Hungary’s Anti-Money Laundering Defenses: A Thriving Financial Sector Braces Against Financial Crimes

Hungary, with a GDP of approximately €110.100 billion in 2015 and thirty-two banks, has a vibrant financial services industry. despite not being a financial hub. Yet, financial crimes, particularly money laundering, pose a significant threat.

Challenges Facing Hungary’s Financial Sector

According to the Hungarian National Risk Assessment:

1. Criminal organizations: A persistent threat due to their involvement in various forms of illegal activities.
2. Offshore businesses: Lack of transparency and regulatory oversight make them attractive for money laundering.
3. Money transfer services: Anonymous transactions make it difficult to trace the sources and motives of funds.
4. The absence of a centralized bank account registration: Facilitates anonymity in financial transactions.
5. Shell companies: Can be used for hiding true ownership and beneficiary information.

Strengthening Anti-Money Laundering Measures

In response to these risks, Hungary enacted new legislation in 2017 to enhance its Anti-Money Laundering (AML) measures. The Financial Action Task Force (FATF) endorsed these changes, ensuring alignment with international standards and EU Directives.

Under the AML Act, reporting entities must:

1. Conduct customer due diligence: Verify the identity of customers and Ultimate Beneficial Owners (UBOs) and individuals acting on their behalf.
2. Archive records: Maintain andarchive records and information.
3. Assess risks: Classify risks based on transactions or clients.
4. Implement a screening system: Use a system to identify potential suspicioustransactions or customers.
5. Share information: Report findings to the relevant authorities.

Hungary’s AML Supervisory Authority: NAV

The Hungarian Financial Intelligence Unit, a division of the Primary Management of the National Tax and Customs Administration (NAV), plays a crucial role in Hungary’s AML system. NAV centralizes the collection, analysis, and dissemination of suspicious transaction/activity reports from financial institutions. It collaborates with other investigative bodies, such as the Prosecutor General’s Office and the National Courts Office.

Other Entities Under AML Oversight

Apart from financial institutions, entities under the AML Act’s jurisdiction include:

1. The government
2. The Hungarian Bar Association
3. Law firms
4. Real estate agencies or brokers, and associated services
5. Bookkeepers
6. Tax experts and counselors
7. Suppliers of exchange services between virtual currencies and legal tenders
8. Custodian wallet providers
9. Providers of corporate headquarters services

Complementary Legislation

Two other essential pieces of legislation support Hungary’s AML efforts:

1. The Restrictive Measures Act: This lawmandates the freezing of financial assets and the prohibition of financial services for individuals and entities subject to EU and UN Security Council sanctions.
2. The AML Act: This legislation aims to prevent and combat money laundering and terrorist financing.

To adhere to EU legal actions and UN Security Council resolutions:

• Service providers must screen their client databases against lists of sanctioned persons and entities.
• Report any matches to the NAV.

Staying Ahead of Financial Crimes: The Role of Compliance Software

To combat financial crimes and meet international AML obligations, Comply with the Sanction Scanner, an AML compliance software developed by Sanction Scanner, offers a risk-based strategy. It conducts a thorough assessment of a company’s risk and helps prevent sanctions. For more information, contact Sanction Scanner and ask for a demo.