New EU Directive Facilitates to Report Irregularities

It will be easier and safer to report corruption in companies under new legislation based on an EU directive, the international consultancy firm Ernst&Young (EY) said in a statement sent to MTI this Thursday.

It said that companies with at least 250 employees have 60 days from the publication of the legislation on April 12 to allow whistleblowers to report wrongdoing through an ethics hotline that can even ensure anonymity. Companies with between 50 and 249 employees have until December 17 to do so.

The statement explains that companies in Hungary with 50 or more employees must find a way for employees and other stakeholders, including suppliers and subcontractors, to inform management if they see corporate abuse, such as human rights violations, fraud, corruption or even suspected cartels. The whistleblower must be informed of the status of an internal investigation within three months at the latest.

Companies with between 50 and 249 employees can set up an internal abuse reporting system, even jointly.

Regardless of the number of employees, a hotline is also compulsory for companies covered by the law on the prohibition of money laundering and terrorist financing. “As a consequence, the rule will apply to all property managers, auditors, casinos, law firms and trusts, among others," EY said in a statement.

Firms will need to put in place a complex system that can keep in touch with the person reporting the abuse while ensuring their anonymity, Ádám Farkas, head of EY's responsible business operations said.

In 2022, EY conducted a global survey of 4,762 senior managers and employees in 54 countries to assess the conditions for ethical conduct. Of those surveyed in Hungary, 30% had reported wrongdoing to the board, and 57% had experienced some pressure not to complain. Meanwhile, only 55% of companies have made an effort to sanction unethical behavior.