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Hungary imposes new transaction monitoring obligations on financial institutions

Hungary
21/05/2025
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Controversial draft legislation in Hungary seeks to impose far-reaching transaction monitoring obligations on financial institutions.

The new rules would apply specifically to banks managing the accounts of organisations whose activities are deemed to pose a threat to Hungarian sovereignty. In addition to conducting ongoing surveillance on financial transactions, banks would be required to intervene in certain cases.

Under the legislation, if a listed organisation receives a grant that is subject to prior government authorisation, the bank must suspend access to the relevant funds for up to five days and immediately notify the Financial Intelligence Unit (FIU). At the same time, the FIU will initiate an investigation to assess the legitimacy of the transaction. This investigation can result in a continued suspension of access to the funds for a maximum of 180 days.

If the FIU concludes that the foreign grant is intended to influence Hungarian public life (i.e. promoting the aims or fulfilling the requests of a foreign donor), it may order the return of the funds to the original source.

In cases where a bank fails to act as required and disburses a grant without the necessary authorisation, the FIU may oblige the financial institution to transfer the disbursed amount to the National Cooperation Fund.

While the government frames the legislation as a transparency and national security measure, critics argue that it could be used to silence organisations critical of the government.

In addition, sweeping powers granted to FIU raise concerns of overreach, selective enforcement, and the chilling effect such measures may have on civil society. While the law claims to promote transparency, critics argue that it may suppress opposition voices under the guise of sovereignty protection.

For more information on this draft law, contact your CMS client partner or these CMS experts.

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