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Evaluation Report on Hungary’s Compliance with FATF Recommendations

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The Financial Action Task Force (FATF) recommendations on anti-money laundering (AML) and combating the financing of terrorism (CFT) are crucial for maintaining global financial stability. This report evaluates Hungary’s compliance with these recommendations.

National Risk Assessment (NRA)

Background

  • The NRA was finalized in 2015 and adopted by the Anti-Money Laundering Sub-Committee.
  • The scope includes money laundering, crimes-generating assets, and terrorist financing.
  • Participation comprised representatives of relevant departments, competent authorities, and the private sector.

Identified Risks/Threats

  • Fraud
  • Corruption
  • Trafficking in human beings
  • Drug trafficking (Hungary is a transit country for illegal drugs)
  • Kidnapping and illicit arms trafficking

Shadow Economy and Cash Limitations

Key Issues

  • The relatively large shadow economy is a significant risk factor.
  • Widespread use of cash and lack of cash limitations are considered ML-vulnerabilities.

Terrorism Financing (TF)

Assessment

  • No serious indications of a terrorism-favorable environment in Hungary.
  • Competent authorities have under scrutiny the recent phenomenon of foreign terrorist fighters.

Overall Level of Effectiveness and Technical Compliance

Key Findings

  • Hungary has improved technical compliance with FATF recommendations in areas related to the ML offence and the HFIU.
  • Still significant shortcomings related to the TF offence, CDD, PEPs, transparency/beneficial ownership of legal persons and arrangements.

Assessment of Risks, Coordination, and Policy Setting

Limitations

  • The NRA does not make a critical analysis of the outcomes of risk factors identified by working groups.
  • Limited breadth and depth in identifying potential ML/FT threats and vulnerabilities.
  • No overall appreciation of ML risks apparent to the assessment team.

Financial Intelligence, Money Laundering, and Confiscation

Key Strengths

  • Hungary’s use of financial intelligence demonstrates characteristics of an effective system.
  • Moderate improvements needed in areas such as CDD, PEPs, transparency/beneficial ownership of legal persons and arrangements.