Financial Crime World

Hungary Tightens Banking Compliance Procedures in Bid to Boost Anti-Money Laundering Efforts

Strengthened Regulations Earn Hungary a “Largely Compliant” Rating from the Council of Europe

Hungary has made significant strides in recent years to enhance its Anti-Money Laundering (AML) regulations, earning the country a “largely compliant” rating from the Council of Europe. As part of this effort, Hungary has implemented a comprehensive AML framework that requires financial institutions operating within the country to adhere to strict compliance procedures.

Key Provisions of the AML Law

According to Act LIII of 2017 on Preventing and Combating Money Laundering and Terrorist Financing (AML Law), all financial institutions established in Hungary or providing services within the country are subject to regulation. This includes, but is not limited to:

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

AML Supervising Body: Central Management of the National Tax and Customs Administration (NAV)

The NAV serves as the main AML supervising body in Hungary, responsible for ensuring that affected institutions follow the AML Law. The NAV cooperates with other governmental organizations, such as:

  • National Bank of Hungary
  • Chamber of Hungarian Auditors
  • Authorities in charge of gaming

Key Compliance Requirements

Financial institutions must establish internal policies and familiarize employees with them through training programs or hiring suitable staff. They must also conduct Customer Due Diligence (CDD) on new customers, which includes:

  • Collecting and verifying personal information from customers, including:
    • Full name
    • Nationality
    • Place and date of birth
    • Identification number
    • Mother’s maiden name
    • Place of residence
  • Verifying the provided information through comparison to government-issued documents (e.g., personal ID card)
  • Proving place of residence with one of the following documents:
    • Address card
    • Bank statement
    • Utility bill

Ongoing Monitoring and Reporting Requirements

Companies must implement ongoing monitoring procedures beyond initial verification, including:

  • Checking customers for presence on sanctions lists (e.g., OFAC, UN, HMT, EU, DFT)
  • PEP lists
  • Adverse media
  • Submitting Suspicious Activity Reports (SARs) that include relevant records about the customer and data related to suspicious transactions

Penalties for Non-Compliance

If a company fails to comply with the AML law, it can face penalties, including:

  • Mild to severe repercussions ranging from being issued a warning by regulators
  • Fines of up to HUF 2 billion (approximately $4.76 million)
  • Seizure of operations
  • Executive officers may also be on the hook for HUF 100,000 to HUF 500 million (approximately from $240 to $1.2 million)

Conclusion

Hungary’s continuous efforts to improve AML regulations demonstrate its commitment to enhancing security for customers and imposing stricter rules on financial institutions. Companies operating within Hungary should implement efficient compliance solutions with built-in AML/KYC features to navigate local regulations and avoid penalties.

To learn more about the benefits of AML/KYC solutions, contact Sumsub today.