In response to a recent series of fraud in the Hungarian investment sector, the Hungarian Parliament amended the Criminal Procedure Code to impose more stringent regulation on asset freezing in case of white collar crimes committed in connection with financial services. The amendment also authorizes courts to freeze managers’, board members’ or auditors’ private assets and even company assets on a group level. The new law provides a swift and more simple way to courts in case of freezing assets of both companies and private individuals, already at a very early stage of a criminal investigation. This will be applicable in case of white collar crimes allegedly committed in the financial, insurance or investment sectors the amount of which is higher than EUR 165,000. Until now asset freezing has been available typically only after someone was accused in a criminal investigation but that time the defrauded assets were often unavailable. The procedure will be more automatic, i.e. asset freezing will be possible also in lack of the current statutory conditions, e.g. regardless of whether a civil remedy is initiated by the injured party. Although there has been a corporate criminal liability in Hungary and company assets have not been immune to asset freezing, in most cases only the accused individuals’ assets were frozen. The new law focuses on company assets regardless of whether the company at or by which the crime is committed is owned by the alleged wrongdoers. A significant change is that assets of affiliated companies may also be frozen, which is more relevant to multinational companies having several subsidiaries in Hungary. Another rigorous change is that in addition to the wrongdoers’, several others’ private assets may be frozen. These are – among others – the affected company’s owners, managers and other key employees, board members or even the company’s auditors, regardless of whether the above are actually accused in the criminal investigation and in most cases even if such assets were already conveyed any time after the case was initiated. The more stringent regulation on asset freezing can raise compliance costs in Hungary and would incur a higher risk to managers, key employees and board members. The inclusion of auditors among persons whose assets can be frozen will also certainly raise audit costs for companies. On the other hand, the recovery of defrauded assets will be more effective regardless of whether the affected company is the injured party or the company being prosecuted.
Dr. Janos Puskas is an attorney in Baker McKenzie's Budapest office and focuses on compliance and investigations, administrative/regulatory disputes, white collar crime and asset recovery. Janos as an investigation practitioner assists clients with internal and government investigations, anti-corruption due diligence, compliance and ethics inquiries, risk assessment, risk minimization strategies and creating and implementing compliance programs. He also focuses on disclosure issues and represents clients in civil and criminal procedures initiated in relation to compliance violations. Janos has a proven track record in administrative regulatory dispute cases, in which he represented several multinational companies in administrative litigation against the regulator, including extraordinary judicial review procedures before the Supreme Court.