Alert: The Hungarian draft Law on Transparency of Public Life

ECNL’s initial assessments highlights the following problematic issues:

1. If adopted, it creates unprecedented legal grounds that limit freedoms and aim to silence people’s voices, collective action and dissent. The draft provisions violate the rights to freedom of association, assembly and expression and participation as among others, the draft targets foreign-funded organisations discriminatorily, it does not provide a substantiated assessment of risk; subjects organisations to excessive government control and surveillance, imposes high fines and possibility of termination. The draft law is likely to fail scrutiny by the human rights system and will likely not meet the proportionality and necessity tests. (See section below on resources on the topic). The draft law will impact funds flowing from the EU and is likely incompatible with EU law, particularly regarding the free movement of capital and the rights of EU citizens. (Read this analysis to see why the European Court of Justice found the previous, 2017 Hungarian Transparency Law in breach of EU law).
2. The Government gives itself right to seize legitimate money from foreign individuals, corporate donors, governments and other private or multilateral institutions. The draft law requires credit institutions and listed organisations to transfer the foreign funding received to the state-owned National Cooperation Fund. This raises questions about the right of the state to take ownership of funding from donors and repurpose it.
3. Misusing the anti-money laundering framework to suppress dissent. The draft law dangerously misappropriates the anti-money laundering (AML) framework to silence dissent. The draft law grants the AML body, along with credit insitutions, the authority to scrutinize foreign funding transactions based on their intended use specifically to anticipate how the foreign funding will be used to influence public life based on past actions of the entity. As such, the law conflates the legitimate scope of standard AML measures with political objectives. This misuse fundamentally distorts the purpose of an AML legislation, which is designed to combat financial crimes and counter financing of terrorism, rather than to police expression or public engagement activities, including those of civil society. Such an approach directly contradicts established international standards. Notably, in 2017, the Hungarian government attempted a similar tactic by linking foreign funding restrictions to AML concerns in the “Law on the Transparency of Organisations Receiving Support from Abroad.” In response, MONEYVAL - the Council of Europe’s AML evaluation body - unequivocally stated that the law was not grounded in any genuine risk assessment. MONEYVAL emphasised that the introduction and justification of AML measures require a clear, evidence-based risk analysis, which was entirely absent in Hungary’s case. By bypassing these critical safeguards, the draft law weaponizes AML mechanisms to target and restrict civil society, undermining both international AML standards and fundamental democratic freedoms.

The draft law follows the adoption of the Law on the Defence of National Sovereignty and the false and dangerous line of thinking that civil society work is harmful to national sovereignty, contrary to international standards adopted also by Hungary.

• The draft introduces a new requirement for organisations who are receiving foreign funding and are found by the Office for the Protection of Sovereignty to be threatening Hungary’s sovereignty to be listed in a government register. Those organisations will need permission to receive foreign funding from the anti-money laundering authority.
• By being put on the list, civil society organisations will lose opportunities to benefit from domestic philanthropy. 
• Influencing public life is broadly defined as influencing democratic debate, state or social decision-making, or the will of voters (including election outcomes) capturing a wide range of legitimate activities of people and groups to engage in society on matters they care about.
• Senior executives, founders and members of the supervisory or audit committee of organisations will have to declare their assets and will be considered “prominent public figures”, subjecting them to the anti-money laundering and terrorist financing laws although EU and global anti-money laundering standards do not require this.  
• Credit institutions (banks, credit unions and other financial institutions) are turned from financial crime gatekeepers into watchdogs on public views - essentially, they are asked to continuously monitor transactions of “listed organisations” and report to AML authorities in case they identify transactions from abroad. They are required to suspend the payment until the authority decides on whether to suspend it or allow its execution. 
• According to the draft law, the AML authority will decide on realising foreign transactions by taking into account previous activities, objectives, public appearances in press or social media; such observation will help them determine if the payment will be used to influence public life and fulfil requests or promote goals of the foreign supporter. In essence, this will amount to censorship, surveillance and overbroad restriction to funding for civil society.
• The draft law applies to all legal entities (registered or not), that receive foreign funding and as part of their activities they try to influence any decision-making process or the will of voters (including election outcomes).
• "Foreign support" is defined very broad/vague and includes any financial (e.g., grants, gifts, any income) or material contribution (e.g., services) from foreign individuals, organisations in Hungary who receive foreign funding or from abroad, or states (including bilateral donors and the European Union grants). Organisations that are found to receive foreign funding and use it to influence public life will receive hefty fines and may be terminated contrary to international law and anti-money laundering standards. 

1.  Crush public discourse broadly

The law broadly suppresses public discourse by targeting a wide range of entities and communities - not just civil society and media organisations under attack so far, but also trade unions, companies, and even groups providing social services or addressing community needs. Any organisation receiving foreign funding, directly or indirectly, will face restrictions on offering expert opinions or engaging the public on issues affecting marginalized or other groups. This creates a chilling effect on people and community activism, as individuals may hesitate to collaborate with organisations, movements, or campaigners for fear of repercussions or stigmatisation.

The impact on civil society is profound: the law defines "influencing public life" very broadly to include shaping democratic debate, state or social decision-making, or voter will, including election outcomes. This expansive definition means that virtually all public discussions on societal issues could be targeted, effectively crushing the right of citizens to participate in society through debate or action.

2.  Cut off groups from social life

The draft law severely restricts vital independent funding sources for civil society, imposing disproportionate administrative burdens on organisations, companies and individuals. This not only chills foreign support, but also discourages domestic donors, who may be reluctant to disclose their income sources or risk stigmatisation for backing certain groups.

• First, the draft law introduces a permission requirement to receive foreign funding: i.e., listed organisations must receive prior approval from the AML authority to receive foreign transactions. Every single donation must be accompanied by a donor’s declaration confirming that the funds do not originate, directly or indirectly, from foreign persons. This expansive requirement affects not only grants from foreign foundations and bilateral donors but also donations from individuals or entities abroad-including Hungarian expatriates, diaspora communities, and foreign-based nonprofits or businesses. Domestic donors may also be subject to similar demands if their funds have any foreign connection.
• Second, the law imposes draconian penalties - up to 25 times the amount of any unauthorised foreign donation - aimed at effectively dismantling targeted organisations. Managers face strict liability, including mandatory asset declarations, suspension of representation rights, and fines ranging from HUF 500,000 to 2 million (EUR 1,240–5,000) without the right to appeal. Ultimately, organisations may be banned from operating, forcibly dissolved, and their senior officials barred for 5 years from holding leadership or founding roles in civil society or business.
• Third, the law also cuts off access to the 1% tax designation scheme - a critical source of support for Hungarian civil society for nearly 3 decades. Organisations listed by the government lose eligibility for this popular mechanism, which has supported over half of the sector, including media outlets, democracy advocates, and human rights groups.

Together, these provisions may isolate civil society groups financially and socially, undermining their ability to operate and engage communities. Ultimately it will impact the ability of Hungarian people to come together and contribute to democratic discourse in Hungary.

3.  Overburden credit institutions as gatekeepers for foreign transactions

The draft law imposes heavy and unprecedented obligations on credit institutions, effectively turning them into gatekeepers of foreign funding for listed entities. Banks and other financial institutions are required to continuously monitor payment transactions sent to these organisations. This is akin to financial surveillance, as banks are supposed to spot money laundering and terrorism financing by looking at transactions, not the profile of the entities that own the accounts. Upon receiving such a transaction, they must notify the AML authority and suspend the payment until official approval is granted, which seems to indicate that this obligation is outside the Suspicious Activity Report (SAR) systems mandated by the Financial Action Task Force.

This framework raises multiple serious concerns:

1. Creation of a de facto blacklist: The law effectively compiles a suspicion list of organisations that banks must monitor closely, turning these entities into de facto blacklisted groups without any judicial oversight or clear criteria.
2. Excessive transaction suspension requirements: Forcing banks to suspend transactions goes far beyond standard suspicious transaction reporting under AML and counter-terrorism financing rules, which do not require automatic suspension linked to public views. This approach appears to hijack an established system for identifying and reporting suspected money laundering and terrorism financing, using it instead to surveil and police the financial dealings of civil society actors.
3. Increased operational burden: Credit institutions must establish dedicated units solely to comply with this law, significantly increasing administrative complexity and operational costs. If transactions are bounced or cannot go through those banks from which the transactions are initiated, it will also create increased burden for foreign banks processing the payments to Hungary.
4. Financial liability and limited exemptions: Banks face potential financial liability unless they can prove they exercised due care and diligence in processing transactions, shifting an onerous burden of proof onto financial institutions. In addition, they will lose income due to less foreign transactions going through.
5. Erosion of bank secrecy and privacy protections: The law relaxes certain bank secrecy rules, raising serious privacy concerns for both organizations and their donors.
6. Subject managers of listed organisations to enhanced customer due diligence: The personal finances of these individuals come to be further scrutinised by financial institutions, possibly leading to restricted access to financial services.

Together, these new obligations will likely divert critical resources and attention from banks’ core responsibilities-detecting and preventing genuine money laundering and terrorist financing. Given the already heightened risk aversion in the banking sector due to existing anti-money laundering regulations, banks will become even more reluctant to onboard or maintain accounts for civil society organisations. 

This chilling effect will severely undermine the ability of civil society and similar groups to operate effectively, as access to basic financial services becomes increasingly difficult or impossible.

4.  Deplete talent and support for the sector  

If adopted in its current form, the law will severely deter support for and participation in civil society. Key figures - such as representatives, founders, and supervisory board members of listed organisations will be required to disclose their assets and will be classified as “prominent public figures,” placing them alongside heads of state, ministers, and top judicial officials. This elevated status exposes them to heightened scrutiny and public exposure, likely discouraging many qualified individuals from taking on these roles, resulting in a significant loss of talent and leadership within civil society.

Moreover, the draft law empowers the AML authority to conduct on-site inspections whenever it suspects that an organisation has received foreign funding without proper authorisation. This invasive power will exacerbate uncertainty and fear, placing additional financial and emotional strain on activists and employees, further undermining their capacity to operate freely.

Taken together, these measures represent an all-out assault on dissent and public discourse. Yet, despite previous crackdowns, Hungarian civil society and people have shown extraordinary resilience - through successful legal challenges, grassroots mobilisation, and increasing civic engagement. 

This enduring spirit offers hope that through collective action, international solidarity across sectors, and unwavering commitment to democratic values, the space for critical voices and participatory democracy of the Hungarian people can be preserved and strengthened.

• The text of the draft law
• No country was built on blacklists - Joint statement from independent civil society organisations and media outlets

Legal opinions:

• European Court of Justice: Judgement on the Hungarian Law on the Transparency of Organizations which receive support from abroad (2020)
• Expert Council on NGO Law: Regulating political activities of NGOs and Opinion on the Hungarian Draft Act on the Transparency of Organisations supported from abroad (2017)
• MONEYVAL: 6th Enhanced Follow-up Report & Technical Compliance Re-Rating on Hungary (2024) and 1st Enhanced Follow-up Report 
• Venice Commission: On the draft law on transparency of organisations receiving support from abroad  and On the national sovereignty law 

Related ECNL materials:

• Analysis on the Law on the Defence of National Sovereignty
• Analysis on the European Court of Justice ruling on the 2017 Hungarian Transparency Law
• Briefer analysing the Hungarian 2017 Transparency Law
• ECNL Learning Center modules on Participation and EU law and Security and counter-terrorism, including access to financial services

News coverage:

Telex, Politico, The Guardian