Hungarian police have launched an investigation into the country’s former residency bond programme after Transparency International Hungary filed a criminal complaint over suspected mismanagement causing significant financial damage to the state.

According to 444.hu, the Budapest Police Headquarters (BRFK) is investigating the case following a complaint filed in late July by Miklós Ligeti, then legal director of Transparency International Hungary, who was elected to the Constitutional Court earlier this week.

The complaint was initially submitted to the Prosecutor General’s Office before being transferred to the Central Chief Prosecutor’s Office for Investigation and subsequently to the BRFK. In August, authorities said they had ordered supplementary investigation of the complaint. Police have now confirmed that a criminal investigation is under way, although they have not disclosed when it officially began or provided further details.

How did the residency bond scheme work?

The residency bond programme was introduced in 2012 on a proposal by Antal Rogán, then head of Parliament’s Economic Committee. Under the scheme, non-EU citizens could obtain Hungarian residency permits after investing EUR 250,000 or EUR 300,000 through the programme.

Eight intermediary companies were authorised to handle the bonds. According to Transparency International’s calculations, these companies could have made around HUF 60 billion (approximately EUR 165 million at the time) in profits from public funds.

The programme ended in June 2017. By then, 6,621 residency bonds had been sold, while a total of 19,855 foreign nationals, including family members, had received Hungarian residency permits. These permits allowed them to travel freely within the Schengen Area.

The investors were required to keep their investment for five years, after which most of the money was returned, while the residency status remained valid for life.

Transparency raises concerns over state losses

Transparency International now alleges that the scheme caused at least HUF 21 billion in damage to the state budget and argues that the authorities failed to properly examine who ultimately owned the intermediary companies.

The organisation also claims that the state could have handled the bond transactions itself, for example through the Government Debt Management Agency, rather than relying on companies with unclear ownership structures.

Transparency previously filed a complaint over alleged abuses connected to the approval of the intermediary companies in 2018, but the investigation was rejected by the Central Chief Prosecutor’s Office for Investigation. The latest complaint instead focuses on the alleged financial damage to the state.

The organisation argues that the case has not become time-barred, partly because the state was still buying back bonds in 2022.

However, the Government Debt Management Agency previously argued that the scheme had saved the state more than EUR 9.6 million between 2013 and 2017 compared with issuing Premium Euro Hungarian Government Securities.

The current investigation will determine whether the allegations raised by Transparency International amount to a criminal offence.