Ultimate Benefical Owners Register in Hungary
The Central Registry of Ultimate Beneficial Owners goes live in Hungary next year (2022) years after the deadline set in the AMLD4 and AMLD5.To enhance of transparency in the name of anti-money laundering and counter-terrorist financing the AML Directive of the EU required the member states to maintain public record of ultimate beneficial owners (UBO).
The UBO’s – despite their name – may not be the real owners of an entity, but may have significant interest over the assets of the entity or power to manage the entity. For example UBO is the phyisical person who have 25% shares in a company. And the settlor/trustee/beneficiary/protector of a trust and similar fiduciary arrangements or just the senior member/director of a limited partnership.
The UBO is identified by the services provider subject to the AML+CTF Law. Currently these services providers are not only the banks, the payment services providers, employer pension funds, accountant, tax advisors, auditor, lawyers, trustees, etc. But the casinos, precious metal or jewel dealers and any kind of merchant who accepts cash payment exceeds HUF 2,5 million are also subject to the law.
Implementation Step by Step
The AML+CTF Law 2017 of Hungary implemented the rules of the UBO register in y2017. The elaboration of the detailed rules had to established by the legislator in a separated law. The UBO Register Act 2021 published on 22th of May, 2021. The UBO Register will be managed by the National Tax Office of Hungary since they are the supervisory authority most of the service providers effected by the AML rules.
The data uploading of the UBO registry is the obligation of the financial institutions, they had to do it till 12th of June, 2021. It means the the banks and payment service providers has to report the identifed beneficial owners of the companies what have payment account with them. Hereinafter the financial insitutions have to submit the UBO data monthly to the registry.
The rest of the services providers will be able check the UBO Register from 1st of February, 2022 to compare the registered UBO details of their client with their own UBO records. From this date the competent authorities also will be able to access to the registry. Third party with certain conditions will have access to the UBO Register from 1st of July 2022.
The HU UBO Register will be available in the European Central Registry of UBOs from 1st of February, 2023.
The TT Index
All of the entities will be rated on a 10-point reliabililty index, what called TT Index. At the begining each entity starts with 10 points and in case data discrepancy reported to the Tax Office by the authorities or service providers the index will be reduced by 2 or 1 point. If entity has TT Index below 8, it will be classified to “uncertain” category in relation to UBO details.
If the TT Index falls below 6 will result “uncertain” category for the entity and they will be notified by the Tax Office to update the UBO details within 5 days with their payment account provider. Worth to mention that in accordance with the AML+CTF Law 2017, the client has to report the changes of the UBO to their service providers within 5 days.
The so called “unrelaible” entities will be published on the website of the Tax Office, in case the “uncertain” status of an entity last for more than 180 days, their name will be also published on the Tax Office’s “Wall of Shame”. But the UBO Registry Act does not impose any other fine in money. The sactions will be applied after 1st of July, 2022.
Risks of the loss of points
The sevice providers have to check the TT Index of their clients and they have to refuse to participate in transacation which exceeds the app. USD 15 000 if their client is labeled as “unreliable”.
In my experience most of the HU banks do not ask their clients to update their UBO records in case changes. The clients usually do not know the 5 days rule and update the UBOs details in case the banks draw their attention to this or for example they have to change signatory of the account because of the appointment of new directors. Therefore it may occur that the UBO details reported to the bank is not the same as the lawyer or auditor knows what could lead to data discrepancy and loss of points shortly. The risk is higher for the companies limited by shares since their records of shareholders is difficult checked by the public.
Access to Data of the UBO Register
Third party can access all of the UBO data of the Hungarian companies for fee. The UBOs are able to check their data in the register, but their inquiry have to be filed by the entity.
The UBO data of the trust (fiduciary asset management agreement) can be checked with certain conditons and for fee. The third party has to prove their “legitimate interest” with documents. Their interest can be legitimate in case,
- the third party is the close relative of the UBO,
- also the UBO of entity
- they are in close business relationship (whatever it is…)
- they are in property lawsuit.
The trust’s UBO detailed also will available for third party in case the trust is the majority owner of the entity.