Financial Crime World

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Hungary Fights Financial Crimes: Understanding the Country’s Anti-Money Laundering Measures

In recent years, Hungary has made significant strides in combating financial crimes, including money laundering and terrorist financing. Despite its relatively small size, Hungary’s economy is thriving, with a GDP of around EUR 110 billion in 2015. The country’s banking industry plays a vital role in this growth, but it also poses risks, particularly when it comes to high-risk customers.

Identified Risks

The Hungarian National Risk Assessment has identified several key areas of concern:

  • Criminal Organization: Hungary has seen an increase in organized crime activity, which poses a significant threat to the country’s financial system.
  • Offshore Businesses: The use of offshore companies for money laundering and tax evasion is a major concern in Hungary.
  • Money Transfer Services: Unregulated money transfer services can facilitate illicit activities, such as human trafficking and terrorism financing.
  • Absence of Centralized Registration of Bank Accounts: This lack of transparency makes it difficult to track suspicious transactions and identify potential financial crimes.
  • Shell Companies: The use of shell companies for money laundering and tax evasion is a significant risk in Hungary.

Anti-Money Laundering Act

To combat these risks, the Hungarian government enacted legislation in 2017 to prevent and combat money laundering and terrorist financing. This law aligns with international standards set by the Financial Action Task Force (FATF) and European Union directives.

Key Responsibilities of Reporting Entities

Under the Anti-Money Laundering Act, reporting entities are required to:

  • Conduct Customer Due Diligence: Identify and verify customers, including their business relationships.
  • Identify Ultimate Beneficial Owners (UBOs): Determine who ultimately benefits from a customer’s activities.
  • Gather and Archive Information: Collect and store data on customers, transactions, and UBOs.
  • Risk Evaluation and Categorization: Assess the risk level of each customer and transaction.
  • Use Screening Systems: Utilize software to identify potential red flags and suspicious activity.

AML Supervisory Authority: NAV

The Hungarian Financial Intelligence Unit (FIU), a part of the National Tax and Customs Administration (NAV), is responsible for receiving, analyzing, and publishing suspicious transaction reports. The FIU works closely with other law enforcement agencies to investigate financial crimes.

Authorized Agencies

In addition to the FIU, several other agencies are authorized to oversee compliance with the Anti-Money Laundering Act:

  • Government: The Hungarian government is responsible for ensuring that all entities comply with anti-money laundering regulations.
  • Hungarian Bar Association: Regulates individual practitioners and law firms based on Article 38 of the AMLA.
  • NAV: Oversees real estate agencies, bookkeepers, tax experts, and other service providers.

AML Regulations

The Restrictive Measures Act mandates the freezing of cash and other financial assets, as well as the ban on providing financial services to individuals and entities subject to restrictive measures imposed by the EU or UN Security Council. Service providers must compare their clients’ data with the names on the consolidated list of effective restrictive measures.

Compliance Software

To help organizations comply with anti-money laundering regulations, Sanction Scanner offers AML Compliance Software. This solution provides a risk-based approach to analyzing an organization’s risk and avoiding sanctions.