Procedimiento dentro de cada ronda

Perpetrators of certain crimes can spend the assets originating from criminal activities without money laundering. There are, however, crimes in which:

- the perpetrators gain extremely huge amount of income or,

4

See D. Derenčinović, Mit(o) korupciji [The Myth of corruption] (Zagreb, 2001) p. 78. Same in Ž. Howatić, Osnove kriminologie [Basis of criminology] (Zagreb, 1998) p. 103.

5 Ibid.

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- the perpetrators regularly (weekly, monthly) realize illegal benefits originating from criminal activities without having legal sources of income.

In these two cases the risk of being detected is too high, thus the criminal can watch the money accumulate from the crime but he cannot spend it. Or, he can try to spend it, but with it he may draw the attention of tax- and investigating authorities. They need money laundering, which, in criminological sense, is an illegal economic service whose aim is to make justifiable the origin of the wealth from the criminal activity, getting rid of its obviously illegal character.

Hungary was the first amongst the Council for Mutual Economic Assistance (or Comecon) countries to enact regulations against money laundering in 1994. Since then the regulation has been numerously modified, but the crime has not become significant in practice. Annually, in average less than ten investigations begin with the suspect of money laundering. This activity was developed with capitalism in our country in the 1990ies. The reason for the lack of money laundering in the 1970ies and 1980ies in Hungary was not that there were no organized criminals or that no extra profit was produced, but the underdeveloped nature of the banking system and the lack of the convertibility of the Forint, which prevented it. A couple of years later, however, everything changed drastically. The standard of living was dropping continuously in the second part of the 1980ies, while inflation accelerated. It became obvious that something had to be done to the economy, and the political change of regime was also around the corner. By the summer of 1989,

‘the movements ongoing in the political sphere shifted their direction, content and dynamism too; in addition to the change of advertised models,, the emphasis – at least in the manifestation of some organizations and certain layers of society – shifted in the direction of the change of regime’.6

Following the political and economic change of regime, the establishment of a market economy started in 1990. This paved the way for the spending of assets that were previously accumulated. The banking system was not yet able to satisfy the hunger for capital; usurious interest rates and the collection of money related to it

6

J. Horváth, A tábornok vallomása [The confession of a general] (Budapest, 1990) p. 315.

István László Gál – Igor Vuletić

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flourished in the underworld. The long-term decrease of the standard of living and the increase of tensions of income distribution gave an impulse to crime, and, additionally, subsistence crime also spread. Criminals of outstanding abilities and good organizational skills started building their domestic criminal organizations, for which they also had sufficient amounts of cash. The disarrangement of the police also contributed to the leap forward of the criminal underworld. The economic and social transformation related to the change of regime, as well as the privatization of state property necessarily implied the appearance of certain business crimes. The significant increase of the number of criminal activities and the increase of the average amount of damage calculated for one criminal activity – even with the rate of inflation deducted – continuously produces the wealth that can also be the basis of money laundering. In addition to this, on 1 January 1987, the one-tiered banking system was replaced by the two-tiered system, and, in the early years, the too broad interpretation of the scope of banking secrets provided a favorable area for money launderers. However, the creation of anti-money laundering regulations and criminal law protection took years to develop. In Article 86 of the Articles of Partnership of Hungary, created with the European Community in 1994, we undertook the obligation to make all efforts to prevent money laundering, and to introduce sufficient regulation that is of equivalent value with those regulations that the Community and other international forums working in this area – including the Financial Action Task Force (FATF) – accepted.

In 1994, the Parliament passed a law covering the prevention and obstruction of money laundering, and the Government issued an executive order. Furthermore, the definition of the crime of money laundering, and its sanctions were laid down in the Criminal Code: Law IX of 1994 integrated money laundering as Article 303 in the Criminal Code. The law ordered that the laundering of money be sanctioned with regard to material goods emerging in connection with areas most affected by organized crime that is crimes committed in connection with drug abuse, arms smuggling, and terrorism. In harmony with the planned modifications of Law LXIX of 1991, on financial institutions and activities of financial institutions, the modification of the Criminal Code sanctioned the failure to perform the obligation of reporting defined in the law in the case of both willful and negligent commission.

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For aggravated cases, the legal regulations contained habitualness, and, similarly to drug abuse, the commission within the framework of an organization. Furthermore, the law ordered that those perpetrators who – through their position (rank, occupation, profession) – found it easier to help with the covering up of the origins of the money one gained in an unlawful way, be punished more severely. Furthermore, Hungary joined the Convention on money laundering, the search for, seizure and confiscation of items originating from criminal activity, ratified in Strasbourg, on 8 November 1990, the announcement of which was ordered by Law CI of 2000.

The facts of the case of money laundering as it is described in the Criminal Code went through continuous change: it was modified practically every other year to prevent practice by criminals.

However, these steps did not satisfy the international financial organizations. Hungary was put on the money laundering ‘black list’ of FATF at the end of June 2001 among non-cooperating countries, as first and so far only amongst the OECD member countries. Even though along the law-making process there were legal regulations created at the end of 2000, according to which it should not have been possible to open a bearer and code-named savings deposit,7 and withdraw money from those already existing without identification, from the day of the accession of Hungary to the EU, the FATF did not consider this solution sufficient, with special respect to the fact that the neighboring countries – being in similar shoes as Hungary – tied the termination of identification to a fixed date.8

Three months after the FATF’s decision to place Hungary on the black- list, under the influence of the 11 September 2001 terrorist attacks in the U.S., the international cooperation against terrorism definitely started to strengthen, and the strengthening of anti-money laundering regulations on the agenda anyway was accelerated. It was in the wake of this that Law LXXXIII of 2001, on the struggle against terrorism, the strengthening of the decrees on the prevention of money laundering, and the order of particular restricting measures, was created. This legal regulation tried to remedy the problems and shortcomings brought up by the FATF, in the following manner:

7

Such were banking papers under the given names of ‘Jubileum’ (Jubilee), ‘Garas’ (Penny), ‘Dénár’ (Denarius), ‘Zafír’ (Sapphire), etc.

8

K. Koós-Hutás, ‘A pénzmosás elleni szabályok szigorítása: megszőnı anonimitás’ [The strengthening of the AML rules: loosing anonimity], 3 Cég és Jog (2002) p. 44.

István László Gál – Igor Vuletić

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- The prevention of circumventing the legal regulation on money laundering is served by the fact that through the modification of Law-decree 2 of 1989, on savings deposits, the possibility of opening anonymous deposits is terminated. The law contains sufficient measures with respect to the already existing bearer and code-named savings deposits as well. In case of safety deposits transformed into bearer deposits following 30 June 2002, and reaching or exceeding the amount of 2 million HUF, every credit institution is obligated to send the data of identification of the client to the National Police Department with the aim of prevention and obstruction of money laundering. After 1 January 2005, upon the client’s written request and with the approval of the National Police Department, the non-bearer safety deposits can be transformed into bearer ones.

- For reasons similar to those of savings deposits, the law orders – with the modification of Law CXI of the year 1996, on the marketing of securities, the investment services and the securities stock exchange - that securities can only be issued and publicly marketed in series only in a bearer manner. - A significant part of the turnover of money is performed in

cash. The monitoring of this in international turnover is served by the above-mentioned law by forcing those crossing the country border – if they have Forints or foreign currency reaching or exceeding one million Forints in their possession – to report this fact to the customs authorities and provide the particulars, the information on the amount and currency of the money in their possession to the customs authority.

- After 1 January 2002, only the credit institution or the agent of the credit institution can get permission from the State Supervision of Financial Institutions to carry out money- changing activities. Through this, the performance of money- changing activities, and the strengthening of their conditions of operation, as well as their increased monitoring, take place on the basis of regulations identical with those with respect to enterprises performing the other financial services.9

9

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As a result of the measures introduced, in June 2002, FATF removed Hungary from the list of Non-complying Countries and Territories.10 In 2003, the former money laundering law was replaced by a new law: at its sitting on 24 February 2003, the Parliament passed Law XV of 2003, on the prevention and obstruction of money laundering. This law, as well as the previous measures, forced the decision-makers of FATF to terminate the former special monitoring mechanism against Hungary at its Berlin meeting ending on 20 June 2003. According to the reasoning of FATF, Hungary ‘sufficiently handled all the shortcomings named earlier’; therefore, the special monitoring mechanism was not needed any more. Furthermore, the report emphasizes the significant development in the Hungarian policy against money laundering, positively mentions the extension of the law to non-financial professions, among others to real-estate traders, tax advisers, and most recently to lawyers and public notaries. It also speaks highly about the assignment of names to some 90% of the anonymous deposits of Hungary, and the good-quality cooperation of the country with the Financial Action Task Force.11 Thus, the most recent developments are promising, the Hungarian regulations in force meet the resolutions of the third money laundering guidelines of the European Union (not in force yet), as it was established by speakers at the conference on ‘The current issues of the struggle against money laundering’, held in the fall of 2004.

The Hungarian anti-money laundering regulation, operating from 2007, can be found in two acts, in the Criminal Code (act IV of 1978) and in the Act of Prevention of Financing Money Laundering and Terrorism (Act CXXXVI of 2007). The previously mentioned Criminal Code contains presently two crimes in connection with money laundering. The first one is called ‘Money Laundering’ and the second is ‘Failing to perform the obligation to report related to ML and FT’.

10

See FATF-GAFI Annual Review of Non-Cooperative Countries and Territories, 20 June 2003.

11

<www.figyelo.hu/cikk.php?action=nyomtat&cid=61860&layout=no&id=3>, (last accessed on 20.07.2003)

István László Gál – Igor Vuletić

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