On 22 May 2021, a new act (Act XLIII of 2021) has entered into force on the establishment of the UBO register in Hungary as well as on the detailed rules of the registration and related obligations of the companies involved therein (hereinafter the Act). Certain sections of the Act are going to enter into force at a later date.
According to the Act, it is for the payment account keepers (i.e. the banks) to upload the data to the UBO register concerning the UBO(s) of each company by transmitting the data they collected in the course of their own client identification process. The banks have been obliged to perform such obligation within 21 days of the entry into force of the Act, i.e. until 12 June 2021.
The Act obliges the companies and other entities to keep records on their own of their beneficial owner(s) and to ensure that (i) these data are up to date; as well as (ii) their beneficial owner(s) inform them within 15 days upon the change of any data. These obligations entered into force as of 22 May 2021.
The data to be recorded and kept by the companies (and other entities) are the followings:
The companies (other entities) and the UBOs will be entitled to exercise information rights, i.e. to request information from the UBO register in order to verify the data registered therein as of 1 September 2021.
As of 1 October 2021, the banks will transmit to the UBO register the UBO data of their clients each month.
However, the companies (other entities) themselves will not be able to modify any data registered with the UBO register directly, changes in the UBO register shall be made by the banks, only based on the information received from the companies (other entities).
As of 1 February 2022, all service providers that are to conduct client due diligence under the Money Laundering Act (lawyers, notaries, seat service providers, realtors etc.) will be obliged to verify the UBO data of their clients in the UBO register and, if there is any discrepancy between the register and the results of their own client due diligence process, they shall report it to the UBO register. It is to be noted, however, that no modification of the same data is allowed to be initiated within 30 days.
The aim of the UBO register is to provide a UBO index to each Hungarian entity and upon any discrepancies, to ensure that points are deducted points from such index. Specifically, if the index for a company falls below certain limits, the banks must deny transactions exceeding certain amounts. The UBO qualifications (depending on the actual points of the index) are also published with the UBO register.
At the time of their original registration by their banks in the UBO register, each company gains 10 points as their original UBO index.
If a service provider (as a result of comparing the data in the UBO register with their own client due diligence results) notifies any discrepancy in the UBO register, the UBO index of the respective client shall be reduced by 1 or 2 points (depending on the type of the service provider). If the UBO index falls under 8 points, the respective entity shall be qualified as “uncertain”. If the UBO index falls under 6 points and remains so for 60 days of the receipt of the notification by the respective entity on such status, the qualification will turn “unreliable”.
Upon any “uncertain” qualification, the UBO register would notify the respective company (other entity) that a correction may be initiated with their banks; however in case of “unreliable” qualification, the company (other entity) will be called to do so. If the UBO data is duly provided or confirmed by the company (other entity) via its account keeper, the UBO index will be restored to 10 points in the UBO register.
As of 1 July 2022, if the “uncertain” qualification of an entity is not changed for a period of 180 days, this status of the respective entity shall be published on the website of the UBO register.
If an entity qualifies as “unreliable”, such status of the respective entity shall be published on the website of the UBO register, and furthermore, this entity shall be considered as a high risk entity from an AML prospective (and all client dd proceedings shall be conducted accordingly by all service providers in Hungary). The most important consequence, however, is that the service providers (whose obligation is to verify the UBO status of all their clients) are obliged to refuse to complete any transactions exceeding the value of HUF 4.5 million for any entity holding and “unreliable” UBO status.
Since the consequences of “uncertain” or “unreliable” qualifications are serious, all entites are strongly advised to verify their UBO data in the UBO register on a regular basis and notify their banks and service providers on any changes as soon as possible.