the 2O2l AMLC Registration and Reporting Cuidelines. o The reckoning date of 5 years is from the date of transaction or date of submission of documents

Foilure ta commence EMI operotions. The authority to engage in E- money business shall be revoked if the BSFI does not commence E-money operations within six (6) months after receipt of the notice of approval of its EMI license, unless a longer period has been approved by the Bangko Sentral. Likewise, EMI license of BSFIs that has become inactive for a period of more than 6 months after commencement of operations shall also be revoked. Outsourcing of seruices by Electronic Money lssuers (EMIs) to Electronic Money Network Seryice Providers (EMNSP). The guidelines on outsourcing of services by EMls to EMNSP are shown in Appendix 98. Sanctions. Violations committed by EMls pertaining to outsourcing activities to EMNSP shall be subject to monetary penalties as graduated under Sec. llO2 and/or other non-monetarv sanctions under Sec. 37 of RA No.7653. Section 2. Applicabilityto non-bank financial institutions (NBFls). The provisions under Section I of this Circular shall likewise apply to NBFls, particularly to quasi-banks, non-stock savings and loan associations, and other NBFIs including cooperatives and shall be codified under Secs. 7o2-Q, 4o2-s, and 4o2-N with some amendments, as follows: a. The subtitle on Applicotion for authority to offer E-money seryices shall be replaced by subtitle on Certiffcqte of Authority as follows: Certificote of Authority. BSFIs planning to be EMI-NBFts shall apply in accordance with the guidelines on outsourcing and electronic services and operations, when applicable. Said procedures for applying for an EMI license as well as licensing requirements are specified in the Bangko Sentral Citizen's Charter. EMI-NBFls shall also comply with pertinent Bangko Sentral rules and regulations covering the following areas, among others: (a) Electronic Payment and Financial Services (EPFS); (b) Liquidity Risk Management; (c) Operational Risk Management and lnternal Control; (d) lT Risk Management including the area of lT Outsourcing/r'endor Ma nagement; (e) Payment Systems; (f) Anti-Money Laundering and Countering Terrorist and Proliferation Financing; (g) Financial Consumer Protection; (h) Corporate Covernance; (i) Requirements for beneficial owners as specified in part 9 of the Q-Regulations/Part 6 of the S-Regulations/part 6 of N- Regulations which shall apply not only during license application but whenever there is a significant change in ownership; and (1) Requirements for Money Service Business registration as specified in Sec. 9Ol-N. EMI-NBFlsthat engage in lending activities must secure a quasi- banking license from the Bangko Sentral in accordance with the requirements of the Sec. ll'l-Q. PaqeT of 12

b. The following provisions shall be added under Aggregate Limits (item 6 of subtitle Governonce) as last paragraph: For large value pay-outs of more than PSOO,OOO or its equivalent in foreign currency, in any single transaction with customers or counterparties, enhanced due diligence shall be conducted and said pay-outs shall be done through banks using check payments or electronic fu nd transfer facilities. c. Provision on Liquidity Requirement shall be replaced by the following paragrapn: Provided, that:the liquid assets as prescribed in ltems '0)(b)(ii)", "(l)(b)(iv)" and "(2)(c)" meet the definition of High-Quality Liquid Assets under the Basel lll Framework on Liquidity Standards - Liquidity Coverage Ratio, pursuant to Appendix Q-82. d. The provisions on Capitol f,lequr'rements shall be replaced by the followinq: Capital Requirements. The term capital shall be as defined under Secs. l2l-Q (combined copitol occounts)fi2'l-S (capital of NSSLAs). The required capital for EMI-NBFls shall be the higher of: (a) the required minimum capitalization for NBFIs depending on NBFI types or (b) the required minimum capitalization based on EMI category as follows: EMlCateqorv Required Capital Larqe scale EMI-NBFI PHP 200.OOO.OOO .|OO.OOO,OOO Smallscale EMI-NBFI PHP Review of aggregated transactions shall be done twelve (12) months after the commencement of EMI operations and quarterly assessment henceforth shall be done by the appropriate supervising department of the Bangko Sentral to assess the volume/value of EMI transactions. Consequently, an EMI-NBFI shall be classified as Large scale if the twelve (12) month average value of aggregated inflow and outflow transactions is equal to or greater than P25.O billion. Once classified as large scale, the EMI-NBFI will no longer be classified as small scale unless approved by the Bangko Sentral. EMI-NBFls are expected to comply with the P2OOM capital requirement within one year from date of reclassification. e. The subtitle on f,leporting Requirements shall be replaced by the followinq: Notification and Reporting Requirements. BSFIs shall comply with the notification and reporting requirements as prescribed under Sec.9Ol-N and Appendices Q-3/S-2/N-.|. In addition, BSFIs shall maintain records and submit the appropriate reports to the supervising department of the Bangko Sentral: Cooperatives which are among the EMI-NBFls shall maintain the higher of the required minimum capital for EMI-NBFls under these guidelines and that prescribed by applicable provisions under Republic Act No.9520 or the Philippine Cooperative Code of 2OO8. Page B of 12

BSFIs shall ensure that transaction and due diligence records are maintained for a period of at least five (5) years6, unless a longer period is required by law or by legal orders/processes. They shall likewise adhere to other relevant guidelines issued by the Bangko Sentral and other regulating authorities on record keeping and retention, and digitization of records as well as the manner of submission of required reports. All changes and enhancements to the E-money platform shall be reported in accordance with the reportorial requirements of EPFS to the appropriate department of the Bangko Sentral. The first paragraph of subtitle on Sonctions shall be replaced as follows: Sqnctions. Violations of the provisions of this Section shall constitute grounds for the imposition of sanctions on the BSFI and/or its directors/officers or a combination of the following in accordance with the Bangko Sentral supervisory enforcement policy under Sec.OO2-Q/: v. Subtitle on Voluntoryt Closure of EMI Business or Surrender of EMI License shall be added after the subtitle on f,legistrotion with the AMLC as follows: Voluntary Closure of EMI Business or Surrender of EMI License. Any EMI-NBFI who wishes to cease carrying on with the business or activity of issuance of E-money shall comply with the requirements on voluntary closure under Appendix Q-6O/ Secs. lO4-S/eOt-1.1. n. Subtitle on Outsourcing of services by Electronic Money lssuers (EMIs) to Electronic Money Network Seryrce Providers (EMNSP) shall be replaced as follows: Outsourcing of seruices by Electronic Money lssuers (EMIs) to Electronic Money Network Service Providers (EMNSP).The guidelines on outsourcing of services by EMls to EMNSP are shown in Appendix Q- 56. Sanctions. Violations committed by EMls pertaining to outsourcing activities to EMNSP shall be subject to monetary penalties as graduated under Sec.llO2-Q (Cuidelines on the imposition of monetory penolty) and/or other non-monetarv sanctions under Sec.37 of RA No.7653. Section 3. Appendix 7 is hereby amended to include the following reports: Cotegory Form MORB Report Title Frequency Submlssion Submission Number Ref Deodline Procedure (Annex Number) A A-Z 702 Quorterly Report Quorterly Fifteen (15) emoilto on Totol Volume bonking oppropriote ond Volue of E- doys from supervising money tronsocted end of deportments (Duly certified by reference the President or quorter The reckoning date of 5 years is from the date of transaction or date of submission of documents

ony officer holding equivolent oosition) .7/11 A A-Z For BSFIs with Monthly emoilto outstonding EMI bonking oppropriote bolonce of ot leost doys ofter supervising Ptoo,ooo,ooo.oo the end of deportments the Certificotion reference On Month -end month Trust Account Bolonce Signed by the President/CEO/ony officer holding equivolent position), occomponied by o Stotement of Account from the Trust Entity os of month-end indicoting the outstonding bolonce of their trust occount ond olltronsoctions during the reporting period showing ot /eost the tronsoction dote, description, debit/credit omount ond ending bolonce per tronsoction A A-2 702 List of operoting Semestro/ Fifteen (15) emoilto offices ond digitol bonking oppropriote platforms of EMIs doys from supervising (Duly certified by end of deportments the President or reference ony officer holding sernester equivolent oosition) Section 4. Appendices Q-3/S-2/N-l are hereby amended to include the following reports: Category Form MORNB Report Title Frequency Submission Submission Number Fl Ref. Deadline Procedure (Annex Number) Sec. Audit Financial Annually Not later emailto 7o2-Ql Statement (AFS) than l2O approprrate 402-3l (audited by an calendar supervising 402-N external auditor days after departments included in the the close of

List of Selected the ExternalAuditors reference for NBFIs) calendar or fiscalyear subject to the provisions under Sec. 901-N A A-2 Sec. Quarterly Report Quarterly Fifteen (15) emailto 7o2-QJ on TotalVolume banking appropriate 402-3/ and Value of days from supervising 402-N E-money end of departments transacted (Duly reference certified by the quarter President or ony officer holding equivolent position) A Unnumber Sec. For BSFIs with Monthly 15 bonking emoil to eo 7o2-Q/ outstonding EMI doys ofter oppropriote 402-Sl bolonce of ot the end of supervising 402-N /eosf the deportment Pl00,ooo,ooo.oo reference 5 month Certificotion On Month -end Trust Account Bolonce Signed by the President/CEO/o ny officer holding equivolent position), occomponied by o Stofement of Account from the Trust Entity os of month-end indicoting the outstonding bolonce of their trust occount ond oll tronsoctions during the reporting period showing ot /eost the tronsoction dote, description, debit/credit omount ond ending bolonce per tronsoction A A-2 Sec. List of operating Semestral Fifteen (15) emailto 7o2-QJ offices and digital banking appropriate olatforms of EMls davs from Page 1l of l2

402-S/ (Duly certified by end of supervtsrng 402-N the President or reference departments ony officer semester holding equivolent position) Sec. Changes and Semestral Fifteen (15) emailto 7O2-Q/ Enhancement to banking appropriate 402-Sl the E-Money days from supervising 402-N Platform in end of departments accordance with reference the Reportorial semester Requirements of EPFS Section 5. Transitory Provision. Existing BSFIs authorized to issue E-money or engage in E-money operations shall submit the following to the appropriate supervising department of the Bangko Sentral not later than three (3) months from effectivity of this Circular: a. A certification, signed by the President or Officer with equivalent rank and function, that the BSFI is in compliance with all the applicable requirements of this Section; and b. Accomplished gap assessment template as prescribed by the Bangko Sentral (Appendix A for Banks and Appendix B for NBFIs of this Circular), specifying the plan of actions it will undertake, with the corresponding timelines not exceeding one (1) year from the date of issuance of this Circular, to conform with the provisions it has Vet to fully comply with. BSFIs may continue to operate their business pending submission of the Certification unless instructed otherwise. Failure to comply with these requirements within the prescribed timelines shall subject the entity to the a ppropriate enforcement action provided u nder Sec. OO2/OO2-Q/ OO2-S|OO1 - N. Section 6. The Circular shall take effect fifteen (15) calendar days following its publication in the Official Cazette or any newspaper of general circulation. FOR THE MONETARY BOARD: --Otr -r t-*,lr- Ft- Gt. FELIPE M. MEDALLA Covernor v February 2023 Page l2 of l2

Appendix A Name of EMI-Bank Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s Key provisions/requirements under Indicate level of Provide brief statement Identify specific gap/s vis- Indicate action plan/s and Circular No. 1166 dated 7 February 2023 compliance (i.e., on the BSFI’s existing à-vis the regulatory the committed timeline Complied, Partially policies and processes. requirement/s Complied, or Not Complied) Governance. The following guidelines shall govern the issuance and operations of E-money: a. Minimum Systems and Controls. Prior to issuance of E-money, BSFIs shall ensure that the following are in place: (1) Sound and prudent management, administrative and accounting procedures and adequate internal control mechanisms; (2) Properly-designed computer systems which are thoroughly and independently tested1 prior to implementation; (3) Appropriate security policies and measures intended to safeguard the integrity, authenticity, and confidentiality of data and operating processes; (4) Robust selection criteria and due diligence process in accrediting E-money agents and merchant/business partners and criteria for periodic performance review; (5) Fraud risk management system that is commensurate to the risks associated with particular EMI classification or specific EMI activities; (6) Adequate business continuity and disaster recovery plan; and (7) Effective audit function to provide periodic review of the security control environment and critical systems. b. E-money shall only be issued and redeemed at face value. It shall not be purchased at a discount wherein the E-money credited to the customer’s account balance is higher than the amount of fiat money used to purchase it. The issuance and operations of E- money denominated in foreign currency shall be subject to existing foreign exchange rules and regulations. Moreover, E-money is not considered a deposit. It shall not earn interest and other similar 1 These include independent testing of security controls by third-party service providers

Appendix A Name of EMI-Bank Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s incentives convertible to cash that may be construed as earning of interest. BSFIs may offer promotional incentives that are not based on the outstanding balance of the e-wallet to encourage greater usage and attract new users. c. Consumer Protection. BSFIs are required to strictly adhere to Bangko Sentral regulations on Financial Consumer protection as prescribed under Part Ten. BSFIs shall adhere to the expectations provided under this regulation covering the following core principles: (1) Disclosure and transparency of E-money transactions; (2) Protection of client information; (3) Fair treatment of E-money customers; (4) Effective recourse in place for handling complaints and redress mechanisms; and (5) Protection of E-money Consumer Assets against Fraud and Misuse. d. Minimum Disclosure Requirements. BSFIs shall provide clear terms and conditions on the use of E-money, which should be made available through various channels, including the BSFI’s website, brochures, and registration form (user’s and merchant’s copy). BSFIs must obtain acknowledgement from their users and merchants that they have read and understood the terms and conditions prior to their availment of E-money services. The terms and conditions shall include the following information, among others: (1) Issuer of the E-money who is ultimately responsible to the E-money holders; (2) Type of transactions that can be made using the E-money; (3) All applicable fees and charges; (4) FX risks and basis of applicable exchange rates for FX transactions using the application for multi-currency E money wallets; (5) Availability of user’s transaction history and/or statement of account; (6) Procedures for reporting lost or stolen E-money and lodging a complaint, including the manner on how the losses and

Appendix A Name of EMI-Bank Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s liabilities from security breaches, system failure, or human error will be settled between the BSFI and its customers; (7) Refund policy, including refund conditions, procedures, turn- around time and cost; (8) Rights and responsibilities of users and merchants; (9) User’s and merchant’s liability for damaged, lost, malfunctioned, or compromised e-wallet instrument or value, and fraudulent transaction; and (10) Customer service contact number(s) as well as the details of the Bangko Sentral Consumer Assistance Mechanism. Users and merchants shall be notified at least thirty (30) calendar days before any amendments/changes to the terms and conditions may take effect. e. Interoperability of Systems. BSFIs shall make its E-money products/services/platforms with fund transfer functionality interoperable by participating in an Automated Clearing House pursuant to the guidelines set under the National Retail Payment Systems (NRPS) Framework. f. Aggregate Limits. BSFIs shall adopt a client categorization process in order to implement pre-defined limits and thresholds based on institutional risk assessment and customer due diligence process. Provided, That: BSFIs participating in payment systems (PS) shall adopt limits and thresholds consistent with those applied by the PS. In case a BSFI issues several E money instruments to a person (E-money holder), the total transactions and/or amount loaded in all the E-money instruments shall be aggregated in determining compliance with the EMIs' established limit. g. Liquidity Requirement. BSFIs shall have sufficient liquid assets to meet E-money redemptions at all times and to protect the interest of the E-money holders. In this respect, BSFIs shall maintain liquid assets at least equal to the amount of outstanding E-money issued for each currency in which the E-money obligations are denominated.

Appendix A Name of EMI-Bank Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s (1) BSFIs with outstanding E-Money balance of at least P100,000,000.00, shall have unencumbered liquid assets comprised of the following: (a) At least 50 percent (50%) of the outstanding E-money balance,2 shall be held in trust3 for the specific purpose of E-money balance liquidation. The trust arrangement shall assure the preservation of principal amount and prudent management of funds. EMIs shall ensure that the amount held in trust account shall not fall below the required minimum trust account balance, at any day. Decline in required minimum trust account balance arising solely from marked-to-market losses shall not be considered a breach of the minimum requirement. Provided, That: the BSFI tops up the deficiency arising from aforesaid marked-to-market as of month-end within five (5) banking days after end of reference month. (b) The remaining percentage of outstanding E-money balance shall be held in any of the following assets: (i) bank deposits specifically earmarked for liquidity requirements of the E-money balances. This shall be maintained in accounts separate from other deposits of the BSFI; (ii) government securities earmarked and set aside for the purpose; (iii) balance in the settlement account with the BSP that is used by a non-bank EMI specifically for the settlement of its net clearing obligations arising from electronic payments; and (iv) such other liquid assets as the Bangko Sentral may allow. 2 Required minimum trust account balance 3 Definition and requirements in accordance with Part IV of the MORB.

Appendix A Name of EMI-Bank Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s (2) BSFIs with outstanding E-Money balance below P100,000,000.00 may: (a) Hold liquid assets following the requirements under (1) above; or (b) Hold liquid assets equivalent to the total amount of outstanding E-Money balance as stated under (1)(b) above; or (c) Hold such other liquid assets as the Bangko Sentral may allow. Provided, that: the liquid assets as prescribed in Items “(1)(b)(ii)”, “(1)(b)(iv)” and “(2)(c)”, meet the definition of High-Quality Liquid Assets under the Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio, pursuant to Appendix 72. BSFIs shall ensure that their current and prospective creditors understand that liquid assets maintained for safeguarding of outstanding E-money issued shall remain unencumbered and are not subject to attachment. Upon effectivity of this Circular, liquid assets being used to comply with the E-money liquidity requirements that are subject of encumbrances and attachments shall automatically lose their eligibility as a form compliance with the E-money liquidity requirements. Records pertaining to the above liquid assets shall be made available for inspection by the Bangko Sentral at any time. BSFIs shall have in place control mechanisms to ensure prompt accounting and recording of liquidity requirements particularly for multi-currency wallets. Capital Requirements. The term capital shall be as defined under Section 121. The required capital for EMI-Banks shall be the higher of: (a) the required minimum capitalization for banks depending on bank category or (b) the required minimum capitalization based on EMI category as follows:

Appendix A Name of EMI-Bank Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s EMI Category Required Capital Large scale EMI-Bank PHP 200,000,000 Small scale EMI-Bank PHP 100,000,000 Review of aggregated transactions shall be done twelve (12) months after the commencement of EMI operations and quarterly assessment henceforth shall be done by the appropriate supervising department of the Bangko Sentral to assess the volume/value of EMI transactions. Consequently, an EMI Bank shall be classified as Large scale if the twelve (12) month average value of aggregated inflow and outflow transactions is equal to or greater than P25.0 billion. Once classified as large scale, the EMI-Bank will no longer be classified as small scale unless approved by the Bangko Sentral. EMI-Banks are expected to comply with the P200M capital requirement within one year from date of reclassification. Registration with the AMLC. In line with the authority of the Bangko Sentral to check compliance of BSFIs with Republic Act No. 9160, as amended, or the Anti-Money Laundering Act (AMLA), Republic Act No. 10168 or the Terrorism Financing Prevention and Suppression Act (TFPSA), their respective IRR, and other AMLC and Bangko Sentral issuances, BSFIs shall also secure a Certificate of Registration with the AMLC pursuant to the 2021 AMLC Registration and Reporting Guidelines.

Appendix B Name of EMI-NBFI Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s Key provisions/requirements under Indicate level of Provide brief statement Identify specific gap/s vis- Indicate action plan/s and Circular No. 1166 dated 7 February 2023 compliance (i.e., on the BSFI’s existing à-vis the regulatory the committed timeline Complied, Partially policies and processes. requirement/s Complied, or Not Complied) Certificate of Authority. BSFIs planning to be EMI-NBFI shall apply in accordance with the guidelines on outsourcing and electronic services and operations, when applicable. Said procedures for applying for an EMI license as well as licensing requirements are specified in the Bangko Sentral Citizen’s Charter. EMI-NBFIs shall also comply with pertinent Bangko Sentral rules and regulations covering the following areas, among others: (a) Electronic Payment and Financial Services (EPFS); (b) Liquidity Risk Management; (c) Operational Risk Management and Internal Control; (d) IT Risk Management including the area of IT Outsourcing/Vendor Management; (e) Payment Systems; (f) Anti-Money Laundering and Countering Terrorist and Proliferation Financing; (g) Financial Consumer Protection; (h) Corporate Governance; (i) Requirements for beneficial owners as specified in Part 9 of the Q-Regulations/Part 6 of the S-Regulations/Part 6 of the N- Regulations which shall apply not only during license application but whenever there is a significant change in ownership; and (j) Requirements for Money Service Business registration as specified in Sec. 901-N. EMI-NBFIs that engage in lending activities must secure a quasi- banking license from the Bangko Sentral in accordance with the requirements of Sec. 111-Q. Governance. The following guidelines shall govern the issuance and operations of E-money:

Appendix B Name of EMI-NBFI Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s a. Minimum Systems and Controls. Prior to issuance of E-money, BSFIs shall ensure that the following are in place: (1) Sound and prudent management, administrative and accounting procedures and adequate internal control mechanisms; (2) Properly-designed computer systems which are thoroughly and independently tested1 prior to implementation; (3) Appropriate security policies and measures intended to safeguard the integrity, authenticity, and confidentiality of data and operating processes; (4) Robust selection criteria and due diligence process in accrediting E-money agents and merchant/business partners and criteria for periodic performance review; (5) Fraud risk management system that is commensurate to the risks associated with particular EMI classification or specific EMI activities; (6) Adequate business continuity and disaster recovery plan; and (7) Effective audit function to provide periodic review of the security control environment and critical systems. b. E-money shall only be issued and redeemed at face value. It shall not be purchased at a discount wherein the E-money credited to the customer’s account balance is higher than the amount of fiat money used to purchase it. The issuance and operations of E-money denominated in foreign currency shall be subject to existing foreign exchange rules and regulations. Moreover, E-money is not considered a deposit. It shall not earn interest and other similar incentives convertible to cash that may be construed as earning of interest. BSFIs may offer promotional incentives that are not based on the outstanding balance of the e-wallet to encourage greater usage and attract new users. c. Consumer Protection. BSFIs are required to strictly adhere to Bangko Sentral regulations on Financial Consumer protection as prescribed under Part Ten. BSFIs shall adhere to the expectations 1 These include independent testing of security controls by third-party service providers

Appendix B Name of EMI-NBFI Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s provided under this regulation covering the following core principles: (1) Disclosure and transparency of E-money transactions; (2) Protection of client information; (3) Fair treatment of E-money customers; (4) Effective recourse in place for handling complaints and redress mechanisms; and (5) Protection of E-money Consumer Assets against Fraud and Misuse. d. Minimum Disclosure Requirements. BSFIs shall provide clear terms and conditions on the use of E-money, which should be made available through various channels, including the BSFI’s website, brochures, and registration form (user’s and merchant’s copy). BSFIs must obtain acknowledgement from their users and merchants that they have read and understood the terms and conditions prior to their availment of E-money services. The terms and conditions shall include the following information, among others: (1) Issuer of the E-money who is ultimately responsible to the E-money holders; (2) Type of transactions that can be made using the E-money; (3) All applicable fees and charges; (4) FX risks and basis of applicable exchange rates for FX transactions using the application for multi-currency E money wallets; (5) Availability of user’s transaction history and/or statement of account; (6) Procedures for reporting lost or stolen E-money and lodging a complaint, including the manner on how the losses and liabilities from security breaches, system failure, or human error will be settled between the BSFI and its customers; (7) Refund policy, including refund conditions, procedures, turn- around time and cost; (8) Rights and responsibilities of users and merchants; (9) User’s and merchant’s liability for damaged, lost, malfunctioned, or compromised e-wallet instrument or value, and fraudulent transaction; and

Appendix B Name of EMI-NBFI Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s (10) Customer service contact number(s) as well as the details of the Bangko Sentral Consumer Assistance Mechanism. Users and merchants shall be notified at least thirty (30) calendar days before any amendments/changes to the terms and conditions may take effect. e. Interoperability of Systems. BSFIs shall make its E-money products/services/platforms with fund transfer functionality interoperable by participating in an Automated Clearing House pursuant to the guidelines set under the National Retail Payment Systems (NRPS) Framework. f. Aggregate Limits. BSFIs shall adopt a client categorization process in order to implement pre-defined limits and thresholds based on institutional risk assessment and customer due diligence process. Provided, That: BSFIs participating in payment systems (PS) shall adopt limits and thresholds consistent with those applied by the PS. In case a BSFI issues several E money instruments to a person (E-money holder), the total transactions and/or amount loaded in all the E-money instruments shall be aggregated in determining compliance with the EMIs' established limit. For large value pay-outs of more than P500,000 or its equivalent in foreign currency, in any single transaction with customers or counterparties, enhanced due diligence shall be conducted and said pay-outs shall be done through banks using check payments or electronic fund transfer facilities. g. Liquidity Requirement. BSFIs shall have sufficient liquid assets to meet E-money redemptions at all times and to protect the interest of the E-money holders. In this respect, BSFIs shall maintain liquid assets at least equal to the amount of outstanding E-money issued for each currency in which the E-money obligations are denominated. (1) BSFIs with outstanding E-Money balance of at least P100,000,000.00, shall have unencumbered liquid assets comprised of the following:

Appendix B Name of EMI-NBFI Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s (a) At least 50 percent (50%) of the outstanding E-money balance,2 shall be held in trust3 for the specific purpose of E-money balance liquidation. The trust arrangement shall assure the preservation of principal amount and prudent management of funds. EMIs shall ensure that the amount held in trust account shall not fall below the required minimum trust account balance, at any day. Decline in required minimum trust account balance arising solely from marked-to-market losses shall not be considered a breach of the minimum requirement. Provided, That: the BSFI tops up the deficiency arising from aforesaid marked-to-market as of month-end within five (5) banking days after end of reference month. (b) The remaining percentage of outstanding E-money balance shall be held in any of the following assets: (i) bank deposits specifically earmarked for liquidity requirements of the E-money balances. This shall be maintained in accounts separate from other deposits of the BSFI; (ii) government securities earmarked and set aside for the purpose; (iii) balance in the settlement account with the BSP that is used by a non-bank EMI specifically for the settlement of its net clearing obligations arising from electronic payments; and (iv) such other liquid assets as the Bangko Sentral may allow. (2) BSFIs with outstanding E-Money balance below P100,000,000.00 may: 2 Required minimum trust account balance 3 Definition and requirements in accordance with Part IV of the MORB.

Appendix B Name of EMI-NBFI Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s (a) Hold liquid assets following the requirements under (1) above; or (b) Hold liquid assets equivalent to the total amount of outstanding E-Money balance as stated under (1)(b) above; or (c) Hold such other liquid assets as the Bangko Sentral may allow. Provided, that: the liquid assets as prescribed in Items “(1)(b)(ii)”, “(1)(b)(iv)” and “(2)(c)”, meet the definition of High-Quality Liquid Assets under the Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio, pursuant to Appendix Q-82. BSFIs shall ensure that their current and prospective creditors understand that liquid assets maintained for safeguarding of outstanding E-money issued shall remain unencumbered and are not subject to attachment. Upon effectivity of this Circular, liquid assets being used to comply with the E-money liquidity requirements that are subject of encumbrances and attachments shall automatically lose their eligibility as a form compliance with the E-money liquidity requirements. Records pertaining to the above liquid assets shall be made available for inspection by the Bangko Sentral at any time. BSFIs shall have in place control mechanisms to ensure prompt accounting and recording of liquidity requirements particularly for multi-currency wallets. Capital Requirements. The term capital shall be as defined under Sections 121-Q (combined capital accounts)/121-S (capital of NSSLAs). The required capital for EMI-NBFIs shall be the higher of: (a) the required minimum capitalization for NBFIs depending on NBFI type4 or (b) the required minimum capitalization based on EMI category as follows: 4 Cooperatives which are among the EMI-NBFIs shall maintain the higher of the required minimum capital for EMI-NBFIs under these guidelines and that prescribed by applicable provisions under Republic Act No. 9520 or the Philippine Cooperative Code of 2008.

Appendix B Name of EMI-NBFI Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s EMI Category Required Capital Large scale EMI-NBFI PHP 200,000,000 Small scale EMI-NBFI PHP 100,000,000 Review of aggregated transactions shall be done twelve (12) months after the commencement of EMI operations and quarterly assessment henceforth shall be done by the appropriate supervising department of the Bangko Sentral to assess the volume/value of EMI transactions. Consequently, an EMI-NBFI shall be classified as Large scale if the twelve (12) month average value of aggregated inflow and outflow transactions is equal to or greater than P25.0 billion. Once classified as large scale, the EMI-NBFI will no longer be classified as small scale unless approved by the Bangko Sentral. EMI-NBFIs are expected to comply with the P200M capital requirement within one year from date of reclassification. Notification and Reporting Requirements. BSFIs shall comply with the notification and reporting requirements as prescribed under Sec. 901-N and Appendices Q-3/S-2/N-1. In addition, BSFIs shall maintain records and submit the appropriate reports to the supervising department of the Bangko Sentral. BSFIs shall ensure that transaction and due diligence records are maintained for a period of at least five (5) years5, unless a longer period is required by law or by legal orders/processes. They shall likewise adhere to other relevant guidelines issued by the Bangko Sentral and other regulating authorities on record keeping and retention, and digitization of records as well as the manner of submission of required reports. All changes and enhancements to the E-money platform shall be reported in accordance with the reportorial requirements of EPFS to the appropriate department of the Bangko Sentral. 5 The reckoning date of 5 years is from the date of transaction or date of submission of documents

Appendix B Name of EMI-NBFI Gap Assessment on Circular No. 1166 dated 7 February 2023 BSP Regulatory Provisions BSFI’s Existing Controls Gap/s Action Plan/s Registration with the AMLC. In line with the authority of the Bangko Sentral to check compliance of BSFIs with Republic Act No. 9160, as amended, or the Anti-Money Laundering Act (AMLA), Republic Act No. 10168 or the Terrorism Financing Prevention and Suppression Act (TFPSA), their respective IRR, and other AMLC and Bangko Sentral issuances, BSFIs shall also secure a Certificate of Registration with the AMLC pursuant to the 2021 AMLC Registration and Reporting Guidelines.