Financial Crime World

FINTECH BUSINESSES IN DENMARK: KEY REGULATORY CONSIDERATIONS

Denmark has implemented various regulations to govern fintech businesses operating within its jurisdiction. These regulations aim to ensure that fintech companies comply with anti-money laundering and terrorist financing requirements, as well as consumer protection standards.

Payment Services

Fintech companies offering payment services must obtain a licence under the Payments Act, which implements the EU’s Payment Services Directive (PSD2). The act requires payment institutions to be licensed if they perform payment services, such as:

  • Processing payments
  • Issuing electronic money

Investment and Crowdfunding

Fintech businesses involved in investment activities, including:

  • Establishing or managing undertakings for collective investment in transferable securities
  • Engaging in crowdfunding activities

must comply with the following regulations:

  • The Investment Association Act
  • The Danish Capital Markets Act
  • The EU Market Abuse Regulation (2014/596), if their scheme constitutes equity crowdfunding

Alternative Investment Funds

Managers of alternative investment funds are regulated by the Alternative Investment Fund Managers Directive (AIFMD). The size of the assets under management determines whether a manager needs to be registered or licensed. Authorised managers must comply with all requirements, while registered managers must adhere to limited requirements.

Peer-to-Peer and Marketplace Lending

While peer-to-peer lending is not subject to bespoke regulation in Denmark:

  • Lenders using these platforms are capped at an annual percentage rate of 35% for consumer loans

Crowdfunding

Fintech companies engaging in crowdfunding activities may be subject to the following regulations:

  • The Danish Fundraising Act
  • The Capital Markets Act
  • The EU Market Abuse Regulation
  • The European Crowdfunding Service Providers Regulation (2020/1503), if the activity involves matching business funding interests of investors and project owners through a crowdfunding platform

Invoice Trading

Invoice trading is not regulated in Denmark, except for factoring arrangements:

  • Which are subject to anti-money laundering requirements and registration with the Financial Supervisory Authority

Payment Data Protection

The Payments Act severely restricts the processing and use of payment data. Fintech companies must ensure that customer or product data is protected in accordance with these regulations.

Insurance Products

Fintech companies selling or marketing insurance products in Denmark require a licence from the Financial Business Act, unless they are exempt:

  • Insurance activities generally trigger a licensing requirement

Credit References

Credit information services and credit information bureaus in Denmark must adhere to:

  • The EU General Data Protection Regulation
  • The Danish Data Protection Act
  • Obtain a licence from the Danish Data Protection Agency prior to commencing data processing

Conclusion

Fintech businesses operating in Denmark must comply with various regulations, including those related to payment services, investment and crowdfunding, alternative investment funds, peer-to-peer lending, invoice trading, insurance products, credit references, and data protection. Failure to comply may result in regulatory action or legal consequences.