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Virtual Currencies Will Be Covered by Amended Anti-Money Laundering Act

Virtual Currencies Will Be Covered by Amended Anti-Money Laundering Act

Hungary
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A new amendment to the Hungarian Anti-Money Laundering Act seeks to extend its scope to custodian wallet providers and virtual currency exchange platforms, in order to reduce the risks associated to cryptocurrencies. The proposal is currently before the Hungarian Parliament, and aims at fulfilling Hungary’s obligations deriving from the 5th Anti-Money Laundering Directive (“Directive”).

The amendment defines virtual currencies as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.” A custodian wallet provider is defined as “an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies”. In line with the international practice on cross-border services, the proposal extends the scope of the Anti-Money Laundering Act to service providers established in Hungary or in another Member State of the EU or in a third country as long as these providers offer their services in Hungary.

These legislative changes are much needed, as they to bring legitimacy and clarity to the European cryptocurrency industry, and they counter the real risks presented by misuse of the technology. As a result of these modifications, it may be possible to address the potential money laundering and terrorist financing risks arising from the use of technological innovations (e.g. blockchain or distributed ledger technology).

Due to the modifications, virtual-currency exchange platforms and custodian wallet providers will be required to comply with the provisions of the Directive (e.g. to identify beneficial owner and to verify a client’s identity). Member States must adopt the necessary regulations to comply with the provisions of the Directive as of 10 January 2020.

By Rita Parkanyi, Partner, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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