For example, many of the suggested protections relating to fund safeguarding may already be contained in non-trust related documents, such as the contract between the customer and EMSP and it may be worth considering whether these could be enhanced.
These rules could consist of duties on the EMSP which are both express (i.
As outlined earlier, under the E-Money Regulations, an EMSP is required to open a trust account at a commercial bank.
The E-Money Regulations could enhance fund isolation protection by requiring the EMSP to use a trust deed and include a declaration of trust as one of the provisions in the trust deed which specifies that the EMSP holds customers' funds on trust for the customer.
These fund safeguarding rules can reduce liquidity risk (by ensuring the EMSP maintains sufficient liquidity) and operational risk (by requiring the EMSP to have adequate safeguards in place to protect customers' funds).
These can take the form of trustee duties specifying that the EMSP must pay all customers' funds into the trust account and that customers' funds cannot be used to finance the EMSP's operating expenses.
The E-Money Regulations grant RBM extensive monitoring powers over the EMSP's accounts, including the trust account, through for example auditing requirements for the EMSP, and powers of RBM to verify such audits.
Protector powers, responsibilities, and duties include requiring RBM to comply with a number of duties when serving as a protector, specifically to act in the best interests of customers, (283) to require the EMSP to provide it with additional audits of the trust account, (284) to remove an EMSP as trustee of the trust where it deems this necessary, (285) to refuse to provide consent to the EMSP's proposed application to appoint a new person as a trustee, (286) and to revoke an EMSP's approval to provide e-money for failing to operate in the interests of the customers.
In turn this is because of their power to enforce the terms of the trust by suing the EMSP (as trustee) for breaches of the trust's terms.
This power may authorise RBM to require the EMSP to pay customers' funds to customers if the fund is terminated.
Under the E-Money Regulations, EMSPs can use a tiered KYC approach, (252) and the Regulations provide detail on how such a tiered approach would operate.
It should also be borne in mind that additional regulatory costs may discourage EMSPs from expanding their services into rural areas of Malawi, or providing e-money altogether; however, the importance of proper customer protection provisions cannot be underestimated in building customer trust and ensuring the delivery of effective services.