CZECH REPUBLIC Law and Practice Contributed by: Ondřej Mikula, Jan Šovar and Markéta Klabouchová, FINREG PARTNERS
Arbitrator, the Personal Data Protection Office etc, can review industry participants’ activities throughout their life cycle. Entities within certain professional organisations may also be subject to supervision and sanctions by these bodies. 2.13 Conjunction of Unregulated and Regulated Products and Services Industry participants can offer both regulated and unregulated products, but the scope and conditions vary depending on the status of the entity. In some cases (eg, payment institutions or investment firms), approval from the CNB is required. The CNB may impose certain condi - tions or even require that these additional activi - ties are performed via a separate entity if these activities hinder effective supervision. 2.14 Impact of AML and Sanctions Rules As mentioned in 2.9 Gatekeeper Liability , most activities by fintech companies in the Czech Republic, whether regulated or unregulated, are subject to AML/CFT legislation. This broad application stems from the Czech Republic’s gold-plating of the fifth AML Directive, bringing all virtual asset service providers (VASPs) under its scope since 2021. Entities subject to the AML/CFT rules must com - ply with national and international sanctions leg - islation, including a 2023 national sanctions list alongside EU and FATF lists. Obligations include verifying clients and beneficial owners against these lists and reporting suspicious transactions. Additionally, the revised EU Transfer of Funds Regulation (the “TFR” ) requires payment service providers and crypto-asset service providers (CASPs) to:
• ensure transparency in transfers by including payer and payee information; • have internal procedures for detecting suspi - cious transactions; and • implement restrictive measures. 2.15 Financial Action Task Force Standards AML/CFT and sanctions legislation in the Czech Republic generally follows the FATF standards, as it largely stems from EU legislation, which ensures FATF standards are applied uniformly across the EU. Additionally, the main AML/CFT supervisory authority in the Czech Republic, the FAO, incor - porates these standards into its opinions, guid - ance and supporting documents. 2.16 Reverse Solicitation In the Czech Republic, there are two potential reverse solicitation regimes. The first is the gen - eral reverse solicitation regime which may be applied to every type of service (regulated and unregulated). This reverse solicitation regime arises from the CNB’s interpretation of general EU case law (not related to the financial sec - tor) and it is therefore sometimes considered accepted market practice reverse solicitation. Accepted Market Practice Reverse Solicitation Under accepted market practice reverse solici - tation, no licensing requirement will be triggered where the client is located outside of the jurisdic - tion and the activities take place outside of the jurisdiction. In general, what is relevant is the place where the characteristic performance (which follows the standard EU doctrine) of the relevant licensable activity is provided, ie, the place where the client
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