Legal Status of Visa Travel Money Plastic Card.

      The credit agency, distributing Visa Travel Money plastic cards, defines Visa Travel Money as a prepaid financial product. The definition of a prepaid financial product is given in the Directive of the Central Bank of RF dated 3 July 1998, # 276- On the Procedure of Resident Credit Agencies Licensing to Distribute Credit Cards or Prepaid Financial Products. The Directive established the procedure of granting licenses to resident credit agencies to distribute credit cards or prepaid financial products of other issuers, making possible non-cash payments for goods (services) and/or encashment. For the purposes of the Directive, prepaid financial products mean organizations pecuniary obligations which in the process of their circulation substitute legal entities or natural persons requests of payment for goods or services, including pecuniary obligations in the electronic form.

      The Visa Travel Money card is intended for encashment. Visa Travel Money Card was issued by Thomas Cook company jointly with Visa International. To obtain the card it is not necessary to open a bank account and to maintain an irreducible balance on it.

      Visa Travel Money has no duration period and expires when the money are drawn out. Visa Travel Money per se is a travellers cheque in the electronic form.

      Visa Travel Money is protected by a secret personal identification number (PIN-code), the access to which permits to use the card for encashment in teller terminals of the Visa International payment system both within or without Russia.

      Visa Travel Money is advertised as a payment card to bearer. However, as we deem it, it is true, but with certain reservations. The card owner, in case of its loss, may, firstly, block its usage and, secondly, receive a new card in replacement of the lost one. Had Visa Travel Money been a card to bearer, it might be reissued only through a court procedure by analogy of restoration of rights for lost securities to bearer. Hence, it would be more correct to say that Visa Travel Money is of a bearer nature, since the conditions of its issue and circulation allows it to be used by another person to whom the owner hands over the card and notifies the PIN-code. At the same time, the person who has purchased it remains the owner of the card.

      Pursuant to the Directive of the Central Bank of RF dated 9 April 1999, # 536- On the Change in the Procedure of Resident Credit Agencies Licensing to Distribute Credit Cards or Prepaid Financial Products, credit agencies need not be licensed by the Central Bank of Russia to distribute payment and bank cards of other issuers, travellers cheques, as well as cheques and bills of exchange which are non- emissive securities in compliance with Russian law.

      In compliance with Russian law credit agencies are entitled to distribute payment and bank cards of other issuers under the license for banking operations. Since Visa Travel Money has been issued by a foreign issuer and allows to draw out cash in foreign currency, a credit agency distributing it must, respectively, obtain a foreign exchange license.

      Hence, Visa Travel Money plastic card is a payment card of a foreign issuer, which may be distributed by a Russian credit agency without a special authorization of the Central Bank of Russia, pursuant to a license for banking operations in foreign currency.

      A resident and non-resident of RF are entitled to obtain Visa Travel Money plastic card from the Russian credit agency distributing such cards.

      At the same time, it is necessary to take into account that para 8 of the Decree of the President of RF dated 23 May 1994, # 1006 On Implementation of Complex Arrangements for Timely and Complete Payment of Taxes and Other Compulsory Payments to the Budget sets forth a requirement providing for the obligation of banks and other credit agencies to inform tax authorities of the operations undertaken by natural persons (including non-residents) in the amount equaling to or exceeding $10,000, which is applicable to acquisition of Visa Travel Money card.

      Visa Travel Money card allows its owner to encash in foreign currency both in Russia and abroad. Owing to the bearer nature of the card, its owner may use it personally or hand it over to another person for use. In principle, an authorized user, if being commissioned by the owner, may dispose of the money in the interests of the owner, including outside of Russia.

      However, it should be noted at the same time that operations with money drawn out with cards abroad should also be performed in compliance with the Russian foreign exchange laws. Such operations fall under the term transborder payments using bank cards, i.e. payments in operations performed using bank cards outside the ountry where these bank cards were obtained. That is why exchange operations related to capital flow and transborder payments may be performed only when authorized by the Central Bank of Russia.

      This is also confirmed by the rule of para 2.6. of the Regulations On the Procedure of Credit Cards Issue by Credit Agencies and Settlement of Payments in Operations Using Such Cards approved by the Central Bank of RF on 9 April 1998, # 23-, pursuant to which the issuer is obliged to notify its clients about the necessity to obtain a mandatory license from the Bank of Russia to perform foreign exchange operations related to capital flow. In our opinion these regulations are applicable to the operations with payment cards of Visa Travel Money type, too.

      With respect to taking the card out of Russia, it is necessary to point out the following.

      A payment card has no exchange value. Pursuant to para 4, Art. 1 of the Law of RF On Foreign Exchange Regulation and Control exchange values are: foreign currency; securities in foreign currency - payment instruments (cheques, bills of exchange, letters of credit, etc), stock values (shares, bonds), and other debentures in foreign currency.

      Payment cards, including Visa Travel Money, are not attributed to securities, same as the credit cards, since they are not considered as such by law, as stipulated by Article 143 of the Civil Code of RF.
      Credit cards are subject to unrestricted transit across the customs border. The authorization of unrestricted transit across the customs border is confirmed by the letter of the State Customs Committee of RF dated 9 April 1993, # 01-13/3081 On Transit of Credit Cards And Their Impressions Across the State Border.

      This rule is also applicable to Visa Travel Money cards. On the other hand, a Visa Travel Money card, in terms of the purposes and the procedure of its issue, acquisition, and use is actually a travellers cheque in the electronic form. Travellers cheques are recognized as payment instruments in foreign currency, they can be taken out of the Russian Federation following the customs rules and must be declared. In this connection it cannot be excluded that a special regulation of taking plastic cards of Visa Travel Money type outside the Russian Federation may be adopted by the Central Bank of RF and the State Customs Committee.

Igor A.Prikhodko,
Doctor of Law,
Director & partner

Vladimir P. Sumin,
Chief expert, associate lawyer