By the adoption of the Proposal, Hungary intends to fulfil its obligations under the 4th and 5th Anti-Money Laundering EU Directives, which requires member states to establish a Central Transparency Register, a central register containing the data of the ultimate beneficial owners of local companies, and a central register of bank accounts and safe-boxes. The Proposal would be applicable for each business association (with the exception of public companies limited by shares), civil organisations and trustees registered in Hungary as well as partially state-owned organisations with Hungarian state ownership of less than 25%.
Establishment of the Central Transparency Register
Pursuant to the Proposal, the National Tax and Customs Administration would be the Hungarian authority responsible for the establishment and operation of the Central Transparency Register. Once the first notification to the Central Transparency Register is performed, each entity would receive a national registration number for the entity and a TT-index. Upon the registration in the Central Transparency Register, the value of each company’s TT-index would be ten points, which means that the status of the entity is reliable.
In addition, the Central Transparency Register will contain the main identification details of the entities and the following data of the entities’ ultimate beneficial owners: full name; full birth name; nationality; place and date of birth; address or place of residence; and nature and extent of its ownership interest.
Notification towards the Central Transparency Register
According to the Proposal, the banks keeping the accounts of Hungarian companies would be the service providers obliged to forward to the Central Transparency Register any information on ultimate beneficial owners of Hungarian entities, identified through the performance of customer due diligence process. This obligation for banks will become effective in two steps:
- as of 6 June 2021, banks will be required to forward data of this type, which they already obtained from their existing clients on 1 January 2021;
- as of 1 October 2021, banks will be required to forward the data of the ultimate beneficial owners of their new clients.
The Proposal does not allow Hungarian entities to perform the notification on the person of their ultimate beneficial owners directly to the Central Transparency Register. The Proposal only states that Hungarian companies will notify their banks within 15 days if any of their registered data changes and afterwards, it is the bank that will forward this new information to the Central Transparency Register. However, banks will be required to perform notifications monthly (i.e. they must report new data or any change in the registered data within five days following the end of a given month).
Discrepancy between determined data and data in the Central Transparency Register
If any authority, court, public prosecutor or organisation, performing supervisory functions over the entities falling under the scope of the Proposal notices a discrepancy between their data on the ultimate beneficial owners and data included in the Central Transparency Register, they may notify the Tax Authority of this, which will result in the decrease of the entity's TT-index by two points. If this discrepancy is noticed by a service provider in the course of performing its customer due diligence, the Tax Authority should be notified within five business days resulting in the decrease of the TT-index of the entity concerned by one point.
If the value of the TT-index of an entity falls under eight points, the entity will qualify as an uncertain entity as a result of which it must be handled as a high-risk customer necessitating the performance of enhanced due diligence. If the value of the TT-index of an entity falls under six points, the entity would be qualified as an unreliable customer, which means that the service provider will deny assistance with any transaction having a value over HUF 4,5 million (EUR 12,500). These provisions are scheduled to go into effect on 1 July 2022.
Access to the data contained in the Central Transparency Register
According to the Proposal, as of 1 February 2022, any authority, court, public prosecutor or organisation performing supervisory functions over the entities falling under the scope of the Proposal may have access to all data included in the Central Transparency Register and can forward this data to an authority, court, public prosecutor or supervisory authority of another EU member state or a third country, provided that in each case the data is necessary for the purpose of performing statutory duties.
Third parties should have access to the Central Transparency Register as of 1 July 2022 and their access will be conditional upon presenting evidence of the purpose of such data use and the legal interest relating to such data access as well as payment of an administrative fee. The fulfilment of a third party’s data inquiry will need to be approved by the minister responsible for financial, capital and insurance markets.
Although the Proposal has not yet been adopted by the Hungarian parliament and its wording may be subject to further amendments, we anticipate that the method of the notification mechanism towards the Central Transparency Register will be adopted as stated.
If the banks keeping the accounts of the Hungarian companies will be obliged to forward the data of their clients’ ultimate beneficial owners to the Central Transparency Register, we would suggest that our clients contact their banks to ascertain and ensure that the information held by their banks regarding ultimate beneficial owners is up-to-date.
For more information on this eAlert, contact your regular CMS advisor or local CMS experts: Anikó Kircsi or Szabina Marsi.