Since 2020, EU Member States have been obliged to make specific information on ultimate beneficial owners (“UBOs”) of corporate and other legal entities available to the general public. However, in light of the recent judgment of the Court of Justice of European Union (“CJEU”), this obligation will not remain in effect and thus, changes to the accessibility of the Hungarian UBO register are to be expected.
As part of the fight against money laundering and terrorist financing, the European Parliament and the Council adopted Directive (EU) 2015/849 (“AML Directive”) in 2015 which – among many other requirements – set forth for the Member States to establish and maintain a central register about the beneficial ownership of corporate and other legal entities incorporated within their territory.
While most of the Member States were reluctant to establish the so-called UBO register (until 2017, only a few of them actually created it), in 2018, the EU called upon increasing transparency even more by prescribing in an amendment to the AML Directive (“2018 Amendment”) that information about the identity of the UBOs shall also be made available to the general public from 2020.
Finally, all Member States created their UBO register in compliance with the above requirements and Hungary was one of the last to do so in 2021. The Hungarian UBO register is maintained by the Hungarian tax authority (NAV) and the data included therein shall be updated on a monthly basis by the banks who hold the accounts of the corporate and other legal entities being subject to the relevant Hungarian law (Act XLIII of 2021). In case of opening a bank account or in the event of any changes in the relevant data at a later stage, banks shall require their clients to make a statement about their UBOs and such statements are forwarded by the banks to the NAV for the purposes of maintaining the UBO register. As per Act XLIII of 2021, the Hungarian UBO register shall contain the following information about the UBOs: (i) first name and surname; (ii) first name and surname at birth; (iii) nationality; (iv) place and date of birth; (v) address, or in lack thereof, place of residence; (vi) nature and extent of the beneficial interest held in the legal entity.
The database is primarily accessible by the authorities and service providers obliged to perform AML screening – however, in accordance with the requirements set forth by the 2018 Amendment, information on the UBOs may also be queried by the general public for a certain fee (currently HUF 1,500 per legal entity).
Nevertheless, the Hungarian UBO register system introduced in 2021 may not operate for too long in the current form.
In two separate lawsuits initiated in Luxembourg, it was questioned whether the publicity of the information on the UBOs is necessary and proportionate from a privacy and data protection viewpoint. The question was referred for a preliminary ruling by the CJEU which adopted its judgment in Joined Cases C-37/20 and C-601/20 on November 22, 2022.
In its judgment, the CJEU held that the provision of the AML Directive as amended by the 2018 Amendment whereby Member States must ensure that the information on the UBOs is accessible in all cases to any member of the general public is invalid. According to the CJEU, the general public’s access to information on UBOs constitutes a serious interference with the fundamental rights to respect of private life and to the protection of personal data and such interference is neither limited to what is strictly necessary nor proportionate to the objective pursued. The CJEU pointed out that the information disclosed enables a potentially unlimited number of persons to find out about the material and financial situation of the UBOs. Furthermore, according to the CJEU, the potential consequences for the data subjects resulting from the possible abuse of their personal data are exacerbated by the fact that, once those data have been made available to the general public, they cannot only be freely consulted, but also retained and disseminated.
In light of the CJEU’s judgment, several Member States (including Luxembourg, the Netherlands, Austria, Germany and Ireland) have promptly put an end to the UBO publicity by shutting down their UBO registers. However, in Hungary, there has been no changes in this regard ever since the issuance of the CJEU’s judgment and information on the UBOs may still be accessed by anyone from the Hungarian UBO register. It seems possible that Hungary is waiting for formal instructions from the European Commission or changes in EU law before it reduces public access to its short-lived UBO register.
By Zsuzsanna Lukacs, Senior Associate, Nagy & Trocsanyi