Financial Crime World

Hungary’s AML Regulations: Understanding Your Obligations as a Business in Hungary

Hungary has made significant strides in enhancing its Anti-Money Laundering (AML) framework, moving towards European and international standards. The Council of Europe recognizes Hungary as a “largely compliant” member state due to its efforts to boost banking relationships and transparency of beneficial ownership information.

Hungary’s Compliance with AML Recommendations

According to the Financial Action Task Force (FATF), Hungary complies with 32 of its 40 recommendations, with some areas still needing improvement, such as those related to non-profit organizations, new technologies, and cash couriers.

Implications for Businesses

This article aims to provide a guide for understanding the implications of Hungary’s AML regulations for various businesses.

Who’s Subject to the Regulations?

Financial institutions based in Hungary or EU member states that offer services within the Hungarian market must adhere to these regulations. These entities include:

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

Determining the appropriate regulatory body depends on the specific institution and the services it extends. The Central Management of the National Tax and Customs Administration (NAV) is the primary supervisory body for most financial institutions.

Key Regulatory Bodies

The NAV is responsible for ensuring all regulated entities follow the AML Law and respond to suspicious activity reports. Collaboration with other relevant bodies like:

  • The National Bank of Hungary
  • The Chamber of Hungarian Auditors
  • Relevant gaming authorities

The Main Regulation

The Hungarian regulatory landscape revolves around Act LIII of 2017 on Preventing and Combating Money Laundering and Terrorist Financing (AML Law). Compliance with the European Union’s 4th, 5th, and 6th AMLDs is essential.

How to Adhere to the Regulations?

To maintain compliance, businesses must:

  1. Implement Internal Policies: approve and modify internal policies as necessary and in collaboration with relevant authorities.
  2. Educate Employees: ensure familiarity with AML regulations through training or hiring relevant staff.
  3. Customer Due Diligence (CDD): perform CDD for new clients, significant transactions, or suspicious activities.
    • Document full name, nationality, date of birth, identification number, mother’s maiden name, place of residence, and government-issued documents.
    • Record all transactions and supporting documents for a minimum of eight years.
    • File a Suspicious Activity Report (SAR) within five business days if reasonable suspicion exists.

Penalties for Non-Compliance

Failure to comply with AML regulations may result in significant penalties based on the seriousness of the infringement, conduct of those responsible, market share of the infringing entity, impact on customers, entity’s cooperation with regulators, and frequency, duration, and recurrence of the infringement.

Conclusion

Strengthening its AML framework, Hungary creates a safer environment for clients and more stringent rules for financial institutions. Businesses operating in Hungary need to stay informed about the evolving regulatory landscape and implement efficient compliance solutions to navigate local regulations.

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