New Hungarian Law: Tightened AML Regulations for Service Providers

Introduction

Hungary’s Parliament recently adopted Act LIII of 2017 on Preventing and Combating Money Laundering and Terrorist Financing. This legislation aims to enforce the prohibition of money laundering and terrorist financing by extending the regulations to various entities.

Scope of Application

The Act covers:

• Credit institutions
• Financial service providers
• Organizations engaged in real property transactions
• Auditing firms
• Casinos
• And others

It also applies to entities established in or providing services in Hungary regardless of their country of origin.

Identification Requirements

• Person trading in goods: The Act defines this term and specifies identification requirements.
• Commodity dealer: Similar identification requirements apply.
• Group: Identification requirements for this and other entities are also detailed.

Exemptions

• Support provided by an employer to its employee
• Financial service providers’ credit reference services
• Payments into payment accounts made as taxes, penalties, and duties

Customer Due Diligence Measures

Section 6 of the Act requires service providers to:

1. Identify the customer
2. Understand the nature and purpose of the business relationship
3. Monitor transactions for potential money laundering or terrorist financing activities

Risk Assessment

Service providers must:

1. Assess and manage the risks of money laundering and terrorist financing
2. Establish risk management procedures according to a national risk assessment

Financial Intelligence Unit

The Act establishes a Financial Intelligence Unit to combat money laundering and terrorist financing within Hungary. This unit is responsible for:

1. Receiving and assessing suspicious transaction reports
2. Forwarding reports and other relevant information to the relevant authorities