Hungary has introduced a UBO register in line with the EU’s 4th Anti-Money Laundering Directive by way of Act XLIII of 2021 on the Establishment and Operation of the Data Reporting Background for the Identification Tasks of Financial and Other Service Providers (“Act”). Certain provisions of the Act will come into force at a later date.
According to the Act, the data on UBOs must be reported to the Hungarian Tax and Customs Authority by the account-holding bank. The first report was due by 12 June 2021. Afterwards, UBOs are obliged to inform their companies of any change in their personal data within 15 days and the companies must update their bank accounts within 5 days.
As of 1 October 2021, the account-holding banks are obliged to transmit the UBO data of their clients to the UBO register each month.
Starting from 1 February 2022, all service providers who are required by law to perform a client due diligence process under the Money Laundering Act (e.g. lawyers, notaries, accountants, etc.) will be obliged to verify the UBO data of their clients in the UBO register. If there is any discrepancy between the register and the results of their own client due diligence process, the service providers must report it to the UBO register.
The Act introduced the TT index, which essentially shows the trustworthiness of the data in the UBO. The TT index starts at 10 and decreases by 1 point if a service provider and by 2 points if any authority, prosecutor or court reports that there is material inaccuracy in the registered data. If the TT index falls below 8 points, the entity in question will be classified as “uncertain” and if it falls below 6 points and remains there for 60 days, the classification will change to “unreliable”. In both cases it is possible to be classified as “reliable” again, i.e. regain 10 points on the TT index, by updating or confirming the registered data.
Starting from 1 July 2022, if the “uncertain” classification of an entity is not changed for a period of 180 days, this status will be published on the website of the UBO register. If an entity is classified as “unreliable”, that status will be published on the website of the UBO register and the entity will be considered a high-risk entity from an AML perspective, and the service providers must refuse to complete any transactions exceeding the value of HUF 4.5 million (approx. EUR 12,000) for any entity with an “unreliable” UBO status.
Since the consequences of “uncertain” or “unreliable” classifications are serious, all entities are strongly advised to verify their UBO data in the UBO register on a regular basis and notify their banks and service providers of any changes.
By Zoltan Nadasdy, Counsel, and Esztella Cseh, Legal Advisor, Noerr
