Financial Crime World

Regulatory Compliance for FinTech Companies in Hungary

FinTech companies operating in Hungary must navigate a complex regulatory landscape to ensure compliance with various laws and regulations. In this article, we will outline the key points regarding regulatory compliance for FinTech companies in Hungary.

Licensing and Capital Requirements

  • Determine if services qualify as regulated activity: FinTech companies must assess whether their services are considered a regulated activity, requiring authorization from the Central Bank of Hungary (CBH).
  • Corporate forms and minimum share capital requirements apply: Various corporate forms and minimum share capital requirements apply to ensure regulatory compliance.

Anti-Money Laundering Provisions

  • Compliance with CBH’s supervision: FinTech companies must comply with anti-money laundering regulations supervised by the Central Bank of Hungary (CBH).
  • Alignment with EU’s 5th Anti-Money Laundering Directive: Requirements align with the EU’s 5th Anti-Money Laundering Directive to ensure a harmonized approach.

Data Protection and Cybersecurity

  • Compliance with GDPR and Hungarian Data Protection Act (Act CXII of 2011): FinTech companies handle personal data, subject to the General Data Protection Regulation (GDPR) and Hungary’s Data Protection Act.
  • Significant administrative fines for non-compliance: Non-compliance can result in significant administrative fines, highlighting the importance of adherence.

Outsourcing

  • No regulatory barriers for cooperation with incumbents: There are no regulatory barriers for cooperation between incumbents and FinTech companies.
  • Guidance from Recommendation No. 7/2020 from CBH: Recommendation No. 7/2020 provides guidance on determining if a given activity is considered outsourcing and outlines requirements for outsourcing agreements.

Restrictions

  • Case-by-case assessment based on type of service provided: FinTech companies are not subject to specific regulations or restrictions; their compliance needs are assessed on a case-by-case basis depending on the type of service provided.

Cross-Border Business

  • Hungary’s passport system encourages foreign market entry: Hungary’s passport system encourages FinTech companies to enter foreign markets, and recent investments suggest an increasing international focus.

Conclusion

While there are specific regulations for certain activities, Hungarian FinTech companies operate under a relatively flexible regulatory framework compared to other jurisdictions. However, compliance with these regulations is crucial to avoid penalties and maintain the industry’s reputation.