Hungary Strengthens Anti-Money Laundering and Countering Financing of Terrorism Laws

The Hungarian government has made significant strides in strengthening its anti-money laundering (AML) and combating financing of terrorism (CFT) laws, according to a recent report.

New Requirements for Exchange Services and Custodian Wallet Service Providers

The Financial Transaction Act (FTA) now requires registration for all exchange services, including those between virtual and fiat currencies and between virtual currencies. Additionally, custodian wallet service providers are also required to register.

Key Changes

All service providers, including Virtual Asset Service Providers (VASPs), must designate at least one person responsible for liaising with the Hungarian Financial Intelligence Unit (HFIU)
Convicted individuals cannot engage in exchange services or be a custodian wallet service provider
Sanctions can be applied to non-compliant VASPs, including fines

Supervision and Enforcement

The Hungarian Financial Intelligence Unit (HFIU) is responsible for supervising VASPs and ensuring compliance with AML/CFT regulations. The agency has issued sectorial model rules to guide the VASP sector and provided feedback to representatives following an audit in 2020.

Administrative Sanctions

Fines ranging from HUF 100,000 to HUF 400,000,000 (approximately €1.01 million) for non-compliance
The report notes that these sanctions may not always be proportionate, given the size of some operators in the market

Compliance with FATF Recommendations

The report highlights that Hungary has amended its AML/CFT Act to require covered VASPs to report suspicious transactions and comply with certain requirements under the Financial Action Task Force (FATF) Recommendations 10 to 21.

Areas for Improvement

Hungary has not yet taken action to ensure compliance with FATF Recommendation 16 regarding information accompanying transfers of certain crypto-assets
While efforts have been largely effective, there are areas where improvement is needed