Decision on the Law on Payment Transactions of the Republika Srpska

2. “Adequate Cover” means the availability of sufficient funds to process payment orders from which the payment order is executed. Funds recorded as mere provisional credit to the originator’s Account do not constitute part of the required cover;

3. “Agreement” means the contractual or other agreed relationship between a bank and customer which governs the operation of Account (such as opening, its duration, and modification) and use of payment orders;

4. “Bank” in terms of this Law means (i) a legal entity that is engaged in the business of receiving money deposits or other repayable funds either under a banking license issued by the competent authority, or established by law as a bank; (ii) a legal entity other than a bank as defined in point (i) of this Article, authorized by law to receive deposits or participating in the Payment Transactions; or (iii) the Central Bank. A branch or other organization as part of a bank is a separate bank for the purpose of computing the time within which, or determining the place at or to which, action may be taken or notice or order must be given;

5. “Banking Day” means the part of the day during which the bank is open for the receipt, processing, and transmission of payment orders and other messages relating to payment transactions;

6. “Central Bank” means the Central Bank of Bosnia and Herzegovina;

7. “Clearing” means exchanging and processing Interbank payment orders for the purpose of calculating either bilateral or multilateral netted amounts owed by or to each bank for the settlement of payment orders included at each clearing cycle;

8. “Konvertible Marka” means the domestic currency of Bosnia and Herzegovina issued by the Central Bank;

9. “Customer” means an individual and any legal or physical person, including a Bank, having an Account with a bank;

10. “Destination Bank” means the Bank identified in a payment order in which payment to the payee in a credit transfer is to take place, or the payor’s Account in which a debit

transfer is held. It is the Bank which is to receive the last payment order in a payment transaction. In a credit transfer the Destination Bank is the payee’s Bank. In a debit transfer the Destination Bank is the payor’s Bank;

11. “Electronically” means the way of transfer by either on-line telecommunication or the off-line physical delivery of tapes, diskettes, or similar devices;

12. “Execution” means the carrying out the instructions contained in a payment order;

13. “Intermediary Bank” means a receiving bank other than the originating or Destination Bank;

14. “Funds” includes cash and deposits kept in Bank Accounts;

15. “Legal Entity” includes an enterprise, company, business association, or a public institution;

16. “Originating Bank” means the Bank which receives the first payment order initiating a payment transaction. In a credit transfer the Originating Bank is the payor’s Bank. In a debit transfer the Originating Bank is the payee’s Bank;

17. “Originator” means the Sender of the first payment order initiating the payment transaction. In a credit transfer the Originator is the payor. In a debit transfer the Originator is the payee;

18. “Passbook Account” is an Account under which debits and credits are advised to the Customer by the bank recording them in a Passbook originally given by the Bank to the customer and presented to the Bank by the customer (client) each time the account is changed;

19. “Payee” means the party who is to receive payment in a payment transaction;

20. “Payment Order” means an unconditional instruction given to a Bank to pay or collect a specific sum of money out of a designated Account;

21. “Payment Transaction” means a transfer of Funds from the Payor’s Account to the Payee or to the Payee’s Account. The Payor and Payee in a Payment Transaction may be the same or two different individuals or Legal Entities;

22. “Payor” means the party who is to make payment in a Payment Transaction;

23. “Receiver” means the participant whose Bank is to receive the last Payment Order in the Payment Transaction. In a credit transfer the Receiver is the Payee. In a debit transfer the Receiver is the Payor;

24. “Receiving Bank” means the bank to which the Sender’s payment order is addressed;

25. “Reserve Account” means the Reserve Account that under the Law of the Central Bank of Bosnia and Herzegovina a Bank must open and maintain on the books of the head office and main units of the Central Bank;

26. “Sender” means an individual or Legal Entity giving a Payment Order to a Receiving Bank;

27. “Third Party Processor” means a Bank or other Legal Entity authorized to perform Payment Operations and to provide clearing and/or settlement via computer or electronic communications services;

28. “Value date” means the Banking Day on which a Payment Order is to be acted on as instructed by the Originator;

29. “Restitution” is an action, which restores the previous situation by providing compensation to the injured party. Compensation for damages could involve two components: the actual damage sustained and lost profits. Restitution can be performed as in- kind restitution and as monetary reimbursement. This law envisages only monetary reimbursement;

30. “Inter-bank settlement”, for the purpose of this law, means payments of the amounts due from the payment orders, amongst banks, after the completion of the clearing process.

2. A Credit Transfer is a Payment Transaction originated by the Payor, who issues a Payment Order to his or her Bank instructing it to transfer Funds out of the Payor’s Account to the Payee or to the Payee’s Account;

3. A Debit Transfer is a Payment Transaction originated by the Payee, based on the Payor’s authority, instructing the Payee’s Bank to collect money from the Payor’s Account.

2. A Payment Transaction is carried out by the Payor’s Bank debiting the Payor’s Account and the Payee’s Bank either crediting the Payee’s Account or otherwise placing the Funds at his or her disposal, as instructed by the Originator. In an Interbank transfer, for each interbank Payment Order, the sending Bank settles with the Receiving Bank as provided in Article 13.

2. In a Credit Transfer, the Originator is the Payor, the Originating Bank is the Payor’s Bank, the Destination Bank is the Payee’s Bank, and the Receiver is the Payee;

3. In a Debit Transfer, the Originator is the Payee, the Originating Bank is the Payee’s Bank, the Destination Bank is the Payor’s Bank, and the Receiver is the Payor;

4. In an Interbank Transfer, beside acting for a Customer, a Bank may act for its own account and in its own name;

5. At least one Intermediary Bank is required in a Payment Transaction whenever the Originating Bank does not settle directly with the Destination Bank;

6. In a Payment Transaction a Bank may act for a Customer or correspondent Bank located outside Bosnia and Herzegovina, in accordance with existing regulations;

7. A Payment Transaction may be out of or into an Account held at the Central Bank in which case this Law applies as if the Central Bank is a Bank.

2. In a Debit Transfer, the advice of the Receiver’s death or adjudication of legal incapacity received by the Destination Bank has the same effect as the Receiver’s advice of revocation of authority under paragraph (1) of this Article;

3. A Customer whose Account was debited with the amount of a Payment Order carrying out a Debit Transfer, who contests the Originator’s authority and who objects to the debit in writing within seven days of learning of the debit to his or her Account, is entitled to the reversal of the debit unless the Destination Bank has been provided with evidence of the authority given by the Customer to the Originator.

2. The Originator in a Payment Order must accurately identify the Receiver and Destination Bank. Where the Payment Order identifies any participant in the Payment Transaction by name and number, a Receiving Bank is not obliged to confirm the consistency between the name and number and may carry out the payment on the basis either of the name or the number.

2. In a Debit Transfer, the Originating Bank shall carry out the Originator’s Payment Order, only upon being presented with proof as to the authority given by the Receiver and proof of Funds. Unless otherwise agreed, the Originating Bank is not obligated to provide the Originator with Funds or even provisional credit prior to the completion of the Debit Transfer. If the Originator’s Account is credited by the Originating Bank before the completion of the Debit Transfer, credit is provisional, and the Originator’s Account may be debited in the amount of the credit if the Debit Transfer is not completed as provided in Article 22 of this Law;

3. A Receiving Bank is obligated to carry out only a Payment Order which (i) is properly filled in and authorized or authenticated; (ii) properly identifies the Destination Bank; and (iii) describes the Receiver with reasonable certainty;

4. A Receiving Bank which declines to carry out its sender’s Payment Order is required to promptly advise the Sender of its refusal or rejection;

5. A Receiving Bank is obligated to carry out instructions contained in a Payment Order either on the Banking Day it received it or on its Value Date, if any, whichever is later. A Receiving Bank may establish a cut off hour not earlier than 12.00 noon after which any Payment Order received is deemed to be received on the following Banking Day;

6. An Originating Bank in a Credit Transfer and a Destination Bank in a Debit transfer that has received in the course of a Banking Day more than one Payment Order or other lawful instructions for the withdrawal of Funds from an Account, may process them in any sequence unless otherwise provided in any Law;

7. In receiving a Payment Order and acting in a Payment Transaction, and notwithstanding any agreement to the contrary, a Receiving Bank is obligated to comply with this Law and any applicable regulation, to act diligently and in good faith, to comply with common banking standards, and assist participants to complete satisfactorily the Payment Transaction. It must maintain confidentiality and act to the best interest of its Sender.

2. After the execution of a Sender’s Payment Order, at the request of the Sender, the executing Receiving Bank may nevertheless issue to its own Receiving Bank its own cancellation order, which is governed by paragraph (1) of this Article. A cancellation order issued to the Destination Bank by its Sender in the Payment Transaction is effective only it reaches the Destination Bank before the Payment Transaction is completed;

3. A cancellation order must accurately identify the Payment Order it seeks to cancel and may be given to the Receiving Bank in writing or electronically;

4. A Payment Order that has not been carried out by the Receiving Bank is withdrawn in the following cases: (i) at the close of the fifth Banking Day of the Receiving Bank after its receipt or Value Date, whichever is later, (ii) where the Receiving Bank learns of the death or adjudication of the legal incapacity of the Sender or (iii) where the Receiving Bank has been closed by the supervisory authorities;

5. No cancellation or withdrawal of a Payment Order is effective after the completion of the Payment Transaction.

2. The time for settlement under paragraph (1) of this Article is as follows:

3. Notwithstanding paragraph (2) of this Article, where settlement under paragraph (1)(b) is for bilaterally or multilaterally netted amounts of Payment Orders, in pursuance to an agreement or rules governing interbank clearing and settlement other than in the Central Bank, settlement occurs when settlement is completed according to the agreement or rules.

1. A Third-Party Processor must be authorized to perform Payment Operations and in providing clearing and/or settlement communication services, it must further comply with the Central Bank Law and other regulations;

2. A Bank and any other Organization Authorized to Perform Payment Operations may act as a Third-Party Processor on behalf of another Bank.

2. The Customer’s Payment Order acted on by the Third-Party Processor is deemed to be an instruction from the Originator to the Originating Bank, executed by the Originating Bank’s corresponding Payment Order sent to the Third-Party processor for onward transmittal to the Destination Bank;

3. Where a Bank authorizes a Third-Party Processor to receive Payment Orders sent to the Bank, a Payment Order received by the Third-Party Processor is deemed to have been received by that Bank acting as the Destination Bank.

2. Payment to the Receiver is to be made by crediting his or her Account not later than on the Banking Day following the completion of the Credit Transfer. Where such Account does not exist or where so instructed, the Destination Bank is to advise the Receiver promptly of the availability of Funds in the Destination Bank’s hands and pay him or her as instructed.

1. Where the Receiver has no preexisting Account with the Destination Bank, or where such Account has been closed or blocked for incoming payments, the Credit Transfer is completed upon payment of the Destination Bank to the Receiver;

2. Where the Receiver or the Receiver’s Account is not identified in the Payment Order received by the Destination Bank with adequate certainty so as to prevent the Destination Bank from being convinced that it is carrying out the Originator’s intention, the Destination Bank shall reject the Payment Order and advise its Sender of its rejection;

3. Where the Destination Bank either paid the Receiver or undertook to pay the Receiver prior to being paid, payment to the Receiver or the undertaking to pay is final and irrevocable and the Credit Transfer is deemed to have been completed, except that each Receiving Bank may be owed by its Sender. The Destination Bank’s undertaking to pay may be given directly to the Receiver or be under an interbank Agreement.

2. Until the expiration of the time prescribed in paragraph (1) of this Article, the Destination Bank may reject the Payment Order and become entitled from its Sender to a settlement for any amount paid to that Sender, by advising its Sender and the Originating Bank, if these are two separate Banks, of its rejection;

3. Having been advised of the rejection, each Bank Sender in the Payment Transaction other than the Originating Bank is under a corresponding obligation to advise its own Sender, and has a corresponding right, to obtain settlement from that Sender. Each Bank Sender in the Payment Transaction other than the Originating Bank is obligated to advise its own Sender of the rejection not later than on the Banking Day following the day it received notice of the rejection;

4. Having been advised of the rejection, the Originating Bank must promptly, and no later than on the following Banking Day, advise the Originator of the rejection, and may reverse any provisional credit previously accorded to the Originator at his or her Account, or otherwise, recover from the Originator any payment previously made to him or her for the Payment Order;

5. Where rejection of the Payment Order by the Destination Bank occurs notwithstanding (i) the knowledge of the Destination Bank of the Receiver’s authority for the Debit Transfer, (ii) the proper identification in the Payment Order received by the Destination Bank of an existing Receiver’s Account held at the Destination Bank and (iii) the availability of Adequate Cover in that Account, the Destination Bank may be liable to the Receiver for wrongfully dishonoring the Payment Order.

1. A Sender is responsible for a Payment Order or cancellation order issued by that Sender or under his or her authority, or that has been authenticated by the Receiving Bank under a commercially reasonable security procedure (herein subparagraph (2)) agreed upon between the Bank and that person. It is the responsibility of the Sender to prove that the issue of the Payment Order or cancellation order was made by an unauthorized person;

2. A security procedure may require the use of algorithms or other codes, identifying words or numbers, encryption, callback procedures, or similar devices. Comparison of a signature on a Payment Order or communication with an authorized specimen signature of the Customer is not by itself a security procedure.

1. Where a Credit Transfer is properly and timely completed, a Sender shall hold the Receiving Bank harmless, so that the Sender is obligated to reimburse the Receiving Bank for any loss sustained by the Receiving Bank in properly carrying out the Sender’s instructions contained in the Payment Order, including but not limited to, covering the amount of the Payment Order, commercially justifiable expenses, fees and interest charges;

2. In a Debit Transfer, each Sender warrants to its Receiving Bank that its own Payment Order is duly authorized, and is in accordance with the authorization of the Originator and Receiver, and that each is effective and valid.

2. An Originating Bank that carried out the Originator’s instructions has a corresponding entitlement for the recovery of the amounts due for the Payment Order from each Receiving Bank and from the Destination Bank that did not complete the Payment Transaction;

3. Rights under this Article are irrespective of either the existence or absence of fault on the part of any participant in the Payment Transaction.

2. Where the grossly negligent bank was other than the Originating bank, the Originator is entitled to recover under this Article from either the originating or the grossly negligent Bank. As between the two Banks, vis-U-vis each other, liability is to be allocated to the grossly negligent Bank, and where both were grossly negligent, according to the degree of their respective fault.

1. Where the amount paid to the Receiver exceeds the amount of the Originator’s Payment Order, each Sender is responsible for the amount of its own Payment Order. The erring Bank is entitled to recover from the Receiver the amount of overpayment;

2. Where the amount paid to the Receiver is less that the amount of the Originator’s Payment Order, the erring Bank is required to pay the difference and is entitled to recover that amount from the Originator;

3. Where payment was made to a Receiver other than that of the Originator’s Payment Order, the Credit Transfer is deemed not to have been completed. The erring Bank must honor the original instruction in the Payment Order but is entitled to recover from the Receiver who has mistakenly been paid the amount of Payment Order.

1. Subject to the terms of the Agreement between Bank and Customer a credit balance which constitutes Adequate Cover in an Account may be withdrawn by the Customer or paid by the Bank according to a Payment Order;

2. Paragraph (1) of this Article does not apply where the credit balance in an Account has been subject to a garnishment, seizure or a similar creditor process, where the Account has been closed, suspended or frozen, and where in carrying out the Payment Orders the Bank will be violating any law.

1. A bank will exercise ordinary care in handling payment orders;

2. A customer will exercise ordinary care in order to prevent forgery and unauthorized issue or alteration of payment orders to ensure that Payment Orders are clear and unambiguous;

3. Having exercised ordinary care in the interpretation of ambiguous Payment Orders, a Bank acting in good faith and without knowledge that it acts contrary to what the Sender actually meant, may carry out the Payment Orders.

2. For a Passbook Account, a Bank must facilitate the ongoing update of the Passbook upon presentation of the Passbook by the Customer. In each such an update, each credit or debit is posted to the Account since the previous update, and the final Account balance, must be recorded;

3. The Customer must exercise ordinary care in reviewing the Passbook updates and Account balances and advise the Bank, as soon as the Customer knows of any discrepancy or contested debit or credit. The Bank will investigate any discrepancy or contested credit or debit, and where the facts are agreed or determined, make all necessary adjustments and corrections to the Passbook Account.

2. The Bank and Customer will exercise duties under this Law, including any Regulations, and their Agreement in good faith.