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White Collar Crime Laws and Regulations in Hungary

White Collar Crime Laws and Regulations in Hungary

White Collar Crime Comparative Guide: 2022
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Contributed by KNP Law.

1. Legal Framework

1.1. What is the legal framework for bribery and corruption in your jurisdiction?

Chapter XXVII of the Criminal Code Act C of 2012 on the Criminal Code (Criminal Code) regulates crimes of corruption, which include:

  •      Active Corruption (Section 290 of the Criminal Code), 
  •      Passive Corruption (Section 291 of the Criminal Code), 
  •      Active and Passive Corruption of Public Officials (Sections 293 - 294 of the Criminal Code). 
  •      Active and Passive Corruption in Court or Regulatory Proceedings (Section 295 – 296 of the Criminal Code), 
  •      Indirect Corruption (Section 298 of the Criminal Code), 
  •      Abuse of Function (Section 299 of the Criminal Code), and 
  •      Failure to Report Corruption Felonies (Section 300 of the Criminal Code).

1.2. Which international anti-corruption conventions apply?

By joining the international anti-corruption conventions and recognizing their binding force, Hungary has undertaken to transform its national legal system to comply with the requirements of anti-corruption conventions. This commitment is monitored by international organizations such as the GRECO, OECD, and UNODC.

1.3. What is the definition of bribery?

Subsection (1) of Section 290 of the Criminal Code defines bribery, which is a felony committed by any person who gives or promises unlawful advantage to a person working for or on behalf of an economic operator, or to another person to induce him/her to breach their official duties.

1.4. Is private sector bribery covered by law? If yes, what is the relevant legislation?

Based on the relevant legislation, a distinction can be made between active and passive corruption in the private sector (Sections 290-291 of the Criminal Code), active corruption in the public office (Section 293 of the Criminal Code) but also in the course of judicial and regulatory proceedings (Sections 295-299 of the Criminal Code).

1.5. What is the definition of a public official and a foreign public official? Are employees at state-owned or state-controlled enterprises treated differently? Are there official lists of public officials, offices, or state-owned or state-controlled enterprises?

The interpretative provisions of the Criminal Code define precisely who classifies as a public official or as a foreign official.

Point 11. of subsection (1) of Section 459 of the Criminal Code defines public officials such as:

a) the President of the Republic,

b) Members of Parliament, spokesmen for the nationality [national minorities], and Members of the European Parliament elected in Hungary,

c) constitutional court judges,

d) the Prime Minister, other ministers, state secretaries, state secretaries for public administration and deputy state secretaries, government commissioners,

e) judges, public prosecutors, and arbitrators,

f) the commissioner of fundamental rights and his/her deputy(ies),

g) public notaries and assistant public notaries,

h) independent court bailiffs, independent bailiff substitutes, and assistant bailiffs authorized to act as process servers,

i) members or councils of representatives of municipal governments and representatives of nationality self-governments,

j) commanding officers of the Hungarian Armed Forces, and commanders of watercraft or aircraft, if vested with the authority to enforce the regulations pertaining to investigating authorities,

k) members of the staff of the Alkotmanybírosag (Constitutional Court), the Koztarsasagi Elnok Hivatala (Office of the President of the Republic), the Országgyűlés Hivatala (Office of Parliament), the Alapveto Jogok Biztosanak Hivatala (Office of the Commissioner of Fundamental Rights), Magyar Nemzeti Bank (National Bank of Hungary), the Allami Szamvevoszek (State Audit Office), the courts, prosecutors’ offices, central government agencies, the Országgyulesi Orseg (Parliament Guard), Budapest and county government agencies, and persons exercising executive powers or serving at public bodies, whose activity forms part of the proper functioning of the agency in question, and

l) members of the election committee.

Point 13. of Subsection (1) of Section 459 of the Criminal Code defines foreign public officials as:

a) a person serving in the legislative, judicial, administrative, or law enforcement body of a foreign state, and/or persons exercising executive powers or serving in foreign states, including persons exercising executive powers or serving in public bodies or in state or municipal government-owned companies,

b) a person serving in an international organization created under an international treaty ratified by an act of Parliament, whose activities form part of the organization’s activities,

c) a person elected to serve in the general assembly or body of an international organization created under an international treaty ratified by an act of Parliament, including members of the European Parliament elected abroad,

d) a member of an international court that is vested with jurisdiction over the territory or over the citizens of Hungary, and any person serving in such international court, whose activities form part of the court’s activities.

1.6. Are there any regulations on political donations?

Act XXXIII of 1989 on the Operation and Financial Management of Political Parties

1.7. Are there any defenses available?

Yes, possible defenses are based on the general principles of Act XC of 2017 on Criminal Procedure such as the prosecution, the rights of the defense, defense in absentia, and the prohibition of self-incrimination.

1.8. Is there an exemption for facilitation payments?

No, there is no exemption for corruption offenses. Property obtained by criminal means is subject to confiscation of property based on Section 74 of the Criminal Code.

1.9. What are the criminal sanctions for bribery? Are there any civil and administrative sanctions related to bribery cases?

The basic offense of Active Corruption is up to three years of imprisonment and in aggravated cases, it can be up to eight years based on Section 290 of the Criminal Code.

(1) Any person who gives or promises an unlawful advantage to a person working for or on behalf of an economic operator, or to another person on account of such employee, to induce them to breach their duties is guilty of a felony punishable by imprisonment not exceeding three years.

(2) The penalty shall be imprisonment between one to five years if the felony described in Subsection (1) is committed in connection with a person working for or on behalf of an economic operator who is authorized to act in its name and on its behalf independently.

(3) The penalty shall be:

a) imprisonment between one to five years in case of Subsection (1);

b) imprisonment between two to eight years in the case of Subsection (2).

1.10. Does the national bribery and corruption law apply beyond national boundaries?

Hungarian criminal law applies to any act committed by a Hungarian citizen beyond national boundaries (abroad), which is a criminal offense under Hungarian law.

1.11. What are the limitation periods for bribery offenses?

Pursuant to Subsection 2 of Section 26 of the Criminal Code, the limitation period for the criminal offenses defined in Chapter XXVII (bribery) is 12 years.

1.12. Are there any planned amendments or developments to the national bribery and corruption law?

We are not aware of any pending or planned amendments.

2. Gifts and Hospitality

2.1. How are gifts and hospitality treated?

According to court practice, any small gift can be seen as corruption if it is given in an official function (and with the intent to influence an official).

Industry Codes of Ethics play a key role to ensure organizational integrity and reduce corruption risks within the organization, in the fight against corruption.

2.2. Does the law give any specific guidance on gifts and hospitality in the public and private sectors?

There are specifics – for example in the case of medical professionals who are employed by the state or government-owned hospitals or clinics. For them the smallest gifts are considered bribery and can be prosecuted and punished as bribery since March 1, 2021, following the issuance of the Medical Professionals Status Act C of 2020 on Healthcare Services Relationship.

2.3. Are there limitations on the value of benefits (gifts and hospitality) and/or any other benefit) that may be given to a government/public official? If so, please describe those limitations and their bases?

  •      The acceptance of an advantage is only allowed if there is a legal basis for it. So-called protocol gifts are not permissible if they are likely to affect in the slightest degree the impartial and fair functioning of a public office or officer. 
  •      The same rules apply to non-officials in the public sector if they are employees who have the right to take independent actions. 
  •      A non-official person (for example, an employee or member of a budgetary body, an economic body, or an association) commits an offense if, in connection with their activities, the person seeks an undue advantage or accepts such an advantage or a promise of such an advantage in return for a breach of duty or acts in consent with the person seeking or accepting the undue advantage. 
  •      An official who, in their official capacity, obtains credible knowledge that an undetected corruption has been committed and fails to report it to the authorities as soon as they are able to do so, shall be also prosecuted for the felony of corruption.

2.4. Are there any defenses or exceptions to the limitations (e.g. Reasonable Promotional Expenses)?

See Section 2.3., Rules on gift acceptance in public bodies and the public sector.

3. Anti-corruption compliance

3.1. Are companies required to have anti-corruption compliance procedures in place?

Companies are required to prepare their internal anti-corruption procedures as part of their internal compliance programs. It is governed by an internal Code of Ethics, based on the OECD Integrity Management Framework model, which was first prepared in 2008 taking into account the best corporate compliance models; it is the equivalent of the Integrity Infrastructure model. According to the model being recommended for implementation in developed countries, an important element in preventing corruption is the organization, which can be made resilient by applying integrity management tools, thus reducing corruption risks.

3.2. Is there any official guidance on anti-corruption compliance?

According to Subsection d) of Section 4 of Government Decision No. 1336/2015 (May 27) on the adoption of the National Anti-Corruption Program, the internal control system and internal measures for the prevention of corruption must be harmonized within the public administration bodies in the whole of the organizational operation, including real and management processes and the necessary legislation must be developed.

3.3. Does the law protect whistleblowers reporting bribery and corruption allegations?

Directive 2019/1937/EU on the protection of persons who report breaches of European Union law was adopted by the Council of the European Union and the European Parliament in 2019 but has not yet been transposed into Hungarian law. Currently, Act CLXV of 2013 on Complaints and Whistleblowing of Public Interest provides for the protection of the confidentiality of whistleblowing and provides for the protection of whistleblowers.

4. Corporate criminal liability

4.1. Can corporate entities be held liable for bribery and corruption? If so, what is the nature and scope of such liability?

Yes, corporate entities may be held liable for bribery and corruption given a certain limited scope outlined in Act CIV of 2001 on criminal measures against legal persons, the specifics of which you can find below.

Pursuant to Subsection 1 of Section 2 of the act, measures may be taken against a legal person for the intentional commission of an offense if the offense was committed with the purpose or effect of obtaining an advantage for the benefit of the legal person, or if the offense was committed using the legal person and the offense was committed by 

(a) a director or a member authorized to represent the legal person, an employee or an officer, a company secretary or a member of the supervisory board or their delegates, in the course of the legal person’s activity, or

(b) a member or employee in the course of the legal person’s activities, and the fulfillment of the duties of management or control by the manager, the company secretary, or the supervisory board could have prevented the commission of the offense.

4.2. Can a company be liable for a bribery offense committed by an entity controlled or owned by it? Are there requirements for the parent to avoid liability in these situations?

Parent companies can be found liable for the corruption of their subsidiaries if the corruption was committed with their knowledge, at their instructions, or served the financial or other economic interest of the parent company. Preparation of Compliance Codes (internal SOPs) and their regular and consistent enforcements as well as internal courses to educate people on bribery and strict adherence are keys to prevention.

4.3. Can a company be liable for corrupt actions of a third-party agent engaged to help it obtain or retain business or a business advantage (such as government or regulatory actions or approvals)? If so, are there measures recognized in law, enforcement, or regulatory guidance to mitigate this liability?

The situation and the answer are similar to Section 4.2. If the third-party agent with the knowledge, at the instruction, or for the financial or other economic interest of the company, the company, as a legal person can be held liable. Liability can be mitigated if the third-party agent acted on their own behalf without the knowledge of the company which contracted them.

4.4. What are the sanctions for the corporate criminal entity?

According to Act CIV of 2001 on criminal measures against legal persons Subsection 1 of Section 3, measures that may be taken against a legal person regulates that if the court imposes a criminal sentence, a reprimand or probation, confiscation or forfeiture of property on the perpetrator of an offense specified in Section 2, it may apply the following measures against the legal person:

(a) dissolution of the legal person,

(b) restriction/limitation of the activities of the legal person, and/or

(c) fine.

5. Criminal proceedings into bribery and corruption cases

5.1. What authorities can prosecute corruption crimes?

In Hungary, the Office of the Prosecution is the entity charged with prosecuting criminal offenses (including bribery cases).

5.2. Is there a legal obligation to report bribery and corruption cases? If so, to whom does it apply and what are the sanctions for failing to meet such an obligation?

There is no legal obligation to report cases of corruption, but as stated above, persons who are aware of or have knowledge of the commission of bribery can be prosecuted as an accomplice. Corruption offenses are difficult to detect and prove because there is no natural person victim and both parties i.e., those who give and those who accept the bribery benefit from the offense. Bribery is an act that requires two parties and their close and, in most cases secret, cooperation and conspiracy. The possibilities for tangible evidence are limited – those who are parties to bribery try not to leave any external traces, are secretive, and try to hide their actions from third parties.

Cases of whistleblowing include anonymous reporting, whistleblowing by persons who identify themselves, whistleblowing as a possible means of tackling corruption, i.e., whistleblowing (mainly widespread in Anglo-Saxon countries. In English, it is often translated as “ringing the alarm bell.” The term covers the process of sharing some confidential and specific information with the authorities to expose some covert and illegal activity)

See Section 1.1.

5.3. Is there any civil or administrative enforcement against corruption crimes?

In case harm is caused in connection with acts of corruption, there is a possibility to enforce claims in civil proceedings, but there are no administrative redress or enforcement proceedings.

5.4. What powers do the authorities have generally to gather information when investigating corruption crimes?

In relation to the abuse of function and corruption, it is important to emphasize that in many cases investigative authorities are successful in using the means of secret information without a judicial warrant and collection of secret data with judicial authorization. However, the use of data obtained by secret methods can also give rise to a number of issues, including their legitimate nature and use in subsequent phases of criminal prosecution. At the same time, open investigations and data collection may jeopardize the success of the bribery investigation.

5.5. Is there any form of leniency law in your jurisdiction, allowing a party to a bribery or corruption crime to voluntarily confess to the crime in exchange for a release from liability or reduction of the penalty?

The law allows for the unlimited reduction or waiver of punishment for corruption offenders who cooperate with the authorities in the investigation of the corruption offenses. The institution for the ground for decriminalization was introduced to address this situation. On  April 1, 2002, Article 255/A of the Criminal Code entered into force, which provided for the non-criminalization of both passive and active bribery, whether it was official or economic bribery. Act CL of 2011 changed this regulation and allowed for the unlimited reduction or waiver of punishment instead of grounds for non-criminalization (see Act C of 2012 on the Criminal Code, Chapter XXVII on corruption offenses). Under this rule, an offender who, before the offense has come to the attention of the authority, reports it to the authority, discloses the circumstances of the offense, or, in the case of passive corruption, hands over to the authority the illicit financial advantage received or its countervalue, is not punishable.

5.6. Can a person plea bargain in corruption cases? If so, how is such a process conducted?

The Criminal Procedure Act (Act XC of 2017) currently in force allows for plea bargaining between the prosecution and the defendant in every case, for every offense including bribery. According to the law, “the prosecution and the defendant may, for the purposes of the plea bargaining procedure, enter into a plea bargain before the indictment on the admission of guilt and the consequences thereof in relation to the offense committed by the defendant. The conclusion of a plea bargain may be initiated by the defendant, the defense, and the prosecution. The prosecution may also communicate its initiative during the questioning of the accused.” However, a plea bargain is only possible until the indictment – the law is intended to motivate the accused to confess at the earliest possibility and therefore expedite the proceedings.

Guide Contributors For Hungary

Istvan Hadzsi

Attorney at Law

ihadzsi@knplaw.com

+36 70 410 5021

 

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