Glossary of terms about retail payments supervision

Publication date: December 12, 2023
Last updated: June 17, 2024

Read the definitions of terms about retail payments supervision used in Bank of Canada supervisory policies and guidelines.

See also terms defined in:

• the Retail Payment Activities Act (RPAA)
• the Retail Payment Activities Regulations (RPAR)

A-C

A

activity-based exclusion

Exclusion for an activity that falls outside the scope of the Retail Payment Activities Act (RPAA). (In contrast, other activities performed by the individual or entity might be captured by the RPAA.)

administrative monetary penalty (AMP)

A monetary penalty issued by the Bank of Canada in a notice of violation to an individual, entity or payment service provider.

administrative monetary penalty (AMP) methodology

The methodology used to determine the penalty amount to impose on an individual, entity or payment service provider (PSP), as outlined in a notice of violation. This includes how the AMP criteria would be considered, taking into account the overall facts and circumstances of each case, which could include PSP data and metrics.

agent (also known as mandatary)

An individual or entity that performs retail payment activities within the scope of its authority as the representative of a payment service provider (PSP). This relationship is arranged by the principal of a PSP. Agents and mandataries are, for all intents and purposes, considered the same under the Retail Payment Activities Act.

anomalous event

An event or activity that deviates from standard or normal operations.

ascertain

The Bank of Canada’s duty to establish the total amount of expenses incurred for or in connection with the administration of the Retail Payment Activities Act.

authorized person

A person authorized—for verifying compliance with the Retail Payment Activities Act—to examine the records and inquire into the business and affairs of a payment service provider that performs retail payment activities.

availability

Services being accessible and usable on demand by an authorized entity; ensuring timely and reliable access to and use of a payment service, system, data or information.

C

case selection

The process to determine whether a referred case should be accepted and an investigation initiated.

compliance order

An order issued by the Governor’s delegate if they are of the opinion that a payment service provider (PSP) is committing or is about to commit an act that could have a significant adverse impact on an individual or entity outlined in section 94(2) of the Retail Payment Activities Act. This order may direct the PSP to:

• cease or refrain from committing an act or pursuing a course of conduct
• perform any acts that are necessary to remedy the situation

confidentiality

Ensuring that data or information is neither made available nor disclosed to unauthorised individuals, entities, processes or systems; preserving authorized restrictions on data and information access and disclosure.

conflict of interest check

A check to determine whether staff have a potential or actual conflict of interest that could require them to recuse themselves from a matter.

conflict of interest questionnaire

A questionnaire to help identify whether staff have a potential or actual conflict of interest in a matter.

court enforcement

An application by the Governor to a superior court for an order requiring an individual or entity to cease contravening or begin complying with:

• a provision of the the Retail Payment Activities Act (RPAA) and/or the Retail Payment Activities Regulations; or
• a Governor’s order made pursuant to section 94 of the RPAA.

D–F

D

designated violation

A type of violation identified in the Retail Payment Activities Act or Retail Payment Activities Regulations (RPAR) for which the Bank is able to issue a notice of violation against an individual, entity or payment service provider. The list of designated violations is set out in section 46 of the RPAR.

desk investigation

The collection of information and evidence (internally from Bank staff and management and, if necessary, externally from third parties or the payment service provider) as well as its review and analysis by the Bank of Canada.

duty to assist

The requirement, as stated in the Retail Payment Activities Act, for an individual or entity to:

• give all reasonable assistance to enable the authorized person to perform their functions
• provide any documents, information and access to data specified by the authorized person

E

end-user funds

Funds that a payment service provider holds on behalf of an end user.

end-user funds held

The total amount of funds held on behalf of end users (i.e., the ledger balance).

end-user funds safeguarded

The total amount of end-user funds placed in a safeguarding account.

end-user fund safeguarding requirements

The regulatory obligations of a payment service provider set out in section 20 of the Retail Payment Activities Act, sections 13 to 17 of the Retail Payment Activities Regulations.

end-user funds to be safeguarded

The total amount of end-user funds that must be placed in a safeguarding account (i.e., at a minimum, the amount of end-user funds held by the payment service provider by the end of the business day following the day of receipt).

enforcement tools

Tools used by the Bank of Canada to address designated violations of the Retail Payment Activities Act.

entity-based exclusion

Exclusion for an individual or entity entirely out of scope of the Retail Payment Activities Act (RPAA) and not needing to register with the Bank of Canada (see RPAA, section 9).

evidence

Information collected by the Bank of Canada related to an investigation.

exit interview

An interview conducted by the Bank of Canada at the end of an investigation to provide the payment service provider with preliminary findings.

F

follow-up notice

An order from the Bank of Canada to a payment service provider, requiring further information about a previously reported incident, in line with section 19 of the Retail Payment Activities Act.

G–I

G

Governor’s decision

A decision issued by the Governor’s delegate after conducting an independent review of certain Retail Payment Supervision decisions.

See “Governor’s review” for a list of these decisions.

Governor’s delegate

An officer of the Bank of Canada who is delegated the Governor’s powers, duties and functions under section 15(1) of the Retail Payment Activities Act.

Governor’s review

An independent review by the Governor’s delegate of certain Retail Payment Supervision decisions. The review can be requested by an individual, entity or payment service provider within 30 days of receiving one of these decisions:

• notice of refusal to register
• notice of intent to revoke registration
• notice of violation
• notice of default

I

integrity

Accuracy and completeness; no improper modification or destruction of a system, data or information.

interview

A Bank-initiated meeting between the Bank of Canada and affected parties, such as payment service providers, applicants, other individuals or entities subject to the Retail Payment Activities Act (RPAA), or relevant third parties, such as domestic or foreign regulators, experts, witnesses and informants. The meeting has at least one of three main purposes:

• to assist in the interpretation of facts or the collection of additional facts related to a potential violation(s) of the RPAA
• to receive information from a third party
• to communicate or discuss the preliminary findings of an investigation with an affected party (e.g., an exit interview)

investigation

The process in which the Bank of Canada collects information or evidence to determine:

• whether the key elements of a violation have been demonstrated, and
• if the Bank has reasonable grounds to believe that a violation has occurred.

J–L

L

late and erroneous filing (RPAR) ss.48(2) exceptions)

A type of violation that occurs when:

• a payment service provider does not submit a required report or notice to the Bank of Canada within a period specified in the Retail Payment Activities Act, or as prescribed in the Retail Payment Activities Regulations, or
• the submission contains inaccurate or incomplete information.

If this violation continues for 30 days or fewer, the penalty is $500 for each day. If it continues for more than 30 days, the penalty is calculated according to the administrative monetary penalties methodology and will range from $15,000 to $1,000,000.

M–O

M

mandatary

See “agent”

N

notice of compliance

An official record or notice issued by the Bank of Canada to a payment service provider (PSP) to indicate that:

• the Bank considers the PSP has complied with a s. 76 compliance agreement (76CA)
• no further proceedings may be taken against the PSP with respect to the violation(s) outlined in the agreement

notice of default

An official record or notice issued by the Bank of Canada to a payment service provider (PSP) to indicate that:

• the Bank considers the PSP has not complied with a s. 76 compliance agreement (76CA)
• the PSP is liable to pay the difference between the administrative monetary penalty (AMP) set out in the notice of violation and any portion of the reduced AMP that was paid, plus an additional AMP equal to 100% of the original AMP.

notice of violation

An official record or notice that is:

• issued and served on an individual, entity or payment service provider that the Bank of Canada believes on reasonable grounds to have committed a violation(s)
• published on the Bank’s website once the violation is deemed to have been committed (i.e., under subsection 78(1) or subsection (3) of the Retail Payment Activities Act) or confirmed to have been committed through the issuance of a Governor’s decision
• issued with or without an administrative monetary penalty (AMP); if an AMP is issued, it may be with or without an s. 76 compliance agreement (76CA).

P–R

P

payee

An individual or entity that is the intended recipient of funds from an electronic funds transfer.

payer

An individual or entity that consents to the initiation of an electronic funds transfer and provides the funds.

Prescribed supervisory information

Information designated in section 37 of the Retail Payment Activities Regulations that the Bank of Canada provides a payment service provider (PSP), which cannot be disclosed to third parties by the PSP.

proportionality

Alignment of risk management rigour with the impact that a reduction, deterioration or breakdown of the payment service provider's (PSP’s) retail payment activities could have on end users and other PSPs, indicated by factors including but not limited to the PSP’s ubiquity and interconnectedness.

protective elements

Framework elements including systems, policies, procedures, processes, controls and other means that are implemented to mitigate operational risks and protect assets and business processes.

R

reasonable grounds to believe

The threshold in the Retail Payment Activities Act that the Bank of Canada must meet if it believes a violation was committed before it can issue and serve a notice of violation on a payment service provider, individual or entity.

registration application fee

A fee paid by all registration applicants prior to their application being evaluated. In the Retail Payment Activities Act, this is referred to as the “registration fee.”

registration refusal

Determination by the Bank of Canada that an applicant does not meet the criteria in the Retail Payment Activities Act (RPAA) for registration and is not in scope of the Bank’s ongoing supervision, or should otherwise be refused registration at the Bank’s discretion in certain circumstances.

The Bank’s authority to refuse to register an applicant is set out in:

• paragraphs 48(1)(a)–(g) and subsection 48(2) of the RPAA, and
• subparagraphs 30(b)(i)–(ii) of the Retail Payment Activities Regulations (RPAR).

The Minister of Finance may also issue a directive to the Bank to refuse to register an applicant for any of the reasons cited in section 40 of the RPAA. Where such a directive is issued, the Bank must refuse the applicant pursuant to section 49 of the RPAA.

Such applicants are listed as a refused entity and explicitly notified by the Bank not to perform payment services as they are not registered. The Bank monitors these individuals and entities to ensure their compliance with the registration requirements under section 23 of the RPAA.

registration revocation

Revoking of a payment service provider’s (PSP’s) registration with the Bank of Canada under the Retail Payment Activities Act (RPAA). This action is taken by the Bank for reasons set out in section 52 of the RPAA and section 33 of the Retail Payment Activities Regulations (RPAR) or by the Minister of Finance for reasons set out in subsection 45(1) the RPAA.

The Bank’s authority to revoke a PSP’s registration is set out in subsection 53(2), section 54, subsection 55(1) and subsection 56(1) of the RPAA.

Such applicants are listed as a revoked entity and explicitly notified by the Bank not to perform payment services as they are not registered. The Bank monitors these individuals and entities to ensure their compliance with the registration requirements under section 23 of the RPAA.

registration status

The current status of a payment service provider's (PSP’s) registration: registered, refused or revoked (which also includes ceased). A PSP can have only one registration status. The Bank of Canada sends the PSP a notification of their registration status

registry

A list that the Bank of Canada maintains of registered payment service providers (PSPs). The Bank must make public:

• the name and address of each registered PSP
• any prescribed information in relation to the PSP, the activities it performs or its registration status (as set out in the Retail Payment Activities Act, section 26)

reliability target

Quantifiable measures of the performance level used to assess compliance with a payment service provider’s availability objectives.

Retail Payments Advisory Committee

A forum established by the Bank of Canada to gather industry expertise about the retail payment services landscape, composed of members who perform payment-related activities. Refer to the Retail Payments Advisory Committee's webpage.

risk-based approach

Alignment of supervisory rigour with the nature and amount of risk posed by the payment service provider (PSP) and that PSP’s particular circumstances.

S–U

S

s. 76 compliance agreement (76CA)

A formal agreement between the Bank of Canada and a payment service provider (PSP) if the Bank offers, as part of a notice of violation (NOV), to reduce by half the administrative monetary penalty amount(s) set out in the NOV. The agreement must identify which provision a violation relates to and provide corrective measures the PSP must fulfil.

s. 71 compliance agreement

A formal agreement between the Bank of Canada and a payment service provider (PSP) to implement measures to further the PSP’s compliance with the Retail Payment Activities Act and Retail Payment Activities Regulations. This agreement does not involve issuing a notice of violation or an administrative monetary penalty.

safeguarding account

An account that is not used for any other purpose than the safeguarding of end-user funds, as referred to in subsection 20(1) of the Retail Payment Activities Act.

safeguarding-of-funds framework

A written framework that must be established, implemented and maintained by payment service providers (PSPs) to achieve the following objectives, set out in subsection 15(1) of the Retail Payment Activities Regulations:

• end users have reliable access without delay to the end-user funds that are being held by the PSP; and
• end-user funds, or proceeds of the PSP’s insurance or guarantee, are paid to end users as soon as feasible in the event of the PSP's insolvency.

secure and liquid assets

Assets that can be easily and immediately converted into cash at little or no loss of value.

supervisory guideline

Document that clarifies the standards and practices the Bank of Canada expects payment service providers to incorporate into their business operations to meet requirements on:

• managing operational risks
• safeguarding end-user funds
• reporting on incidents and significant changes

supervisory policy

Document that clarifies what the Bank of Canada will do to carry out its supervisory role, including registration and enforcement activities.

supplemental investigation

An additional investigation the Bank of Canada must conduct if they do not collect sufficient evidence during a desk investigation. This type of investigation may involve the use of various tools and processes, such as a special audit or an on-site investigation.

T

temporary order

See “compliance order” for more information.

third party

Parties that a payment service provider (PSP) has a contract with, as well as those that it does not, depending on the PSP’s business arrangements and organizational structure. Examples include:

• third-party service providers
• agents and mandataries
• affiliated entities
• other PSPs
• financial market infrastructures (also known as clearing and settlement systems)

three certainties of trust

Certainty of intention: the person (the payment service provider) transferring the trust property (the end-user funds) does so with the intention that the property be held in trust for a third party (its end users);

Certainty of subject matter: the property that is subject to the trust (the end-users’ funds) is known, and the amount of such property that each end user is entitled to is also known; and

Certainty of objects: it is clear who the beneficiaries of the trust arrangement are (the payment service provider’s end users).

trust account

Any safeguarding account where the use of that account does not compromise the trust arrangement established between the payment service provider and its end users.

trust arrangement

An arrangement between a payment service provider and its end users that establishes and documents in writing a valid express trust, established under Canadian law.

two-year limitation period

The period outlined in s. 90 of the Retail Payment Activities Act that limits the Bank of Canada from issuing a notice of violation after the second anniversary of the day on which the Bank becomes aware of the alleged violation.

U

ubiquity and interconnectedness

Indicators of the impact that a reduction, deterioration or breakdown of a payment service provider’s (PSP’s) retail payment activities could have on end users and on other PSPs. Information the Bank of Canada would use to establish a PSP’s ubiquity and interconnectedness includes:

• the number of end users to which the PSP provides retail payment activities;
• the value of end-user funds held by the PSP;
• the value of electronic funds transfers in relation to which the PSP performed a retail payment activity;
• the number of electronic funds transfers in relation to which the PSP performed a retail payment activity; and
• the number of PSPs to which the PSP provides retail payment activities.

V–Z

V

valid express trust

A trust arrangement that satisfies the three certainties of trust.

W

warning letter

A non-legislative tool that identifies areas of non-compliance and seeks corrective action.

warrant

A legal document issued by a justice of the peace that authorizes a person designated under section 68 of the Retail Payment Activities Act (RPAA) to enter a dwelling house to verify compliance with the RPAA.