How to Launch a Regulated Fintech in Prague and European Union as a Foreign Company

Setting up a fintech operation in the Czech Republic as a foreign company requires navigating complex EU and national regulations, obtaining multiple licenses, and establishing robust compliance frameworks. This article provides practical guidance on company formation, regulatory licensing requirements, and key compliance obligations you must address before launching your fintech business in Prague and across the European Union.

Understanding the fintech regulatory landscape in the Czech Republic and European Union

The regulatory environment for fintech companies in Prague and across the European Union has become increasingly sophisticated and demanding. When you establish a fintech business as a foreign entity, you are subject to harmonized EU financial regulations alongside Czech national requirements implemented through the Czech National Bank (CNB). The regulatory framework applies regardless of your company's origin, meaning that foreign firms must comply with the same stringent standards as domestic operators.

The Digital Operational Resilience Act (DORA), which became effective on January 17, 2025, imposes strict requirements on operational resilience and cybersecurity management.

The Markets in Crypto-Assets Regulation (MiCA), fully applicable since December 30, 2024, establishes uniform rules for cryptocurrency service providers and crypto-asset issuance. Additionally, the Payment Services Directive 2 (PSD2)—implemented into Czech law via the Act on Payment System—requires banks and payment institutions to open their systems to third-party providers through secure APIs. These regulations form the foundation of the compliance obligations your fintech business must address.

What many foreign entrepreneurs underestimate is that these regulations interact in complex ways. A payment institution offering payment initiation services may simultaneously fall under PSD2 requirements, DORA's cybersecurity obligations, and anti-money laundering directives. The regulatory compliance framework is substantially more intricate in practice than regulatory summaries suggest, involving interdependencies and hidden compliance obligations that experienced legal professionals regularly encounter but which laypeople frequently miss.

Choosing your legal structure: company formation for foreign fintech operators

Before you can obtain any financial services license that allows for EU-wide operation ("passporting"), you must first establish your company as a legal entity in the Czech Republic. While the Czech Republic permits foreign companies to establish operations through branches, establishing a subsidiary is strictly recommended for fintechs intending to operate across the EU.

For most foreign fintech entrepreneurs, the limited liability company (s.r.o.) represents the optimal choice. This structure requires only minimal share capital, offers limited personal liability protection, and provides operational flexibility essential for fast-moving fintech businesses. Crucially, an s.r.o. is a distinct legal entity capable of holding a full license and exercising "passporting rights" to other EU member states.

Alternatively, foreign companies can establish a branch office (odštěpný závod) directly in the Czech Republic. A branch is not a separate legal entity but rather an extension of your foreign parent company. While branch registration typically requires fewer formalities, this structure exposes your entire parent company to liability for all obligations incurred by the Czech branch. Therefore, for non-EU investors, the s.r.o. is the only viable path for a pan-European strategy.

Essential steps for establishing your Czech company

When you register a company in the Czech Republic as a foreign entity, you must complete several mandatory steps. First, you need to select a unique company name and verify its availability in the Czech Commercial Register. The name must contain at least three distinct characters and cannot differ solely by location from existing registrations. Second, you must prepare your corporate documentation, principally the Memorandum of Association (Společenská smlouva), which must be notarized according to Czech law.

You must gather personal documentation for all founders and directors (jednatelé), including valid passports, proof of address, and certified birth certificates. For foreign nationals, you additionally need criminal record certificates from your country of origin and any country where you resided for more than 3 months in the last 3 years, translated into Czech by a certified translator.

Fourth, you must have all foreign-language documents officially translated into Czech by a qualified translator. This is not optional—the Czech authorities will reject applications containing untranslated foreign documents. The registration process itself involves submitting your documentation through the regional court that maintains the Commercial Register or directly via a notary. Once your company is registered, you must establish a registered office address (sídlo společnosti) in the Czech Republic.

Finally, you must open a corporate bank account and deposit your share capital. While some banks permit remote account opening for established companies, financial institutions typically require physical presence for initial account establishment due to strict AML requirements they must enforce. The combination of company formation, address registration, and bank account setup typically requires 3 to 4 weeks from initial application to full operational readiness.

Licensing requirements: which fintech activities require authorization

Understanding which fintech activities require licenses is essential because operating without proper authorization constitutes a serious regulatory violation with severe penalties. The Czech National Bank supervises most financial services in the Czech Republic and issues the licenses required for regulated activities.

Payment institution license

If your fintech business involves executing payment transactions, accepting money transfers, or operating payment accounts, you must obtain a Payment Institution License from the CNB. The requirements for this license depend directly on the scope of services you intend to provide.

If you intend to provide payment initiation services (enabling customers to initiate payments from their bank accounts through your platform), the minimum capital requirement rises to €50,000. For a full payment institution license covering services such as operating payment accounts, issuing payment instruments, or acquiring merchant payment transactions, you must maintain minimum initial capital of €125,000.

The payment institution license application requires comprehensive documentation. You must submit a detailed business plan covering your operational model, target customers, revenue projections, and competitive positioning. You must also document your organizational structure, internal control mechanisms, anti-money laundering procedures, and measures for safeguarding customer funds. At submission for a standard Payment Institution license, you must pay the administrative fee of CZK 100,000 (approximately €4,000).

The review process statutorily takes 3 months from the submission of a complete application, but in practice, due to interruptions for additional information requests, the process typically requires 6 to 9 months. One critical point that many applicants overlook: you cannot commence payment services operations while your application is pending. Providing regulated payment services without a valid license constitutes a serious breach of financial law with substantial fines and potential criminal prosecution.

Electronic money institution license

If your fintech business involves issuing electronic money (e-money), you must obtain separate authorization as an Electronic Money Institution (EMI). Electronic money typically means a digital representation of value issued against received funds that is accepted as a means of payment by third parties other than the issuer. The CNB requires minimum initial capital of €350,000 for electronic money institutions.

Beyond capital requirements, you must demonstrate a sufficient material, technical, personnel, and organizational base appropriate for managing electronic money issuance and payment services. The CNB pays particular attention to the business plan, which must demonstrate realistic financial projections, market analysis, and operational feasibility over three reporting periods.

The CNB also carefully scrutinizes the founders and management of electronic money institution applicants. The CNB's supervisory approach reflects concerns about potential money laundering risks through electronic money schemes, meaning that applicant suitability receives rigorous examination.

Investment services and cryptocurrency regulations

Your fintech regulatory obligations depend heavily on whether you trade financial instruments, manage investment funds, or provide services related to cryptocurrency assets. If your business involves managing customer assets invested in securities or cryptocurrency derivatives, the CNB requires separate authorization as an Investment Firm (Obchodník s cennými papíry).

Providers offering exchange services between cryptocurrencies and fiat currency must comply with MiCA requirements and typically require Virtual Asset Service Provider (VASP) authorization.

MiCA introduced phased implementation. The regulation covers crypto-asset issuers, service providers (CASPs), and trading platforms, with requirements including proper authorization, organizational governance, operational resilience testing (required by DORA), customer due diligence, and transaction monitoring.

Regulatory sandbox and innovation support

The Czech Republic has recently launched support initiatives for innovative fintech and distributed ledger technology (DLT) companies. While not a "sandbox" in the sense of a complete regulatory exemption, the Fintech Sandbox initiative provides a supported environment. Eligible companies can work with experts to validate their business models and test compliance approaches.

Selected companies can receive support (often valued up to roughly €50,000 per participant) in the form of consulting services and indirect support. Participation in innovation programs does not eliminate the need for proper licensing but rather facilitates the licensing process by providing expert guidance and clarity on regulatory requirements. This proves particularly valuable for foreign companies unfamiliar with Czech regulatory procedures and expectations.

microFAQ – Legal tips on company formation and licensing for fintechs

1. Can I operate my fintech business in the Czech Republic without establishing a Czech company?
No. Financial services licensing requirements, bank account operations, and regulatory compliance obligations all require a legal entity with a registered office in the Czech Republic (or an EU branch with passporting rights). Foreign parent company structures alone are insufficient.

2. Do I need Czech directors and shareholders, or can they all be foreign nationals?
You may have foreign ownership and management for an s.r.o. limited liability company. Directors and shareholders can be foreign nationals without Czech residency requirements, although having at least one resident director or senior manager facilitates bank account opening and CNB credibility.

3. How long does it typically take to establish a company and receive a payment institution license?
Company registration typically requires 5-10 business days. Payment institution licensing requires a statutory 3 months for assessment of a complete application, but with standard interruptions for clarifications, the reality is often 6-9 months. Total time from initial planning to operational readiness typically ranges from 6-12 months.

Compliance obligations: anti-money laundering and know your customer requirements

Once licensed, your fintech business must implement comprehensive compliance frameworks addressing anti-money laundering (AML), counter-terrorist financing (CTF), and know your customer (KYC) requirements. The Czech Republic implements AML/CFT obligations through the AML Act and related decrees enforced by the Financial Analytical Office (FAÚ) and the CNB.

The scope of AML/CFT obligations in the Czech Republic extends broadly, encompassing not only traditional financial institutions but also virtual asset service providers, payment institutions, and money transmission services.

Customer due diligence and KYC procedures

Your fintech business must establish robust Customer Due Diligence (CDD) procedures that verify customer identity before establishing business relationships. For natural persons, you must obtain and verify their full name, birth identification number or date of birth, gender, place of birth, address of permanent residence, and citizenship.

The identification procedure must occur before the business relationship commences. While in-person identification remains standard, the Czech AML framework permits alternative identification methods including electronic identification (BankID), qualified electronic signatures, or the "penny drop" method combined with document copies.

For remote financial services agreements, you must implement enhanced verification procedures. Under current rules, the first payment from a customer must originate from a bank account in the customer's name held at a credit institution operating in the EU or EEA, or be verified via a state-guaranteed electronic identity scheme.

Transaction monitoring and suspicious activity reporting

Beyond customer identification, your fintech business must establish transaction monitoring systems capable of identifying suspicious transactions and patterns indicating potential money laundering or terrorist financing. You must monitor customer activity on an ongoing basis and report suspicious transactions to the Financial Analytical Office (FAÚ) without delay. You must establish clear procedures for identifying suspicious activities and designating responsible personnel (AML Officer) who assess whether reporting to authorities is required.

The regulatory requirements for transaction monitoring and reporting are substantially more technical and procedurally complex than summaries suggest. Fintech companies frequently encounter difficulties determining whether particular transaction patterns trigger reporting obligations, whether aggregation of multiple related transactions crosses suspicious threshold levels, and how to document justifications for reporting decisions.

Enhanced customer due diligence for high-risk situations

Your fintech business must implement Enhanced Customer Due Diligence (EDD) procedures for customers presenting elevated risk profiles. These situations include remote financial services relationships, transactions with politically exposed persons (PEPs), and business relationships with high-risk third countries.

PEPs are defined as individuals entrusted with public functions and family members or associates of such individuals. For PEP relationships specifically, you must obtain senior management approval before establishing business relationships, establish the source of wealth, and implement enhanced ongoing monitoring.

Digital operational resilience and cybersecurity compliance

Regardless of your specific fintech business model, the Digital Operational Resilience Act (DORA) establishes mandatory cybersecurity and operational resilience requirements applicable to all financial institutions and their critical ICT service providers.

DORA, effective since January 17, 2025, requires your fintech business to establish comprehensive frameworks for identifying, assessing, and mitigating ICT risks. This encompasses vulnerability detection, implementation of security controls, and development of incident response procedures.

When your fintech business experiences significant ICT incidents affecting service availability, customer data security, or financial stability, you must notify the CNB within 24 hours of incident detection.

Your fintech business must implement operational resilience testing, including simulated cyberattack scenarios evaluating whether your systems can withstand disruptions and recover effectively. This testing occurs regularly and must address various threat scenarios, recovery procedures, and backup system functionality.

If your fintech business outsources critical functions, you must establish contractual relationships specifying security obligations, implement due diligence procedures evaluating service provider security posture, and conduct ongoing monitoring ensuring compliance with security standards.

The DORA compliance framework carries severe penalties for non-compliance. Competent authorities have the power to impose administrative penalties and remedial measures. For critical third-party ICT service providers, the European Supervisory Authorities can impose fines of up to 1% of the average daily worldwide turnover for each day of non-compliance.

microFAQ – Legal tips on DORA compliance and cybersecurity obligations

1. Does DORA apply to my fintech company even if I am not a regulated bank?
Yes. DORA applies to financial institutions including banks, payment institutions, investment firms, insurance companies, and authorized electronic money institutions. It also applies to critical ICT service providers supporting financial institutions. If your fintech provides services to regulated financial entities, DORA obligations likely extend to your operations.

2. What constitutes a "significant incident" requiring 24-hour notification?
Significant incidents include disruptions affecting critical functions, unauthorized access to customer data, and operational failures exceeding defined recovery time objectives or geographical spread. The specific thresholds are defined in DORA Regulatory Technical Standards (RTS).

3. Can I outsource my cybersecurity functions to third-party providers and rely on their compliance?
You may outsource functions but you remain legally responsible for oversight. You must conduct due diligence on service provider security posture, implement contractual obligations specifying security standards (as per DORA Art. 30), and conduct ongoing monitoring.

The AI Act: compliance obligations for AI-driven fintech services

The EU's Artificial Intelligence Act (AI Act), which entered into force in August 2024, establishes new regulatory obligations for fintech companies deploying artificial intelligence systems. The AI Act employs a risk-based regulatory approach defining four risk levels for AI systems.

High-risk AI systems, which the AI Act defines to include AI used for creditworthiness evaluation (credit scoring) and risk assessment in relation to life and health insurance, are subject to substantial obligations. These include comprehensive risk assessment, high-quality training datasets minimizing discriminatory outcomes, and robust cybersecurity standards.

Most AI Act rules for high-risk systems become applicable 24 months after entry into force (August 2026), providing fintech companies a transition period to establish compliance frameworks.

The AI Act applies broadly to fintech companies deploying AI systems with links to the EU market. Penalties for violations are severe: fines up to €35 million or 7 percent of annual worldwide turnover for prohibited AI systems; fines up to €15 million or 3 percent of turnover for violations of high-risk AI obligations.

Open banking and Payment Services Directive 3: future regulatory changes

The Payment Services Directive 3 (PSD3) and accompanying Payment Services Regulation (PSR) represent the next generation of EU payment services regulations. These proposals are currently in the legislative process, with adoption expected in the near future. PSD3 aims to strengthen open banking obligations by improving the performance of APIs and removing obstacles to third-party providers.

The new regulatory framework will introduce phased compliance requirements once adopted. Upon formal publication in the Official Journal of the European Union, affected financial institutions will typically receive an 18 to 24-month transition period before full compliance becomes mandatory.

Markets in Crypto-Assets Regulation and blockchain innovation

The Markets in Crypto-Assets Regulation (MiCA), fully applicable as of December 30, 2024, establishes the EU's regulatory framework for cryptocurrency services, stablecoin issuance, and blockchain-based financial activities.

MiCA applies to crypto-asset service providers (CASPs) offering exchange services between crypto-assets and fiat currencies, custody services, asset management, and related financial services.

Stablecoin issuers (Asset-Referenced Tokens and E-Money Tokens) face particularly stringent requirements. MiCA imposes requirements for full reserve backing, redemption at par value, segregated custody arrangements, and strict capital adequacy standards.

A distributed ledger technology (DLT) pilot regime established under EU regulation permits regulated financial institutions to trade and settle tokenized traditional assets on permissionless blockchains under defined conditions. This pilot creates regulated pathways for blockchain-based trading, though access remains limited to authorized financial institutions.

Identifying and managing cross-border regulatory complexities

When you establish a fintech company with operations spanning multiple EU jurisdictions, regulatory compliance becomes substantially more complex because national variations persist despite EU harmonization efforts. While MiCA, DORA, PSD2, and other regulations establish EU-wide frameworks, Member States retain discretion in implementation, supervisory approaches, and certain regulatory matters.

For payment institutions, this means navigating different notification procedures for passporting, complying with varying national consumer protection standards, and managing different AML/CFT reporting specifics in host countries. The Financial Passporting system permits European financial institutions to operate across EU borders based on home country authorization and notification to host country authorities.

ARROWS Law Firm, a leading Czech law firm based in Prague, European Union, regularly advises foreign fintech companies on cross-border regulatory compliance and maintains extensive experience with the regulatory complexities created by multi-jurisdictional operations.

Our lawyers combine in-depth knowledge of Czech financial services regulation with practical experience assisting clients navigating regulatory requirements across multiple EU jurisdictions.

Risk and Compliance Framework Table

Risks and Sanctions	How ARROWS (office@arws.cz) helps
Operating without proper license: Providing regulated payment services, electronic money issuance, or investment services without CNB authorization constitutes a criminal offense with imprisonment and substantial fines.	Licensing application preparation and representation: ARROWS Law Firm prepares complete licensing applications, coordinates with CNB, manages supervisory communications, and represents you throughout the licensing process ensuring applications meet all procedural requirements.
AML/CFT compliance failures: Non-compliance with AML/CTF obligations results in CNB/FAÚ fines up to millions of CZK (or % of turnover), plus potential revocation of operating authorization and criminal prosecution of responsible individuals.	AML/CFT compliance framework development: ARROWS Law Firm establishes customer due diligence procedures, transaction monitoring systems, suspicious activity reporting protocols, and compliance documentation ensuring full alignment with Czech and EU AML/CFT requirements.
DORA non-compliance: Failure to implement required ICT risk management, incident reporting, and operational resilience testing incurs effective and dissuasive administrative penalties, plus potential business operation restrictions.	DORA compliance implementation and documentation: ARROWS Law Firm develops ICT risk assessment frameworks, establishes incident detection and reporting procedures, implements resilience testing protocols, and prepares comprehensive DORA compliance documentation.
AI Act violations: Deploying prohibited or high-risk AI systems without required safeguards results in fines up to €35 million or 7% of turnover for prohibited systems and up to €15 million or 3% of turnover for high-risk systems.	AI Act compliance assessment and implementation: ARROWS Law Firm assesses whether your AI systems constitute high-risk applications, establishes governance and human oversight mechanisms, implements required documentation and transparency measures, and ensures compliance with AI training data and accuracy requirements.
Data protection violations: GDPR non-compliance in fintech operations handling personal data incurs fines up to €20 million or 4 percent of annual turnover, plus regulatory enforcement actions and customer lawsuits.	Data protection compliance and GDPR implementation: ARROWS Law Firm conducts data protection impact assessments, establishes data processing agreements with service providers, implements customer privacy protections, and ensures compliance with GDPR transparency and consent obligations.

Practical implementation: creating your fintech operations framework

Establishing a compliant fintech business requires integrating regulatory requirements across multiple dimensions: company formation, licensing, AML/CFT procedures, cybersecurity frameworks, and ongoing supervisory compliance. The CNB strictly enforces the "real seat" principle—a letterbox company will not receive a license.

Your fintech business requires physical presence in the Czech Republic, including a registered office and operational facilities from which management and compliance functions operate. While technology platforms may operate partially in cloud environments, regulatory authorities expect documented Czech presence with actual staff performing compliance, management, and supervisory functions.

You must establish segregated operational functions addressing different regulatory domains. Your compliance function handles AML/CFT procedures, customer due diligence, and transaction monitoring. Your technology function manages system development, cybersecurity, and operational resilience.

Governance and documentation requirements

Your fintech company must maintain comprehensive governance documentation addressing regulatory requirements. This includes internal control procedures, risk assessment methodologies, staff training protocols, incident response procedures, and supervisory communication procedures.

Your company must maintain detailed records documenting compliance decisions, customer due diligence procedures, transaction monitoring activities, and any supervisory interactions. These records serve as evidence of compliance during regulatory examinations and demonstrate your commitment to regulatory obligations.

Ongoing supervisory relationship with the CNB

Once licensed, your fintech company enters an ongoing supervisory relationship with the Czech National Bank. The CNB conducts periodic examinations assessing your compliance with licensing conditions, AML/CFT obligations, cybersecurity requirements, and operational procedures.

The Czech National Bank maintains a FinTech Contact Point established to facilitate communication between fintech companies and regulators regarding unclear regulatory issues and licensing matters. This contact point enables fintech companies to seek guidance on regulatory interpretation and supervisory expectations, clarifying requirements before finalizing business plans or technical implementations.

Executive summary for management

Key considerations for financial decision-makers launching fintech operations in Prague and the European Union:

1. Licensing requirements vary substantially by fintech business model: Payment institutions, electronic money institutions, investment firms, and cryptocurrency service providers each require distinct licenses with different capital requirements, application procedures, and supervisory obligations. Payment institution licensing requires €20,000 to €125,000 minimum capital depending on services offered; electronic money institution licensing requires €350,000 minimum capital.

2. Regulatory compliance infrastructure requires substantial ongoing investment and expertise: Anti-money laundering compliance, DORA cybersecurity obligations, AI Act requirements, and PSD2/PSD3 open banking standards create layered compliance obligations involving continuous monitoring, incident detection, staff training, and supervisory reporting.

3. Regulatory environment complexity and interconnected obligations exceed what independent management typically anticipates: EU financial regulations interact with national Czech requirements, creating procedural complexities, interpretation challenges, and hidden compliance obligations that experienced legal professionals address systematically.

4. International regulatory expertise and cross-border experience prove essential for fintech companies operating across multiple EU jurisdictions: National variations in implementation, supervisory approaches, and specific requirements persist despite EU harmonization. Companies requiring multi-jurisdictional licenses need guidance from legal professionals with experience navigating regulatory requirements across multiple Member States.

5. Professional legal support throughout company formation, licensing, and compliance implementation significantly reduces time-to-market, minimizes regulatory risk, and prevents costly errors and penalties: The combination of company formation procedures, license applications, compliance framework development, and ongoing supervisory interaction involves multiple procedural steps, documentation requirements, and regulatory communications where errors carry substantial consequences.

Conclusion of the article

Launching a regulated fintech business in Prague and the European Union as a foreign company requires navigating complex EU harmonized regulations and Czech national requirements while establishing robust compliance frameworks addressing AML/CFT obligations, cybersecurity requirements under DORA, AI Act compliance, and payment services regulations.

The compliance framework integrates multiple regulatory dimensions with interdependencies and procedural complexities that exceed what most fintech entrepreneurs independently navigate successfully. ARROWS Law Firm specialists regularly handle fintech licensing applications, regulatory compliance implementation, and ongoing supervisory relationships with the Czech National Bank, meaning we understand practical regulatory expectations and supervisory approaches from firsthand experience.

Our expertise extends across EU regulatory requirements and multiple Member State implementations, enabling us to guide cross-border fintech operations and coordinate compliance across jurisdictions where your business operates.

If you are establishing a fintech business in Prague or expanding across the European Union, do not underestimate the regulatory complexities and compliance burden involved. Early consultation with ARROWS Law Firm prevents costly mistakes, accelerates your regulatory approval process, and establishes compliant operational foundations that protect your business from sanctions and supervisory action.

Contact us at office@arws.cz to discuss your fintech business model and regulatory requirements.

FAQ – Frequently asked legal questions about launching a regulated fintech in Prague and the European Union

1. Can my fintech company operate from outside the Czech Republic and serve Czech customers through a website?
Generally, no. Financial services licensing requirements, regulatory supervision, and AML/CFT compliance obligations typically require physical presence and legal entity establishment in the Czech Republic or a valid passport from another EU member state. You cannot lawfully provide regulated payment services, electronic money issuance, or investment services to Czech customers from a third country without proper authorization. Foreign companies operating without proper licensing face regulatory enforcement, business blocking, substantial fines, and potential criminal prosecution. If you require guidance on establishing proper Czech presence and licensing, contact ARROWS Law Firm at office@arws.cz.

2. What is the difference between a payment institution license and an electronic money institution license?
Payment institutions execute payment transactions and operate payment accounts but do not issue electronic money. Electronic money institutions issue electronic money (digital representations of value like e-wallets or certain stablecoins) and can provide payment services related to their issued electronic money. Electronic money institution licensing requires higher minimum capital (€350,000 compared to €20,000-€125,000 for payment institutions) and additional organizational requirements. Your choice depends on whether your business model involves issuing your own digital value or primarily executing transactions. If you need clarification on which license applies to your specific business model, write to ARROWS Law Firm at office@arws.cz.

3. How long does it take to obtain a payment institution or electronic money institution license from the Czech National Bank?
The formal licensing review process statutorily requires 3 months from the submission of a complete application. However, actual time-to-license frequently extends longer (often 6-12 months) because the CNB requests supplementary information, requires clarifications, or identifies compliance gaps requiring remediation. Many applicants underestimate the feedback and revision cycles involved. Prior company formation and bank account establishment typically require an additional 4-6 weeks. Experienced legal professionals familiar with CNB expectations help avoid delays by ensuring your application is complete, well-documented, and addresses known supervisory concerns from initial submission. If you are planning fintech establishment and want to understand realistic timelines, consult ARROWS Law Firm at office@arws.cz.

4. Do I need to hire staff in the Czech Republic, or can I manage my fintech business primarily from my home country?
Regulatory authorities expect your fintech company to maintain a "real seat" in the Czech Republic with actual staff performing management, compliance, and operational functions. Virtual management from abroad without Czech presence or staff does not satisfy regulatory expectations and could jeopardize your licensing. You must have Czech-based personnel handling compliance functions (AML Officer), customer service, and operational management. The size of your Czech staff depends on your business model, but authorities expect documented evidence that meaningful operations occur within Czech jurisdiction. For clarification on specific staffing requirements appropriate to your business model, contact ARROWS Law Firm at office@arws.cz.

5. What happens if I fail to comply with DORA cybersecurity requirements or do not report significant ICT incidents within mandated timelines?
Non-compliance with DORA requirements results in substantial administrative penalties. For critical third-party providers, fines can reach 1% of average daily worldwide turnover. For financial entities, penalties are determined by member states but must be effective and dissuasive. Failure to report significant incidents within 24 hours of detection triggers additional penalties. Beyond financial consequences, DORA non-compliance reflects serious regulatory violations that damage your company's reputation with supervisors, customers, and business partners. If you face questions about DORA compliance requirements for your specific business operations, reach out to ARROWS Law Firm at office@arws.cz.

6. Does my fintech company need to comply with the AI Act if I use artificial intelligence for credit decisions or fraud detection?
Yes. The AI Act applies to all fintech companies deploying AI systems with nexus to the EU market. If you use AI for credit scoring, customer profiling, or risk assessment for life/health insurance, these systems likely constitute high-risk AI applications requiring comprehensive risk assessments, risk mitigation measures, training data quality controls, documentation, activity logging, human oversight mechanisms, and demonstrated accuracy. Failure to implement required AI Act safeguards results in fines up to €15 million or 3% of turnover for high-risk systems. For assessment of your specific AI applications and compliance obligations, contact ARROWS Law Firm at office@arws.cz.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. Although we strive for maximum accuracy in the content, legal regulations and their interpretation evolve over time. To verify the current wording of the regulations and their application to your specific situation, it is therefore necessary to contact ARROWS Law Firm directly (office@arws.cz). We accept no responsibility for any damage or complications arising from the independent use of the information in this article without our prior individual legal consultation and expert assessment. Each case requires a tailor-made solution, so please do not hesitate to contact us.