New regulation applicable to Fintech companies in Honduras

By: José Ramón Paz Morales

On October 28, 2021, Decree No. 83-2021 was published and entered into effect, by means of which the National Congress decreed: “to regulate the organization, operation and functioning of national and foreign legal entities that provide payment and transfer services, as well as to regulate these services”.

Decree No. 83-2021, additionally established that legal entities wishing to provide payment and transfer services to individuals and legal entities residing in Honduras, must obtain authorization from the Central Bank of Honduras (BCH) or register in the registry kept for such purpose by said Institution, in accordance with the regulations issued by the BCH.

The BCH has been working on a draft regulation to regulate the provisions of Decree No. 83-2021, and socializing it with different sectors. The draft defines electronic payment and transfer services as: (i) Conversion of physical money to electronic money and vice versa, (ii) Payment gateways, (iii) Point-of-sale terminals, (iv) Domestic transfers, (v) International remittance transfers, and (vi) Any other service defined by the BCH, through a resolution of its Board of Directors, (hereinafter all these electronic payment services will be referred to in this article as “Regulated Services”).

In addition to the registration and updating requirements, some of the regulatory obligations applicable to the Regulated Services shall be:

Payment aggregator gateways, must keep the available balance of the deposit account, electronic payment account or electronic wallet updated.
Payment gateways with an aggregator model must include in the user’s account statement the name of the merchant where the transaction was made.
Aggregator gateways that use cardholder information must be certified in the PCI Security Standard Council (Payment Card Industry Data Security) according to their transaction levels.
In the event that the BCH establishes transactional limits on payment gateways by means of a resolution, this type of provider must comply with these limits.

Article 48 of the bill establishes that the BCH may regulate the minimum capital of Regulated Service providers, which is the only provision in the bill that seeks to regulate equity or corporate aspects.

It is worth mentioning that in Article 38 of the draft, it is interpreted that the Regulated Services providers will have to comply with policies and procedures related to the prevention and detection of the crime of money laundering. It is not expressly stated that they will be financial or non-financial regulated entities (APNFDs).

As can be seen from the above, Regulated Services providers are currently required to register with the BCH under the provisions of Decree No. 83-2021, an obligation that will have to be fulfilled once the regulations issued by the BCH enter into force, and must also adapt their business to comply with the regulatory requirements contained in such regulations. It is therefore recommended that Regulated Service Providers be aware of the entry into force of this regulation and seek legal advice to structure the business and/or modify the business in case they are already operating in the Republic of Honduras.