AML in Hungary

Hungary’s cash-based economy reached a GDP of approximately EUR 110.1 billion in 2015. Despite not being a financial hub, the nation boasts a flourishing financial services sector, primarily anchored by the banking industry comprising thirty-two banks. Typically, 1-3 percent of bank clients are classified as high-risk.

In 2015, Hungary established its National Risk Assessment, last updated in 2018, pinpointing key threats:

1. Criminal organizations
2. Offshore businesses
3. Money transfer services
4. Lack of centralized bank account registration
5. Shell companies

In 2017, Hungary enacted legislation to prevent money laundering and counter terrorist financing, spurred by a Financial Action Task Force (FATF) evaluation. This legal framework aligns with FATF, global, European standards, as well as Council of Europe and European Union (EU) Directives.

The AML Act imposes key duties on reporting entities in line with the 4th and 5th AML Directives, such as:

– Customer due diligence (e.g., customer identity verification)
– Identifying ultimate beneficial owners and customer representatives
– Gathering, storing, and maintaining records
– Assessing and categorizing risks
– Utilizing a screening mechanism
– Sharing (reporting) data on suspicious transactions/customers.

The Hungarian Financial Intelligence Unit, a part of the Primary Management of the National Tax and Customs Administration (Nemzeti Adó- és Vámhivatal or “NAV”), serves as the central authority responsible for receiving, analyzing, and disseminating information regarding suspicious transactions and activities. The NAV collaborates with various investigative bodies, including the Prosecutor General’s Office and the National Courts Office.

Other entities empowered to supervise compliance with the AML Act and the Restrictive Measures Act include:

– The government
– The Hungarian Bar Association, which, as per the rule issued by the Minister of Administration and Justice, pertains to individual practitioners and one-person law firms in accordance with Article 38 of Act CXXXVI of 2007 on the Prevention of Money Laundering and Terrorist Financing (“AMLA”).
– For law firms with multiple members, the rule is developed internally based on Article 38 of the AMLA and accepted by the regional bar.
– The NAV oversees real estate agencies, brokering, and related services, as well as bookkeepers, tax experts, tax counselors, providers of virtual currency-to-legal tender exchange services, custodian wallet providers, and corporate headquarters service providers.

• The Act on Restrictive Measures: Enforcing EU and UN Security Council-Imposed Restrictions on Liquid Assets and Other Financial Interests.

• The AML Act: Combating and Preventing Money Laundering and Terrorist Financing.

The Act on Restrictive Measures compels the freezing of liquid assets and other financial holdings, coupled with the prohibition of providing financial services. For the comprehensive execution of legal measures outlined by the EU and relevant resolutions from the United Nations Security Council, which involve imposing constraints on liquid assets and other economic interests, service providers are obligated to cross-reference the personal information of their entire client base with the data of individuals listed in EU legal measures and pertinent UN Security Council resolutions. In instances where the screening outcomes reveal that an individual is subject to restrictive measures pertaining to liquid assets or other financial interests, or their data corresponds with that of an entity or individual on the consolidated roster of effective restrictions mandated by the European Union or the United Nations, the service provider is required to alert the NAV.