Financial Crime World

Hungary Strengthens Anti-Money Laundering Regulations for Financial Institutions

Enhanced Compliance Efforts Pay Off

The Hungarian government has made significant strides in strengthening its anti-money laundering (AML) regulations, solidifying the country’s position as a “largely compliant” member state of the Council of Europe. This development is expected to improve banking relationships and increase transparency of beneficial ownership information.

Key Stakeholders Affected by AML Regulations

  • Credit institutions
  • Financial service providers
  • Casinos
  • Certified tax experts
  • Lawyers
  • Custodian wallet providers

The Central Management of the National Tax and Customs Administration (NAV) is responsible for ensuring that these institutions adhere to the AML Law, alongside analyzing and responding to suspicious transaction reports.

Primary Legislation: Act LIII of 2017

Act LIII of 2017 on Preventing and Combating Money Laundering and Terrorist Financing (AML Law) serves as the cornerstone regulation governing AML requirements in Hungary. The law covers:

  • Customer Due Diligence (CDD) procedures
  • Risk assessment processes
  • Reporting obligations
  • Penalties for non-compliant companies

Compliance Requirements for Financial Institutions

To remain compliant, financial institutions must:

  1. Establish internal policies and provide AML training programs or hire employees with suitable prior knowledge.
  2. Conduct CDD under various circumstances, including:
    • Establishing new relationships
    • Executing transactions exceeding HUF 4.5 million
    • Trading in goods worth HUF 3 million or more
    • Betting above HUF 600,000
    • Suspicion regarding data provided by a client
  3. Collect and verify personal information from customers, including:
    • Full name
    • Nationality
    • Place and date of birth
    • Identification number
    • Mother’s maiden name
    • Place of residence

Ongoing Monitoring and Reporting Obligations

  • Implement ongoing monitoring procedures to detect suspicious activities.
  • Submit a Suspicious Activity Report (SAR) that includes relevant records about the customer and data related to suspicious transactions.

Record-Keeping and Penalties for Non-Compliance

  • Keep records of all customer transactions throughout the business relationship and for eight years afterwards, but regulators may request an extension of up to ten years.
  • Failure to comply with AML regulations can result in penalties, including fines of up to HUF 2 billion or even seizure of operations.