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Compliance Best Practices for Financial Institutions in Croatia

As financial institutions look to expand their services and reach new customers in Croatia, they must navigate a complex regulatory landscape. In this article, we will explore the key compliance considerations that financial institutions should be aware of when providing banking as a service (BaaS) in Croatia.

Regulatory Environment

While there are no specific guidelines on BaaS published by the Croatian National Bank (CNB), the provision of these services is subject to relevant Croatian laws and regulations. This lack of developed regulatory environment means that interested parties should seek specific advice from legal advisors and eventually the regulator before proceeding with any BaaS implementation.

Use of Agents/Representatives

Financial institutions are allowed to use agents or representatives for the provision of their services in Croatia, provided they are duly passported with the Croatian regulator. However, certain limitations may apply in particular cases. For example:

  • Distributors of e-money institutions are not allowed to issue electronic money.

Restrictions on Use of Agents by Foreign Passported Financial Institutions

There are no specific restrictions on the use of agents by foreign passported financial institutions. However, entities providing permanent services would typically need to establish a local presence in the form of a branch.

Outsourcing

Outsourcing is explicitly regulated by three notable pieces of legislation relevant for BaaS:

  • The Credit Institutions Act
  • The Payment System Act
  • The Electronic Money Act

Essentially, externalisation requires:

  • Notification to the regulator
  • Adequate risk management
  • Allowing direct supervision over the externalised business

Sandboxes/Hubs

There are no dedicated sandboxes or hubs organized by the regulator for BaaS testing and development. Financial institutions should consider seeking specific advice from legal advisors before proceeding with any BaaS implementation.

Conclusion

Providing BaaS in Croatia requires a deep understanding of the complex regulatory environment. Financial institutions must carefully navigate the use of agents, outsourcing, and other compliance considerations to ensure successful implementation.

At Kinstellar, our team of experts is here to help fintech businesses navigate these complexities and achieve success in the Croatian market.

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