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The Working Group on Payment Systems and Banking of the American Bar Associationís Jurisdiction Project is emphasizing the jurisdictional issues that arise over the transfer of funds that are necessary for the evolution of electronic commerce. Historically, payments that arise through commercial transactions are sent by and through financial institutions. Typically, those institutions have an established and comprehensively regulated infrastructure to allow the free and certain flow of currency or credit from one party to another. Also historically, those payments have been sent predominantly on behalf of a local customer or someone with a physical presence in the same jurisdiction as the financial institution. Advances in technology, including the Internet, allow additional types of institutions to provide financial services across political boundaries and allow both traditional financial institutions and others to offer new products and services. It has become more difficult to maintain traditional distinctions among banking, securities, insurance and fund transfer services as they all become rendered by means of digitized files. Thus, the ranges of providers, of customers, and of products and services have all expanded, while the boundaries between them have blurred.
In almost every country, financial institutions and other financial services providers are heavily regulated, if not direct or indirect arms of the government. Typically, nation states and their major political subdivisions have strong interests in controlling, and even attempting to direct, the payment systems and financial services provided within their boundaries, as well as in protecting their citizens against harm from fraudulent substandard financial services and in generally insuring the safety and soundness of their financial systems.
The predominant jurisdictional questions the group is addressing therefore include: How will we resolve the jurisdictional issues such that financial institutions and other providers have some meaningful guidance about the laws that govern the payment systems, but customers also have a meaningful forum in which to address any grievances that may arise? How will those governments effectively exercise their regulatory jurisdiction, since the nature of cyberspace makes it more difficult for them to enforce their regulations effectively against foreign financial institutions?
This presentation will (1) give a brief overview of the thinking of our Working Group, and (2) will use the work of the Banking and Payments Systems portion of the Project as a vehicle for attempting to address some of the ultimate issues that the Project as whole wishes to resolve.