Responsibility at the Highest Level: The Role of the Management Body

In the case of a financial institution, combating money laundering is not merely an administrative task, but a strategic issue. The MNB recommendation clarifies that the management body is responsible for approving the institution’s overall AML/CFT strategy and for supervising its implementation.

To this end, members of the body must possess adequate knowledge and experience to understand the money laundering and terrorist financing (ML/TF) risks associated with their own business model. It is also their responsibility to adopt the strategy ensuring compliance with international and domestic restrictive measures (sanctions).

In day-to-day operations, a designated responsible senior manager (who is either a member of the management body or a senior executive) must ensure that AML/CFT policies and internal control measures are appropriate and proportionate to the existing risks.

The First Line of Defence: The AML/CFT Compliance Officer

A key actor in the practical implementation of internal policies is the AML/CFT compliance officer. As a general rule, every financial institution must appoint such an officer.

Who is this person and what are their main duties?

• Position and independence: The officer must hold a senior position and have sufficient authority to propose measures to management. Their work must be carried out independently, meaning they cannot be subordinated to the business areas they supervise (for example, sales). As a general rule, the officer must be appointed in Hungary and perform their duties there.
• Risk assessment and policies: The officer develops and maintains the institution-wide risk assessment framework. In addition, they ensure the implementation and continuous updating of appropriate policies and procedures.
• High-risk clients: Before the institution establishes a relationship with a new high-risk client, the opinion of the AML/CFT compliance officer must be obtained.
• Reporting to the authority: The officer is responsible for ensuring that reports on suspicious or unusual transactions are promptly forwarded to the authority (the financial intelligence unit). A strict rule applies that the client concerned must not be informed of the fact of the investigation (prohibition of tipping-off).

An Increasingly Important Role: The Sanctions Compliance Officer

In the current global economic and political environment, compliance with financial and asset-related restrictive measures (sanctions) imposed by the European Union and the United Nations is of particular importance. Therefore, the MNB recommendation requires the designation of a sanctions compliance officer responsible for performing functions related to restrictive measures.

Main duties:

• Establishes and maintains policies and controls ensuring that the financial institution complies with sanctions requirements.
• Assesses the institution’s exposure to restrictive measures and attempts to circumvent them.
• Ensures procedures for cases of a “true positive match” with a sanctions list. In such cases, the officer must ensure immediate rejection, suspension of the transaction, or freezing of funds.

It is possible that the AML/CFT and sanctions compliance officer roles are performed by the same person, provided that this does not give rise to a conflict of interest and is justified by the size of the institution.

Outsourcing: Opportunities and Limitations

Financial institutions may decide to outsource certain operational tasks to external service providers. However, the MNB makes it clear that ultimate responsibility for legal and regulatory compliance always remains with the financial institution.

Strict safeguards must be built into outsourcing arrangements. The external service provider must have adequate expertise and resources, must understand Hungarian, and may not store data in a third country (outside the European Union), in order to ensure that the MNB’s supervisory powers remain unaffected.

An important safeguard rule is that strategic decisions may not be outsourced. Such decisions include, for example, the approval of risk assessments, decisions on establishing business relationships, or the adoption of internal policies.

Group-Level Rules and Training

If a financial institution is part of a larger group of companies, the parent company (the controlling financial institution) must ensure risk assessment at group level as well. A group-level AML/CFT compliance officer and a group-level sanctions compliance officer must also be appointed in order to ensure coordinated protection.

Finally, but not least, compliance officers are responsible for the continuous training and information of employees regarding money laundering trends, methods, and sanctions requirements. Training must be tailored to the specific duties of each employee and to the level of risk they handle.

From When Must It Be Applied?

The MNB expects the requirements set out in the new recommendation to be applied by the affected financial institutions from 31 March 2026. At the same time, previous recommendations on similar subjects will cease to be in force. The new regulatory framework aims to establish a more transparent financial safeguard system in Hungary that better complies with international expectations.

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Notice: This article does not constitute legal advisory services, and does not necessarily match the interpretation of the applicable laws by the authorities. This article is for general information only.

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