July 2021 – After a long preparation, Hungary has introduced the ultimate beneficial owner's registry ("UBO Registry"), in line with the 4th anti-money laundering directive of the EU, by Act XLIII of 2021 on the establishment and operation of the background of data provision in connection with the identification duty of financial and other service providers ("UBO Act''). The UBO Act enters into force in several stages between 22 May 2021 and 1 February 2023, and its main characteristics are summarised below.
I. WHO SHALL BE DEEMED AS THE ULTIMATE BENEFICIAL OWNER?
The UBO Act refers to the definition stipulated in Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing (''Anti-Money Laundering Act''), based on which, such natural person shall be deemed as the ultimate beneficial owner (''UBO'') of a company where it:
- owns or controls at least twenty-five percent of the shares or voting rights, or
- is able to exercise effective control over the company via other means, or
- has a dominant influence in the company (e.g. is entitled to appoint or recall the majority of that legal person's executive officers or members of the supervisory board).
In the absence of an ultimate beneficial owner, the executive officer of the company shall be deemed as the ultimate beneficial owner.
II. DATA REGISTRED IN THE UBO REGISTRY
The UBO Registry is a non-authentic public register, managed by the National Tax and Customs Administration of Hungary (''NAV'') and it contains the below data pertaining to the entities registered in the territory of Hungary and their respective UBO:
- national registration number of the registered entity, which is provided to the registered entity after its data is recorded for the first time;
- the registered entity's name, registered seat, tax number, company or other registration number, EUID number; and
- the UBO's name, citizenship, place and date of birth, address and the nature and extent of his or her interest.
III. WHO IS OBLIGED TO PROVIDE DATA?
i. Account Providers
In principle, the data is recorded in the UBO Registry on the basis of data provided by each of the company's account-holding payment service providers (in most cases, its banks) (''Account Providers'') to the registration authority.
- The Account Providers were obliged to forward the data regarding their clients' ultimate beneficial owner by 12 June 2021.
- Starting from 1 October 2021, the Account Providers shall send the data gathered by them during the client-identification procedure within 5 days of the last day of each calendar month.
ii. The registered entity
The obligation and liability of the registered entities, i.e. the companies, are as follows:
- provide the data requested by the Account Providers;
- ensure, that the data is up to date.
iii. The ultimate beneficial owner
The UBO must notify the registered entity within fifteen days in case of change in his or her data.
The UBO Act does not provide the opportunity for the registered entities or the ultimate beneficial owner to report changes in their data to the NAV directly themselves.
IV. WHO HAS ACCESS TO THE DATA STORED IN THE REGISTRY?
Starting from 1 October 2021, only the registered entity and the ultimate beneficial owner itself (by a power of attorney granted to the registered entity) may access the registered data, free of charge by individual application.
Starting from 1 July 2022, those service providers who are required by law to perform a client-due diligence procedure in respect of the registered entity may also have access to the data registered in the registry free of charge.
Third persons may only have access to the data recorded in the UBO Registry for a fee, by way of an individual application.
V. WHAT ARE THE LEGAL CONSEQUENCES IF THE REGISTERED DATA DIFFERS FROM THE ACTUAL DATA?
During the first data recording, the registered entity receives a so-called TT index that measures the reliability of the data provision, the value of which is 10 points at the first data recording.
The authorities and service providers within the meaning of the Anti-Money Laundering Act (e.g. law firms, auditors) must send notifications to the authority managing the registry, if they observe any discrepancy between the registered data and the data obtained as result of their subsequent client-due diligence processes. These notifications result in the decrease of the TT index (if a notification comes from the authorities, it is decreased by 2 points, if the notification comes from a service provider, the index is decreased by 1 point).
Starting from 1 July 2022, if a registered entity's TT index falls below 8 points, it qualifies as "uncertain" and, if it falls below 6, the registered entity qualifies as "unreliable". It is possible to fall under the "reliable" classification again, i.e. regain 10 points on the TT index, in both cases by updating or confirming the registered data.
The NAV, as the registration authority, publishes the name, tax number and the classification of the entity affected on its webpage, immediately in the case of an "unreliable" qualification and in the case of an "uncertain" qualification, only if such classification exists for 180 days. In addition to the above, service providers within the meaning of the Anti-Money Laundering Act must treat clients with an "unreliable" qualification as high-risk clients and must reject the execution of any matter exceeding a HUF 4,5 million threshold in such case. The above described sanctions may be remedied by submitting a complaint to the competent minister.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.