Friday, June 3, 2016


Hungary has announced that, effective 1 July, 2016, it will fast-track the issuance of Permanent Residency Permits, for foreign investors, in thirty days. For compliance officers, it raises the issue of whether to raise Country Risk on Hungary as the result of this action.

 The Hungarian Residency Bond Program, which previously had a 180 day processing time for temporary residence, with a six month holding period, before one could apply for permanent residence, requires a 300,000 investment per family; the money goes into a 5-year guaranteed bond. It was established in 2013, and reportedly has attracted over 1bn. Hungary is within the Schengen Zone, meaning that permit holders are entitled to visa-free travel throughout member countries.

Obviously, the vast majority of Asian, Middle Eastern and African applicants will pose no threat, but what about the exception ? The danger is that individuals who are transnational criminals, radical Islamic terrorists, corrupt government figures, or fraudsters, may not be identified during the extremely short 30-day period,  but they will be free to roam the European Union, engaging in criminal or terrorist activities, under the legitimacy of a Hungarian residency permit, albeit temporary.

Compliance officers who are responsible for the updating of Country Risk may want to take this new feature of the Hungarian Residency Bond Program into account, when assessing Hungary. It is always prudent to ascertain the place of birth of all new bank customers, and to initiate Enhanced Due Diligence, as needed, upon all applicants who were not born in their country of residence or citizenship, for the proliferation of economic passport programs has made such inquiries a necessary part of any Customer Identification Program, lest you unwittingly allow a career criminal, or worse, to open an account at your bank, by reducing risk, because he holds a passport from a low-risk country. 

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