CMS Expert Guide To Mandatory Reporting Of Criminal Offences For Companies And Their Responsible Persons in Hungary

Under Hungarian law, there is no general duty to report (corporate) criminal offences. However, there are specific instances where the law makes reporting mandatory for specific individuals.

Section 300(1) of the Criminal Code provides that any public official who has credible information of an act of active or passive corruption, indirect bribery or abuse of a function, and who fails to promptly report that to the authorities at the earliest possibility is guilty of a felony punishable with imprisonment up to three years. The definition of “public officials” is set out in point 11 of Section 459(1) of the Criminal Code. The definition includes government officials, MPs, judges, prosecutors, arbitrators, members of law enforcement agencies etc.

Section 404/A of the Criminal Code obliges liquidators who have positive knowledge of any breach of accounting regulations (Section 403) or fraudulent bankruptcy (Section 404) committed in the course of liquidation proceedings to report those at the earliest opportunity to the authorities. Failing to do so qualifies as a misdemeanour and punishable with imprisonment up to one year.

Reporting obligations also exist in connection with the prevention of money laundering and terrorist financing. According to Section 401 of the Criminal Code, [a]ny person who fails to comply with the reporting obligation prescribed by law in connection with the prevention and combating of money laundering and terrorist financing is guilty of misdemeanour punishable by imprisonment not exceeding two years. Section 30 of Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing (“Pmt.”) requires directors and employees of service providers to report without delay in writing any information, fact or circumstance giving rise to a suspicion:

• of money laundering
• of terrorist financing or
• that specific property is derived from criminal activity.

The definition of “service providers” is set out in point 28 of Section 3 of the Pmt. as follows:

1. financial enterprises,
2. entities engaged in money processing activities, other than financial enterprises, in respect of their money processing operations,
3. payment institutions, in respect of their activities falling within the framework of payment services,
4. electronic money institutions, in respect of their activities falling within the framework of issuance of electronic money and payment services,
5. issuers of credit tokens,
6. currency exchange offices,
7. insurance companies, if authorised to pursue life insurance activities, in respect thereof,
8. multiple agents and brokers provided for in the Insurance Act as regards their activities relating to contracts within the life insurance branch,
9. multiple special services intermediaries and brokers defined in the CIFE,
10. investment firms,
11. commodity dealers, in respect of their activities falling within the framework of commodity exchange services,
12. investment fund managers - including venture capital fund managers - in respect of the marketing and distribution of collective investment instruments, and in respect of their investment service activities and activities auxiliary to investment services provided for in the Investment Regulation Act (“IRA”),
13. ‘market operators’ in respect of their activities defined in Act CXX of 2001 on the Capital Market and the IRA,
14. payment services intermediaries regarding the intermediation of payment services,
15. crypto-asset service providers.

In addition to the above, anyone who obtains credible information that

• an act of terrorism (Section 314 of the Criminal Code),
• an abduction (Section 190 of the Criminal Code)
• criminal offences against the state (Section 254-263)
• a violation of international economic prohibitions (Section 327 of the Criminal Code)

is about to be committed or any criminal offence against the state or violation of international economic prohibitions has been committed, and fails to promptly report that to the authorities at the earliest possibility, commits a crime.

There is no obligation for anyone within a company to report criminal offences.

In the above instances, the public official and the liquidator are obliged to make a report to the authorities (prosecution, police).

When it comes to the reporting obligations under the Pmt., the directors and employees of the service providers are obliged to make a report.

In accordance with Section 31(1) of the Pmt., service providers shall appoint one or more persons (“compliance officer”) to forward without delay to the financial intelligence unit the reports received from the directors and employees of service providers.

Furthermore, according to Section 31(3) of the Pmt., the person appointed shall, on behalf of the service provider, dispatch the report and the accompanying documents in the form of a secure electronic message defined by the financial intelligence unit, to the financial intelligence unit and it shall confirm receipt of the report in the form of an electronic message sent to the reporting service provider without delay.

Failing to comply with the above reporting requirements can result in criminal liability.

If the criminal offence is reported in good faith exercising the reasonable caution and attention, there is no associated risk even if the reported event turns out not to be a criminal offence.

Since there is no reporting obligation of corporate crime, this question is not relevant regarding Hungary.

It should be noted however that criminal measures may be applied against companies (and legal persons in general) under Act CIV of 2001 on Criminal Measures Applicable to Legal Persons in case inter alia the intentional crime aims at or results in advantage to the given corporation and it has been committed by an associated individual.