Financial Crime World

Hungary Strengthens Anti-Money Laundering Regulations

Overview

Hungary has made significant strides in enhancing its Anti-Money Laundering (AML) regulations. The country’s efforts have led to recognition by the Council of Europe as a “largely compliant” member state.

Compliance Efforts

Hungary has fully complied with 32 out of the Financial Action Task Force’s (FATF) 40 recommendations, partially complying with FATF recommendations on non-profit organizations, new technologies, and cash couriers. Companies operating in Hungary must ensure they comply with regulations and adapt to shifting changes.

Affected Institutions

According to Act LIII of 2017 on Preventing and Combating Money Laundering and Terrorist Financing (AML Law), the following institutions are subject to regulation:

  • Credit Institutions
  • Financial Service Providers
  • Casinos
  • Certified Tax Experts
  • Lawyers
  • Custodian Wallet Providers

Regulators

The Central Management of the National Tax and Customs Administration (NAV) is responsible for ensuring that affected institutions follow the AML Law. The NAV analyzes and responds to suspicious transaction reports, cooperates with the Prosecutor General’s Office and the National Courts Office.

Staying Compliant

To stay compliant, companies must:

  1. Establish internal policies approved by the relevant authority
  2. Perform Customer Due Diligence (CDD)
  3. Report suspicious activities
  4. Keep records

Compliance Obligations

Companies must establish a list of internal policies for approval by the relevant authority and familiarize their employees with them. Companies must also provide AML training programs or hire employees with suitable prior knowledge.

During the onboarding stage, companies are required to collect and verify personal information from their customers, including:

  • Full name
  • Nationality
  • Place and date of birth
  • Identification number
  • Mother’s maiden name
  • Place of residence

The provided information is then verified through comparison to government-issued documents (e.g., personal ID card). Companies can use external services or available databases to ensure the authenticity of the above information.

Companies should also check customers for presence on sanctions lists (e.g., OFAC, UN, HMT, EU, DFT), Politically Exposed Persons (PEP) lists, and adverse media. Beyond initial verification, companies must implement ongoing monitoring procedures.

Penalties

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

  • Fines of up to HUF 2 billion (approximately $4.76 million)
  • Seizure of operations
  • Executive officers may also face fines of HUF 100,000 to HUF 500 million (approximately from $240 to $1.2 million)

Conclusion

Hungary is continuously working to improve its AML regulations to ensure better security for customers and stricter rules for financial institutions. To comply with all the regulations and avoid penalties, companies working in Hungary should implement efficient compliance solutions with a built-in compliance solution to help navigate local regulations.

If you want to learn more about the benefits of AML/KYC solutions, contact Sumsub today.