Hungary Hits Back At FATF Report

by Ulrika Lomas, Tax-News.com, Brussels

29 June 2001

Following the removal of Liechtenstein from the updated FATF blacklist, Hungary has earned the dubious honour of being the only European country deemed to be 'non-cooperative in the fight against money laundering'. And they're not too happy about it.

The Financial Action Task Force said that the country was included because of loopholes in the laws relating to identification and beneficial ownership: 'Even though Hungary has a comprehensive money laundering system,' said the organisation, 'it still suffers from major deficiencies. Though progress has been achieved in terms of supervision, identification requirements and suspicious transactions reporting, the existence of anonymous passbooks and the lack of clear plans to address this problem constitute a major deficiency of this system.'

The FATF also criticised the fact that in Hungary, financial institutions are not legally required to identify the beneficial owners or renew identification in cases where it is doubtful that the client is acting on his own account, but no specific suspicions exist.

The Hungarian Financial Supervision Authority (PSZAF) has offered a frosty reponse, saying that it regretted that the task force did not take into consideration measures already proposed by the government, which will be discussed during the autumn session of parliament, and are designed to correct the irregularities pointed out by the recent report. The PSZAF also re-emphasized its commitment to the international initiative.

Unlike many of the other countries on the list, experts believe that the majority of money laundered in Hungary does not come from drug trafficking or arms deals, but is money produced by the country's black economy activities, such as smuggling, corruption, and tax fraud. Information on the extent of money laundering in the country is hard to come by, as the National Security Office is the only government agency which publishes estimates on the movements of currency. However, the NSO puts the figure at approximately $50 million a year.

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