CNB notification of changes related to the amendment to the Foreign Exchange Act
The Czech National Bank and the Ministry of Finance have prepared an amendment to Act No. 219/1995
Coll., the Foreign Exchange Act, as amended (hereinafter referred to as the “Foreign Exchange Act”)
. The amendment is being submitted into the legislative process as part of an amending act
accompanying the bill of the new Act on Certain Measures Against Money Laundering and Terrorist
Financing. The main underlying reason for the preparation of the amendment to the Foreign Exchange
Act is Directive No. 2005/60/EC of the European Parliament and of the Council on the prevention of
the use of the financial system for the purpose of money laundering and terrorist financing, which
places new demands on member states in the area of combating money laundering and terrorist
financing. The amendment also implements Directive No. 2004/39/EC on markets in financial
instruments (MiFID).
The Foreign Exchange Act at present mainly regulates the activities of persons purchasing foreign currency based on a bureau-de-change licence and persons selling foreign currency in cash based on a foreign exchange licence. The entities regulated by the Foreign Exchange Act also include persons conducting non-cash foreign exchange transactions or rendering cash services. The most important intended changes for individual entities regulated by the Foreign Exchange Act include the following:
The Foreign Exchange Act at present mainly regulates the activities of persons purchasing foreign currency based on a bureau-de-change licence and persons selling foreign currency in cash based on a foreign exchange licence. The entities regulated by the Foreign Exchange Act also include persons conducting non-cash foreign exchange transactions or rendering cash services. The most important intended changes for individual entities regulated by the Foreign Exchange Act include the following:
- A requirement for “fit and proper” persons
All existing and future entities subject to regulation by the Foreign Exchange Act will have to prove that the persons who manage their business or who are the beneficial owners within the meaning of Article 3(6) of Directive 2005/60/EC, are fit and proper persons – i.e. that they have no criminal record and are, where relevant, sufficiently qualified to carry on bureau-de-change activities. Such requirements will also have to be proved by existing bureau-de-change licence holders and by holders of all kinds of foreign exchange licences no later than 18 months from the effective date of the new legislation. If they fail to do so, their authorisation will become null and void at the end of this period. - Registration for bureau-de-change activities
Natural persons and legal entities purchasing or selling foreign currency in cash will carry on such activities based solely on registration in the future. Bureaux de change will be registered and supervised by the Czech National Bank. Only persons who have completed a training course on the identification of counterfeit or altered money, organised either by the Czech National Bank or by an entity authorised to do so by the Czech National Bank, will be allowed to purchase and sell foreign currency in cash for the registered entity. Bureau-de-change activities will be exempt from Act No. 455/1991 Coll., on Trades and Entrepreneurial Activities, as amended. The new legal regulation will eliminate the current two-track system consisting in the fact that a bureau-de-change licence authorises the holder (an individual or a legal entity) only to purchase foreign currency in cash. Sale of foreign currency in cash is currently only possible with a foreign exchange licence, which, however, may be only granted to a legal entity which has been purchasing foreign currency in cash in accordance with the legal rules for 12 months. - Foreign exchange licence for non-cash foreign currency transactions
Foreign exchange entities will be authorised to conduct or intermediate only spot non-cash foreign currency transactions on the basis of a foreign exchange licence for non-cash foreign currency transactions. Financial derivatives where the underlying asset is a currency, as well as transactions executed with the aim of obtaining valuation changes, will be allowed only on the basis of a licence pursuant to special legal rules governing capital market undertakings (a licence for the business of an investment firm). The transition period for acquiring a new licence to conduct this type of transaction should be nine months from the effective date of this Act. - Foreign exchange licence to provide money services
Entities intermediating payments abroad and accepting payments from abroad (“money services”) will – like bureaux de change – be allowed to carry on this activity only through persons who have completed a training course on the identification of counterfeit or altered money, organised either by the Czech National Bank or by an entity authorised to do so by the Czech National Bank. The existing holders of this type of licence will have a transition period of 18 months from the effective date of the amendment to the Foreign Exchange Act to fulfil the new obligation. - Premises
All the aforementioned entities will be allowed to carry on activities registered or licensed pursuant to the Foreign Exchange Act only on premises that have been registered in advance with the Czech National Bank.